It's been more than a month since AAPL got on the ropes, but if support at p=110.18 fails, the stock could soon be headed down to as low as 102.63 (see inset) over the near term. You can use that midpoint Hidden Pivot support as a minimum downside target in the meantime, and bottom-fish there with a stop-loss as tight as a dime. If it's hit, and especially if it's exceeded on a closing basis, brace for more slippage to at least p2=106.40. We continue to hold a bull call spread sixteen times -- 140/150/160 butterflies @ 0.36 that expire on Nov 20.
If stocks plunged Friday on news that Trump had caught the virus, and then began to surge as soon as it looked like he would recover, investors must like the guy, right? Or so it would seem. The Dow rose almost 500 points on Monday as the President's doctors prepared to send him home earlier than most of us had anticipated. Since they are taking no chances, we can confidently conclude he's in pretty good shape. The maudlin muckrakers who invent the news have been doing their damndest to suggest otherwise, but they've only embarrassed themselves with an effusion of ignorance and cant. Much of it centered on the claim that Trump's doctors misled them or withheld important details about his treatment, but it is only in the staunchest redoubts of Trump Derangement Syndrome that anyone much cared. As for investors, they have yet one more reason to tune out polls that would have us believe Biden will give Trump a good fight. If this were likely, the Dow would be trading 5000 points lower and fixing to plummet anew.
We hold sixteen Nov 20 140/150/160 call butterflies for an average 0.36, based on an idea posted in the trading room a week ago. The stock turned mushy at the end of last week, causing the bull spread to fill for as little as 0.32. However, I am using a higher cost basis because several subscribers reported paying more. Do nothing further for now and cancel any orders that were not filled. The most we can lose on this trade is $36 per four-option spread, but it has the potential in theory to produce a profit of as much as $1,000 per. That would occur if the stock were to rally to 150 between now and November 20, when the options expire. We are getting 20-to-1 odds on this, and you can judge for yourself if you'd lay that bet. Practically speaking, we would be doing well to exit for $700 if everything goes right, but we'll still have opportunities to cash out for a profit on the way up if AAPL rallies. For now, as is customary, I'll suggest offering half of your spreads to close to 0.72, twice what we paid, good till canceled. If the order fills, the remainder of our position will effectively have cost us nothing. Our actual rally target, a Hidden Pivot, lies at 151.94. _______ UPDATE (Pct 5, 4:04 p.m.): With AAPL trading for 116.47 at the closing bell, the spread settled at 0.39 and carried a delta value of 3. This implies the spread will increase in value by 3 cents for every $1 increase in the price of the underlying shares. The spread is 'positive-gamma', meaning we will automatically pick up deltas and get 'longer' as AAPL moves toward 150. Above 150, we'll lose deltas and become 'delta neutral' near and
The selloff on news of Trump's illness triggered a 'mechanical' buy in the wee hours on Friday, but the position is probably no better than an even bet to survive whatever news greets the markets when they re-open Sunday night. There was a theoretical profit of $850 per contract in the trade at the closing bell on Friday, but anyone who took the position home over the weekend was going out on a limb. The 3438.25 rally target will remain viable unless the futures drop below C=3291.25 first. That is all but certain to happen if the President's condition worsens over the weekend. His symptoms have been mild so far, but so were Boris Johnson's initially. A selloff Sunday night could be expected to fall to at least p=3277.25, where you can bottom-fish with a very tight stop-loss. However, if this midpoint pivot fails, the next stop would be p2=3221.88. Here's the chart. _______ UPDATE (Oct 5, 5:03 p.m.): Trump survived the weekend, disappointing millions and sending stocks into an ebullient short-squeeze that was continuing in the early evening. The 3438.25 rally target is not in doubt, but if you want to go short, use this pattern to position a tight rABC against the mob.
DIA barely got its hair mussed Friday on news that Trump has been infected with Covid-19. Even so, the intraday high fell well shy of a midpoint resistance at 281.36 that bulls will need to demolish in order to clear a path to the 297.45 target. On balance, we ended the day with no significant bias either way. That would change dramatically, however, on any news over the weekend that the President's condition had worsened. If that happens, expect DIA to gap down to at least p=270.87, or even to p2=266.13, with 261.39 as the worst case, short-term. Here's the chart. If Mr. Trump is reported to be doing 'great' but there are no confirming television images of him smiling from his bed at Walter Reed Hospital, you can use tightly stopped call options to bottom-fish p=270.87 with a tight stop-loss, since that's where DaBoyz are likely to stage their first rally attempt on inconclusive news. _______ UPDATE (Oct 5, 5:10 p.m. ET): Sunshine and lollipops poured down on Wall Street yet again as DIA hit 281.59 after gapping higher on the opening. Now, two consecutive closes above p=281.36 will all but clinch more upside to the 297.45 target noted above. _______ UPDATE (Oct 8, 8:02 p.m.): DIA has done what we asked of it, but not with sufficient brio to imply that a blast to 297.45 is a done deal. To be cautious, we'll use p2=289.41 (see inset) as a minimum upside projection for now.
The Cubes laid an egg on Friday to end a week that had begun with a scorching rally. The news concerning Trump caused bulls to turn tail and left bears less than eager to cover short positions ahead of the weekend. From a technical standpoint this vehicle failed to trigger a 'mechanical' buy on the drop to the green line because it had failed to reach the red line first (see inset). There is nothing bearish about this per se, but it is most unusual for QQQ to miss an opportunity to signal a 'mechanical' long following a decent rally leg on the hourly chart. Since the failed upthrust was impulsive nonetheless, having exceeded some distinctive 'external' peaks, we should give bulls the benefit of the doubt as the week begins. All bets are off, however, if the news from Walter Reed Hospital is concerning. _______ UPDATE (Oct 5, 5:23 p.m.): If bulls are going to put Friday's punk performance behind them, they'll need to push this hoax up to at least p=286.20 -- or better yet past it, to demonstrate some of the mettle it will take to achieve D=312.29. _______ UPDATE (Oct 9): Even with a short-squeeze gap on the opening, the Cubes still fell a millimeter shy of p=286.20 when they ought to have exceeded it. We'll give bulls the benefit of the doubt for the moment anyway, but the yellow flag will be out until such time as they impale the red line. _______ UPDATE (Oct 12, 7:12 p.m.): My gut is saying D=312.29 will be reached eventually, but you can try shorting p2=299.25 anyway. Use puts priced under 0.65 that expire this Friday, but do the trade only if QQQ is within 0.07 points of the target. Stop yourself out if 301.40 is touched. Here's
Wall Street kept its cool Friday on news that President Trump and Melania had contracted the virus. Investors were so cool, in fact, that one might have wondered whether even a collision between Earth and a giant asteroid would shake their confidence in the Fed's ability to levitate shares indefinitely. Although we might have expected the stock market to suffer devastation on a day when the nation's leader has been stricken with a disease that has killed more than a million people, the broad averages instead faked lower, then higher, manipulated by the usual svengalis to extract maximum profits from the rubes and the panic-stricken. Their hysteria lasted less than hour after word of Trump's contagion crossed the tape just before 1:00 a.m. In a mere 36 minutes the selloff was over: Dow index futures turned sharply following a 600-point plunge and never looked back. Shares see-sawed overnight, but in the minutes before the opening bell they reignited on a manic binge of short-covering, recouping all but 70 points of what had been lost after the news came out. 'Mild' Symptoms The president's symptoms, as well as Melania's, reportedly were mild, but so were Boris Johnson's initially when the British Prime Minister fell ill in April. His conditioned worsened after several days and he nearly died. Trump has proven himself to be hardier than a Seal Rock barnacle, and perhaps that is why investors treated the news as just another buy-the-dip opportunity. But if, heaven forbid, his condition should worsen in the days ahead, the business-as-usual shenanigans and thievery we saw on Friday are going to give way to a selling panic that will shake up even the smart money. We wish Mr. Trump and his wife a speedy and complete recovery in the meantime. If he comes back stronger
Gold was probably oblivious to news of Trump's illness on Friday, but not to the modest upswing in the dollar. As a result, the December futures couldn't hold onto a $7 gain achieved overnight. The intraday high occur an inch above the 1921.90 Hidden Pivot I'd proffered as a target the night before, but that's not enough to assume with confidence that the subsequent pullback is going to be a consolidation for another leg up on Monday. Bulls held the edge at the bell nonetheless, and as long as they don't let the futures dip below C=1885.80 (see inset), they shall remain favored. _______ UPDATE (Oct 5, 5:27 p.m.): The rally on dollar weakness may have looked impressive, but it exceeded zero 'external' peaks. The closest lies at 1925.50 (9/21 on the hourly chart), and let's hold the applause until it has been breached on a closing basis or decisively bettered intraday. ______ UPDATE (Oct 6, 8:18 p.m.): The timid poke above 1925.30 should have fooled no one -- but it obviously did, given the way gold collapsed on news that Trump had taken stimulus talk off the table. The bullish trend since Sep 28's 1851.10 low remains intact nonetheless, but the burden of proof has shifted heavily onto bulls. Whatever happens, plan on bottom-fishing with a tight stop-loss if and when the futures fall to the 1838.00 target shown in this chart. _______ UPDATE (Oct 9, 8:59 a.m.): This morning's so-far $33 upsurge would need to tack on an additional $56 to become technically significant. Here's a chart that explains why.
It could go either way, but I've featured a bearish chart because last week's high failed to exceed any external peaks. That would have put the December contract on track for a run-up to 25.12 or so. As things stands, the bearish pattern we used last week to plot a move down to 21.50 is still viable, even though this Hidden Pivot target was nearly reached on 9/24. The near-miss made the subsequent rally to the green line a 'mechanical' short, albeit an unappetizing one, and there things stand. Look for a move down to at least p2=22.45 Sunday night or Monday if bulls are unable to make any headway at the outset. _______ UPDATE (Oct 5, 5:35 p.m.): Just to be safe, and also unfoolable, let's stipulate that the futures fist-pump above the 25.30 'external' peak recorded on 9/21 before we break out the Prosecco. _______ UPDATE (Oct 6, 8:33 p.m.): Silver flunked our test, penetrating p=23.178 on the way down. This has shortened the odds of more weakness down to at least D=21.680 over the near term. Here's the chart. _______ UPDATE (Oct 8, 8:24 p.m.): The rally from Tuesday's 22.96 low tripped a 'mechanical' short at the green line, but I'll pass up the trade because of the poorly formed C-D leg. It is elongated and choppy, features that tend to diminish the tradeable value of a correction that follows a strong impulse leg. We'll paper trade this one, keeping 21.680 as a downside objective. It would be negated by a pop above C=24.67.
Traders spent the last half of the week torturing each other for who-knows-what reasons. The downtrending pattern is too ugly, and the one-off 'A' too puny, for a precise call on further weakness, but we can still use the 93.34 target, since it is good enough for government work. That means Friday's fleeting rally to the green line was a 'mechanical' shorting opportunity, which further implies that 93.34 is likely to be achieved. If so, this would give bullion at least a little buoyancy early in the week. I wouldn't count on much more than that, however. _______ UPDATE (Oct 5, 5:40 p.m.): The bounce came from three cents above my 93.34 target, but it was not sufficiently robust for us to presume the correction begun from 94.61 on 9/25 is over. Set an alert at 94.04 if you want to be confident the trend is changing. _______ UPDATE (Oct 6, 8:40 p.m.): DXY took a strong leap from 93.34 on a retest, sparing anyone who was long in gold or silver a nasty surprise. The rally would need to pop above 94.34 to turn the chart bullish again and put a 95.33 target in play. Here's the graph.
