DIA

Based on reports from subscribers in the chat room, I've established a tracking position consisting of four July 24 180 puts @ 0.76.  They  traded as high as 0.97 on Friday but settled back to close at 0.72 after the futures crept feebly higher for most of the session. Because bears will face a gauntlet of short-squeeze possibilities in the days ahead, including Apple earnings due out on Tuesday, I'll suggest locking up a profit in our position at the earliest opportunity, provided one comes. Accordingly, you should offer four 178 puts (July 24 expiration) short for 0.76, good-till-canceled. Be prepared to see index futures get hammered Sunday night, only to recover before the opening bell on Monday, when options begin to trade. In any event, I estimate that DIA would need to fall to at least 178.50 for our order to fill. Whatever happens, you should stop yourself out of the puts if they touch 0.50. ______ UPDATE (3:16 p.m. EDT): We were stopped out of the puts for a position loss on about $104. DIA is not up by much, but time decay and a dramatic drop in option volatility have taken their toll.

Subscribers reported buying four July 24 180-strike puts at the close with DIA trading just beneath the 181.31 rally target I'd flagged the night before.  The target was in fact hit, and then exceeded by three cents, earlier in the day. But because this occurred minutes before the opening bell, I suggested holding off on the put purchase. By day's end, however, after DIA had spent six hours creeping back up to the target, we staked out a small position with the puts trading near their intraday lows. This gambit was informed by a more important-looking target at 2119.25 that I'd flagged in the E-Mini S&Ps. The target was not a Hidden Pivot, but rather a trendline that looked likely to show some stopping power. And so it did, capping the day's soporific uptrend at 2118.75, just two ticks beneath my target. My gut feeling is that we will see a top of at least short-term importance at or near these levels. However, I wouldn't advise gutting it out if the broad averages rise above their respective targets on Friday.  Traders should use a stop-loss of 0.50 for the puts -- or perhaps 0.40 if it looks like they can be carried over the weekend for 0.40 or more. My guideline on position size was to risk as much as you might on a 20-to-1 horse whose name reminded you of a favorite uncle. The puts are pure speculation, and even though I regard a short at these heights as a decent bet, there's no point putting ourselves in the path of the bullish stampede that is always possible.  That said, with the best possible news on Greece already out, odds of a weak opening Sunday night seem attractive. ______ UPDATE (12:39 p.m.): So far so good!  DIA has fallen

I've tossed out the nasty-looking green bar from Tuesday to produce a serviceable rally target at 181.29. However, p2=180.94 (i.e., the pink line) more closely coincides with a target for the cash DJIA that I disseminated earlier. To leverage this information, I'll recommend shorting at or very near 180.94 using put options that expire on July 24. Specifically, you should bid for four 180-strike puts, which I estimate will be trading for 0.88-0.96.  You can hone your bid closer to fair value by simply observing bid/asked for this series if and when 180.94 is closely approached. As is my custom, if subscribers report fills in the chat room, I will establish a tracking position based on the worst price paid. Whatever you pay, use a stop-loss on the puts that is 0.25 below the best fill reported by a subscriber.  If the stop is hit, leave enough appetite to try again on Friday if DIA is hovering near D=181.29 at the closing bell. _______ UPDATE (9:30 a.m. EDT): The stock blew past p2 overnight, topping at 181.34 -- three cents above a target I have adjusted slightly to correct a Tradestation glitch. Let's hold off buying the puts for the moment, but check in the chat room for timely guidance.

Difficult as it is to imagine the stock market turning even more boring this summer, the chart shown suggests seasonality's most tedious days and weeks may lie ahead.  Trend legs that surpass at least two prior highs or lows are usually prelude, following retracements, to strong rallies or declines. In this case, however, every promising such move up or down has been met with another going in the opposite direction. This is what I call 'dueling impulse legs', and they are rampant on DIA's daily chart. This doesn't necessarily mean we should set the snooze alarm for autumn, when vacation revelers typically return to their senses. Indeed, so very interesting are these times that we can never be dismissive of the possibility that the bear market we all know is coming could come a-rampaging overnight.

Not long ago, we were looking to short the E-Mini S&Ps at 2138.00. Although there is no precisely equivalent target for this vehicle, the 184.41 Hidden Pivot shown could work. Note that DIA will be a bull trade to at least p2=182.59, and for all we know it could top there. But if it blows past that number, look for a run-up to 184.41 and short it aggressively if you've caught a piece of the rally.  You can short the ETF itself, but if you prefer to buy options, use puts that are slightly out-of-the-money and that expire  within the next 3-4 weeks. This is obviously significantly riskier than the trades I usually recommend, since it will require shorting into a spike and carrying the position over the weekend.  Please note as well that this trade ignores a significantly higher target that I've projected for the DJIA. ______ UPDATE (June 24, 12:32 a.m.): My outlook is still bullish, but I'm retiring this analysis and strategy because they have grown stale.

If DIA breaches the midpoint support at 178.99 (see inset) decisively by falling into the range 178.40-178.60, let's plan on mechanically shorting any subsequent bounce back up to the midpoint.  We'll use eight June 26 175 puts and a stop-loss based on the underlying trading 179.75 or higher.  The target would be 176.72, and if there's an opportunity to spread off the puts on a sharp decline, we'll attempt to do s on-the-fly. _______ UPDATE (10:23 a.m. EDT): DIA opened on 1.22-point gap lower, so the only chance to have gotten short was on Friday. We'll take that into consideration the next time.  Trend and target remain as predicted. _______ UPDATE (June 16, 8:17 p.m.): Yesterday's Whoopee Cushion bounce rendered the downside target useless for the moment, even if it remains theoretically viable. DIA was bullishly impulsive at the bell, but if there's little follow-through, we shouldn't be too terribly surprised.

There is no important rally target in this vehicle that corresponds to the 2138 Hidden Pivot I've drum-rolled in the E-Mini S&P. We can still use the latter to 'interpolate' a DIA short, buying out-of-the-money puts with a June 12 expiration if and when the E-Mini S&Ps closely approaches 2138. Keep the order small, and stop yourself out if the options trade for 0.20 less than you paid. ______ UPDATE (May 28, 7:38 p.m. EDT): A target at 184.04 that I flagged here earlier should be held in mind in case the E-Mini S&Ps blow past their target at 2138.00. The Dow and the S&P 500 are seemingly out-of-synch, but we shouldn't let that stop us from tying to short either or both vehicles at their respective targets. Check out today's tout for the cash DJIA for another angle.

I've grown sweet on that 184.04 rally target over the last few days. DIA has taken such timid steps toward it, however, that one might be discouraged from thinking the target will ever be reached. However, the ease with which the stock blew past the 181.66 midpoint pivot is reason enough to think it'll get there. If and when that happens, let's plan on shorting at 184.04, even if it's reached on the closing bell ahead of a three-day weekend. You can initiate the short in any way that suits your style, but officially we'll look to buy four June 5 182 puts with DIA trading within 0.05 of the target. Stop yourself out if they trade for 0.25 less than you paid. Don't pay up, either, since the life span of these options will be shortened by a full day next week.

Although there's no doubting the authority of the bullish pattern shown, the willingness of bulls to 'actualize' it seems to be a problem. A signal has been tripped for a rally to as high as 184.04, but stocks have been so leaden lately that the better opportunity would seem to lie in getting short at p=181.66. We'll give it a try, buying two May 22 180 puts if DIA gets within 0.10 of the target.  Stop yourself out of the puts if they trade for 0.20 less than you paid for them. ________ UPDATE (8:58 a.m. EDT): This vehicle has advanced overnight on extremely thin volume to as high as 181.81, generating a bullish impulse leg that looks too dangerous to short. This one indicates more upside to as high as 182.74, but there are other bullish patterns as well providing a simultaneous push. _______ DIA (May 17, 9:22 p.m.): Thursday's breakaway gap topped at 182.64, a dime from our target. If DIA gets second wind, look for a new top of at least short-term importance at 183.10.  _______ UPDATE (May 19, 9:44 p.m.): With DIA obliterating every minor Hidden Pivot in its way, I'll suggest using the 184.04 target shown in the chart to  get short (or perhaps long as well on the way up).  The trade could wind up being jackpot-ish if the pullback from 184.04 is sharp. Put options to consider: May 22 183.50s and 183s. This is a longshot, so don't bet the ranch. Also, bail out if DIA trashes the 184.04 resistance -- meaning, exceeds it by at least 11-13 cents. Were that to occur, we'd probably be looking at more upside to at least 184.90, the midpoint pivot of a larger pattern begun from 170.10 on February 2.