E-Mini S&P

We got short at the top on Friday, but how long will Mr. Market let us enjoy the ride? Our vehicle, QQQ put options, nearly ran off the road on Tuesday when the Dow began the day with a 125-point rally. A pullback in the early going shaved that gain by two-thirds, but by early afternoon bulls were beating on the highs, threatening to send bears into a new round of short-covering. The pessimists got a reprieve, however, when something spooked the market late in the session, sending the Industrial Average into a 225-point dive that left it 66 points lower on the day.  It was not a session for the faint-hearted. Still, the outcome boosted the value of our put position, leaving Rick’s Picks subscribers in good shape to try to lock in a profit no matter what the stock market does as 2011 draws to an unpredictable close. On Friday, we’d actually been bullish for most of the day in anticipation of a powerful rally in the E-Mini S&Ps to exactly 1259.25, a Hidden Pivot target. With ten minutes to go before the bell, the futures got as high as 1258.50, and so we sent a bulletin to subscribers telling them to get short by buying January 54 puts for 0.96 in QQQ. This equity-based vehicle corresponds to the S&P futures and was making its high at 57.17. Although we rarely advise opening a position on a Friday afternoon, the circumstances strongly warranted it. This time, taking a gamble paid off when the new week began. Monday’s gap-down opening caused our Jan 54 puts to spike to as high as 1.25, and so we told subscribers to take a profit on half the position. Now that the selling has resumed, our goal will be to spread off our

The futures were wafting toward a presumptive Hidden Pivot rally target at 1241.50 Monday night, but a bigger picture implied a bull trap in gestation.  That's because Monday's downdraft was impulsive on the hourly chart (see inset), but the E-Minis would nonetheless become a speculative buy at either the 'p' or 'D' hidden supports shown.  The same pattern could prove to be shortable as well, but you'd need to initiate the trade on a lesser chart with a downtrending abc pattern that would subject you to theoretical risk of no more than five ticks.

When the bell rang to end the week, the futures were scraping up against a rally target at 1253.50 that had been disseminated here mid-day. They've come off that high Sunday night, creating a bearish impulse leg with immediate potential to 1245.75. Sellers were stalled precisely at the 1248.50 midpoint sibling of that number, but if it's decisively penetrated without 1251.25 (aka point C) having been exceeded to the upside, the target itself would become on odds-on bet. Alternatively, you should jump on the bull trade if the futures deliver something like the camouflage perfection I've sketched out hypothetically in the chart.

Looking for actual trades in Comex Gold and the E-Mini S&Ps, we zoomed in on their lesser charts to find a low-risk entry spot. The results on view here provide a finely nuanced lesson in how to force a trade when conditions are not ideal. Incidentally, we used Tradestation’s drawing extension tool instead of a Hidden Pivot calculator, since it is proving to be most useful in adjusting buy- and sell-stop entries on-the-fly.

The stock market was in the throes of a monster rally as this tutorial session got under way, with the Dow up more than 400 points and the E–Mini S&P inches from a target that could temporarily cap the rally. More important than all of this was a T-Bond selloff, the resolution of which may tell us whether the Western World is about to embark on a hyperinflationary course. We set a screen alert at a key downside target of the December T-Bond futures, there to await a result.

We have our doubts that bullion prices are about to embark on a major rally, since yesterday’s admittedly encouraging upthrust was tied to a stock-market rampage that, having occurred for all of the wrong reasons, is doomed to fail.  It was in fact a quite nasty bear squeeze that sent stocks soaring overnight. The short-covering panic was triggered by rumors -- later denied – that Italy was about to receive an $800 billion bailout.  There were also some news stories over the weekend suggesting that Americans had done their patriotic best to kick off the holiday shopping season with a bang. These two news items, even without confirmation of Italy’s rescue, caused index futures to leap wildly higher Sunday night, all but guaranteeing that the Dow Industrials would open up at least 200 points on Monday morning. This they did, achieving an intraday peak 330 points above Friday’s settlement. Would-be stock traders found themselves choking on dust Monday morning, however, since the gap-up opening left no opportunity to get onboard. Even so, via actionable advice disseminated Sunday night, Rick’s Picks subscribers could have caught a profitable ride in Comex December Gold. Here’s the trading “tout” exactly as it went out at around 8:30 p.m.: Europe's latest bailout, this time for Italy, has goosed the futures into a steep climb. Use 1712.50 as a minimum upside target for now, keeping in mind that anything above that would suggest that plenty of buying power remains to be spent.  For camouflage purposes, you can try getting long if, on the 15-minute charts, the futures create an A-B impulse leg by exceeding the 1708.90 peak from last Wednesday without taking out the more obvious one at 1710.80.  This was occurring as we went to press. ‘Camouflage’ Trading Ultimately, we exited the trade with a

Amidst Wednesday's night's quietness, there were interesting things to do.  Most immiedately, there was a "live" trade in the E-Mini S&Ps that promised a happy outcome for those who paid attention to Wednesday's touts.

With the Dow off as much as 300 points on this particular morning, we nevertheless found a profitable trade against the trend in the E-Mini S&Ps. Our success entailed simply going with the flow, since the flow at the time we were looking for action was “up” on the very lesser charts that we typically use for camouflage. This session will be especially useful to index futures traders, since we rationalized each and every price squiggle up to and beyond the moment the trade was initiated. It was a “successful’ trade to the extent that it reached the ‘p’ midpoint where partial-profit taking was possible.

It's hard to tell whether DaBoyz have exhausted sellers by pulling out the rug tonight in the index futures. In any event, I've proffered a worst-case target for the E-Mini S&P that would imply a drop in the Dow of about 600 points in the days ahead.