DIA

We shouldn't get our hopes too high about shorting April 130 puts for a juicy premium over the 1.50 we paid, effectively, for the Junes.  This has been our goal for a while, but the stock market's relentless rally has made this tactic a non-starter. That said, respite could come soon in the form of the 148.76 target shown. With news about the actual state of the economy beginning to overwhelm the spinmeisters' lies, stocks appear especially vulnerable at these heights. If you want to be alerted in real time to any change in our position, be sure to check the 'E-Mail Notifications' box on your 'My Account' page.

We hold a dozen June 130-March 130 put calendar spreads for 1.50.  Let's roll into the June-April put calendar spread by shorting a dozen April 130 puts for 0.40 or better, good-till-canceled.  This may take a while, and my intention is to do it after the March 130 puts we are short have expired worthless.   We'll need a downdraft in the underlying stock, but stranger things have happened. _______ UPDATE (March 21):  We remain naked long June 130 puts for 1.50, waiting for that rare down-day to short some 'Apes'.

We hold a dozen June 130-March 130 put calendar spreads for 1.50, although the stock never got close enough to a 140.71 target to trigger a companion bid for March 137 puts. We'll sit tight with the position for now even though there are higher targets outstanding for some other vehicles that we trade.  Our goal is to roll the spread by selling April and May 130 puts in succession later on. With any luck, a slow decline in DIA will allow us to more than recoup what we paid for the June puts, effectively giving us free, leveraged exposure to whatever weakness develops.

Although I've drum-rolled a short in the E-Mini S&Ps, it must be noted that DIA looks unstoppable at these levels. Even so, we'll still have a compelling target to short at 140.71, the Hidden Pivot target of the pattern shown. Based on the way buyers shredded the p midpoint at 132.57, this vehicle seems extremely likely to get there, notwithstanding the stall that I'm expecting in the S&Ps right here.  If the target is achieved it would represent a 3.6% rally from current levels -- in line with the last-gasp rally that I've said could take the E-Mini as high as 1548.25. In any case, we'll keep 140.71 in mind as a place to short aggressively. We'll likely do so by legging into a put spread, or perhaps a butterfly at a much lower strike. Notice as well that any progress above the 140.71 target would encounter the presumably considerable stopping power of an even larger pattern with a D target not far above it, at 141.66.  Taken together, these two clear and important Hidden Pivots suggest the long-term bull is near an end. _____ UPDATE (February 5 at 12:52 a.m. EST): The 139.89 crest of Friday's hysterical short squeeze narrowly missed our target, although 'camo' traders could have initiated the short.  If you did so, please let me know in the chat room. If I hear from two or more traders, I'll establish a tracking position. _______ UPDATE (February 12 at 1:53 p.m. EST): The Diamonds are getting close to our longstanding target at 140.71, having traded as high today as 140.21. Let's stake out a low-risk short position by buying the June 130-March 130 puts spread a dozen times for 1.50. (Use the options that expire on the third Friday. Some traders have jumped the gun, but keep

You can see in the hourly chart (inset) just how far DIA is likely to fall if the dam gives way.  Friday's finishing stroke was bearishly impulsive to begin with, and so the 127.05 target of the pattern shown hardly seems out of line.  The p midpoint at 129.02 has already been breached, but not by enough to make the plunge a done deal. _______ UPDATE (January 3 at 2:06 a.m. EST): A powerful reversal from well above 127.05 has put this vehicle on track to hit 134.89.  This outcome would appear all but certain, judging from the way DIA gapped up through the 131.72 midpoint resistance of the pattern shown. The target can be used to get long now, or short soon, but camouflage will be tricky to find on the last leg up, given the runaway power of this move. _______ UPDATE (January 15 at 11:26 p.m. EST):  Twelve days later, DIA did indeed hit 134.89.  It actually topped 11 cents higher than that before DaSleazeballs pulled out the rug the next day with a gap-down print at 134.24 on the opening.  This brazen shakeout was followed by a rip-roaring rally that began on the next bar.  Now, I expect buyers to push this hot little mama to the 137.71 target of the pattern shown.  Camouflageurs will need a deft touch to go with the flow.

We hold four January 128 puts purchased for 1.00.  DaBoyz are obviously capable of squeezing quite a bit of yardage from the 'story' that Democrats and Republicans are getting 'closer' to an 'agreement'.  So that we do not find ourselves having to give such claptrap even a passing thought, I'll suggest raising the stop-loss on the puts to 0.80.  This means that if they trade at that price (or perhaps below it on a gap), you should sell them at-the-market.  Some subscribers have already shorted Jan 127 puts against the 128s for more than they paid.  That is what I should have recommended to you myself, since any profit on a put position, especially in December, is as rare as gorilla eggs. Those of you who have hedged the position in this way should simply forget about it and enjoy the show, since you've got a lottery ticket that cost you nothing. Technically speaking, the Diamonds look bound for at least the 133.35 mipdoint resistance shown.  We're jumping the gun to be plotting an exit before that threshold is reached, but my gut feeling is that strong impulsiveness of this move is sufficient to torment bears for the remainder of the year.  We'll plan on re-shorting this brick when a better  opportunity presents itself, but for now let's cut our theoretical position risk to $80 plus commissions.  _______ UPDATE (11:15 a.m. EST): With the short squeeze on the Dow continuing, we exited the puts at 0.80, booking a theoretical trading loss of $80.  We'll want to try getting short again (and again, and again), but for now do nothing further.

Subscribers should be holding four January 128 puts purchased for 1.00. (Some of you reported paying as little as 0.94, but it is our custom to use the worst price paid by a subscriber.) Our goal now, assuming DIA falls, will be to short puts of a lower strike for at least as much as we paid for the ones we hold.  If successful, we will have legged into a vertical bear put spread at no cost or a net credit, eliminating the possibility of loss. For now, be prepared to stop yourself out if the option falls to 0.70. The chart shows how yesterday's top closely coincided with a Hidden Pivot target that I'd deliberately ignored in choosing to use the 'one-off' A (labeled A2) instead of the more obvious one (A). It is mildly bullish that DIA slightly exceeded A=132.96, but I am suggesting nonetheless that you stick with the puts, using a 0.70 stop-loss, because I still like the trade. The stop-loss is necessary, at least for the time being, because it would be quite bullish if DIA pushes above such a clear target within a day or two of its being hit. The pattern itself took nearly a month to play out, after all, and that is why its 'D' target should be expected to show some tradable stopping power.

The 132.54 target (corrected by 0.03 points) still looks very short-able (see inset).  Camouflageurs should guard against a downturn from somewhere below that number, but officially we'll short it by buying four January 128 puts if and when DIA gets within 0.08 points of the target. The options would be a good buy for around 0.90, but you can pay as much as 1.00 for them (with DIA at or very near 132.54) if that's where they happen to be offered.  Stop yourself out if the puts trade for 0.25 less than you paid for them.  (Note: If any camouflageurs get short from an intraday high that falls shy of 132.46, please let me know in the chat room so that I can establish a tracking position for your further guidance.) _______ UPDATE: With DIA on its way to an intraday high at 133.12, subscribers reported paying as little as 0.94 for the puts. As is customary, however, I will use the worst price reported, 1.00, as our cost basis.  My intention is to spread off our risk by shorting puts of a lower strike against those we own. This will of course work out best for us if DIA is falling. For now, however, do nothing further.

The short-able 'p' alluded to in today's commentary lies at exactly 132.57, and it's as good a place as any to initiate a speculative short.  We did this repeatedly in the E-Mini S&Ps with gratifying results, but I've chosen DIA as a vehicle here because it will allow subscribers with equity accounts to play.  Because there is no rule that says this vehicle must reach our target, we'll need to be alert to a downtrending impulsive leg from here on up. Meanwhile, I've set a screen alert at 132.15, which is about where we should start looking diligently for a 'logical' and tradable reversal.  If you see one and you're in the chat room, by all means please call it out. ______ UPDATE (December 2, 6:43 p.m. EST): No change. This still looks like a low-risk leveraging opportunity to me.  Make sure you've checked 'E-Mail Notifications' on the 'My Account' page if you want to receive a trading alert in timely fashion.