Dow Industrials ETF

DIA on Friday slightly overshot an exceptionally clear and compelling Hidden Pivot target at 327.27 that has been in play since mid-November, then closed above it. This does not bode well for bears because of the stellar quality of the ABC pattern, which should have shown precise stopping power. Regardless, we hold a few March 26 300 puts purchased last week for 0.86 and will continue to offer puts short at a lower strike for at least as much as we paid. This would lock in a no-risk vertical bear spread, but it'll take a 4-5 point pullback to get us filled.  Alternatively, a decisive push past 327.27 would put a 374.13 target (!!!) in play, presumably to be achieved via a continuation of the nearly vertical ascent begun from 182.10 a year ago. Here's the chart. _______ UPDATE (Mar 16, 5:58 p.m.): Although the major indexes are still in a topping range in relation to some Hidden Pivot targets I'd drum-rolled for as long as months, the so-far tiny overshoots could continue to torment bears. Alternatively, the broad averages could blast sharply higher, trashing my targets and leaving no doubt about whether even crazier prices are coming. Concerning DIA, even though its relentless rally gives no hint of weakening, I am uncomfortable telling you, simply, that it's bound for the wild blue yonder. To avoid such vagueness, here's a plausible pattern with a 343.38 target that lies about 4.5% above. It provides an intermediate objective that is not quite as ambitious as the 374.13 target given above. Finally, let me show you again how microscopically the very-big-picture target at 327.40 (slightly modified from 327.27) has been exceeded. Here's the chart. Investors looking for the return of sanity can only hope that it foreshadows the massive coronary that this overheated

We've been using a 323.59 target on the monthly chart as a precise place to look for a potentially important top. However, the thumbnail chart in the inset shows another not far from it at 327.27 that also looks very promising for getting short with risk tightly controlled. On balance, I'll suggest staking out a small short position at the lower target, but adding to it aggressively if the rally should continue to the higher Hidden Pivot. Positioning can be accomplished using out-of-the-money put options that expire in perhaps three weeks, although you should allow an extra week for puts bought with DIA at 323.59. I will provide timely guidance when appropriate, but you should review the free instructional material concerning butterfly spreads on your Account page beforehand, since that is how we may proceed.  _______ UPDATE (Mar 8, 6:56 p.m. ET): If you're keen to short this barf-bag with a very tight stop-loss in an opportune place, targets corresponding to 323.59 lie at 32,692 for the DJIA and at 32,745 for the E-Mini-Dow. _______ UPDATE (Mar 10, 12:16 p.m.): We looked at DIA during this morning's tutorial session, and found the 323.59 target too juicy NOT to short. We considered legging into some Mar 26 300/29? put spreads for cheap -- 0.30 or less -- buying four 300 puts first. Here's the DIA chart again with the ridiculously juicy target at 323.59. _______ UPDATE (Mar 10, 3:46 p.m.): With DIA peaking at 324.31, the March 36 300 puts traded down to 0.83, but I'll track them officially for 0.86. You should be risking as much as you could afford to lose on a 30-to-1 horse that had a good morning workout, and your expectations should be low, since this bet is being made just as the bull market is

Elsewhere on the home page, I've presented a chart that allows for a further rally of 20% in QQQ. The Diamonds, however, could hit granite just 4% above, at 323.59.  Since the temptation to nail the top of a bull market and to profit handsomely from it will always be irresistible, I am going to suggest staking out a small put position if and when DIA gets within a point or so of the target. You know the drill by now, and I should not have to mention that you should regard this bet as money flushed down the toilet. It will be a do-it-yourself project, so you're on your own: no chat room reports, and no questions or comments on the trade until such time as you've doubled out on half of any put positions initiated at the top.

The longstanding target at 318.30 was effectively fulfilled last week when DIA got within 0.70 points of it just ahead of Wednesday's regular-session opening. Even so, the Dow ETF remained buoyant for the remainder of the week, finishing near the middle of the range. A lunge higher on Monday or Tuesday is not likely to get very far, but let's stipulate that DIA must close above 318.30 for two consecutive days before we assume that bulls are still in charge. Otherwise, a rolldown is coming, possibly turning into a long-overdue avalanche. ______ UPDATE (Feb 23, 8:23 p.m.): The hoax that wouldn't die, apparently. Since DIA hasn't actually touched 318.30, let me suggest buying a few cheap, soon-to-expire puts if and when it does. Treat them as you would a scratch-off lottery ticket, since you won't be getting much better odds. All you'll be doing is satisfying a gambling jones for picking tops, but what's so wrong with that? ______ UPDATE (Feb 24, 7:20 p.m.): The puts came to us for as little as 0.38-0.40, but I suggested blowing them out shortly thereafter when DIA fist-pumped its way past the 318.30 target.  This implies more upside to at least 327.45 (60-minute, A= 261.41 on 10/30; B= 299.49 on 11/9). ______ UPDATE (Feb 25, 6:08 p.m.): Today's dive failed to generate a bearish impulse leg on the intraday charts, but I wouldn't count on relative strength in the Dow to save the day for other broad indexes that fared worse.  Key support lies just below 300.

The pattern shown is as gnarly-perfect as they come, and so we should expect the 318.30 target drum-rolled here earlier to work with astounding precision. That implies that the so-far high at 315.76 will need to be improved on before we can consider the rally spent. Even if I am off by a few pennies, I strongly doubt DIA will exceed 318.30 by much before taking the plunge that is so grotesquely overdue. My advice remains unchanged in any event: Buy puts that expire in around two weeks for less than 0.50 when DIA gets within 0.15 of the target. I will be keeping close track and may need to adjust this guidance if index futures spike Sunday evening, so stay tuned. ______ UPDATE (Feb 18, 9:13 a.m.): Tuesday's pre-opening high at 317.60 missed the target by 70 cents, or less than a point. Although this is not quite 'astounding precision', it's close enough for us to consider the target fulfilled. Now let's see how far the reversal goes.

I hadn't noticed the 318.30 target shown in the inset, but it jumped out at me when I accidentally imposed a 240-minute chart on DIA. It looks like a great place to try shorting, notwithstanding the higher targets where we are looking for possible tops in IWM, ES and QQQ.  Specifically, I'll suggest buying puts that expire in around two weeks for less than 0.50 when DIA gets within 0.15 of the target. On Friday, with DIA trading around 311, the nearest strike that would meet our criteria was 285. This implies we'll likely be looking at 290s or 295 when the time comes. You can also interpolate by buying SDOW shares, which closed Friday at 11.90.  A midpoint Hidden Pivot support that comes in at exactly 9.45 corresponds closely to the 318.30 DIA target. _______ UPDATE (Feb 10, 8:04 p.m.): Stay tuned to the chat room, since I'd hate for the Dow to turn down with a vengeance after having gotten within 1% of my target. My recommendation is to buy at least a few puts ahead of the weekend, preferably with this gas-bag in a rally that I am confident will be distributive.

We hold put positions in several indexes that topped simultaneously at compelling Hidden Pivot targets. This one, however -- an ETF proxy for the Dow Industrials -- is  somewhat out of sync, having failed to reach a clear 'hidden' resistance at D=323.59. The actual high at 312.71 is a little more than midway between p2 and D, and, as I've mentioned elsewhere, it would not be unusual or illogical for a major trend to fail where this one did. However, the chart still provides the strongest technical evidence we have to reserve at least some small doubt that the bull market top is in. Specifically, the decisiveness of the move past p=252.85 on the way up has raised the odds of a completion to D to around 75%. We'll give the benefit of the slight doubt to indices that have already reversed and sold down hard, but we should keep a close eye on this potential troublemaker nonetheless. _______ UPDATE (Feb 1, 9:25 p.m. EST): Bulls have a tough climb, given that the most recent down-leg exceeded a key 'external' low on the daily chart. This generated a bearish impulse leg that implies any rally that falls shy of 309.43 is merely corrective. ______ UPDATE (Feb 4, 9:20 p.m.): A fist-pump on the open bar pushed DIA above an internal and external peak, generating an impulse leg that will shortly propel this vehicle to new record highs.  We shouldn't fight it, but neither should we trust it, especially with an unachieved target in the E-Mini S&Ps 67 points above, at 3938.25.

A 327.27 target that has been in play since mid-November can serve as a minimum upside projection. Don't look for bulls to sprint to the target, given their intricate dance at the 308.23 midpoint Hidden Pivot. However, they ultimately were able to build a base atop the resistance, and this will help conserve energy for the next big push. The pattern is not likely to yield a 'mechanical' buying opportunity, since that would require a hellish swoon down to the green line. But we can still look for a handhold using the same tactic on the lesser charts. It will be possible in any case to leverage the target with a call butterfly spread.  Specifically, I'll recommend  buying eight Feb 12 325/330/335 call butterflies, bidding 20 cents for them initially. If they don't come on the first day, we'll try to leg on the spread, bidding 0.55 initially for eight Feb 12 325/330 call spreads. If we are successful, we'll complete the butterfly by selling eight 330/335 vertical call spreads. My prices are guesstimates, but we can adjust them as needed in the week ahead. ______ UPDATE (Jan 14, 6:33 p.m. EST): Since price action has been flaccid lately, let's lower our sights a tad, using p2=317.75 as a minimum upside target for the near term.  Also lower the bid for Feb 12 325/330 calls spreads to 0.45, good through Friday. _______ UPDATE (Jan 16): Any fills to report? (Jan 19 update: Evidently not.) _______ UPDATE (Jan 20, 8:08 p.m.): The rally is all but certain to hit p2=317.75, but if it pops through, look for more upside to the 327.27 target given above. The latter would equate to a 1600-point rally in the Dow, while the lower number corresponds to D targets I've put out for the Russell 2000/IWM. 

The pattern shown looks like a winner no matter what your purpose. Most immediately, there is the prospect of a juicy 'mechanical' buy if DIA pulls back to x from our 'sweet spot' just above the red line. We cannot yet be confident that D=327.27 will be reached, but it would be solidly in play if buyers push this gas-bag easily past p=308.23, For the time being, that midpoint pivot can serve as our minimum upside objective.  It is a surprise that DIA, QQQ and IWM, if not yet the E-Mini S&PS, have all exceeded what looked like robust Hidden Pivot resistances. It's still possible stocks will fall coming out of the gate Sunday night, but the evidence so far suggests that buying power remains at psychotic levels, seemingly inexhaustible. For now, we'll do nothing to augment a small speculative position in out-of-the-money puts. ______ UPDATE (Jan 7, 10:44 p.m. EST): Bulls are steaming toward the  327.27 target at full speed, but you should use p2=317.75 for the time being as a minimum upside target so that we don't get too far ahead of ourselves with easy assumptions.