E-Mini S&P

DaBoyz turned timid Monday night, unwilling to bet that Friday's short squeeze had enough power to continue into a new week.  I'm betting the squeeze resumes within a day or two, although I doubt that it will unfold this morning. Regardless, camouflageurs contemplating aggressive play should take note of the three external peaks that I've labeled in the accompanying chart, since they could provide a perfect set-up for exploiting the fear, chaos and greed of traders who do not understand the difference between a double-top and an impulse leg.

Factor out the hiccup at the opening (see inset), and yesterday's price action amounted to an unusually boring day. Are shorts finally starting to mellow after taking it in the, ahem, shorts for six straight days?  It would seem so, and that would imply stocks will be less buoyant, or perhaps even leaden, in the days ahead. There was a whiff of short-covering fear in the final minutes of Tuesday's session, when the futures spasmed five points higher in a minute. But if trading on a whim, I'd rather have gone home short than long. Even so, we should view any pullback as prelude to thrust that will challenge the all-time highs. Accordingly, you should look for a bottom-fishing opportunity in any downtrend that runs out of steam at its p or D Hidden Pivot.  ________ UPDATE (Feb 14, 2:06 p.m EST):  The latest installment of the Mother of All Short Squeezes is on its way to exactly 1841.25, a Hidden Pivot rally target I posted in the chat room several hours ago.  I've suggested shorting there only to those who were long from 1823.25, the best 'camo' buying opportunity of the day. I wouldn't suggest carrying a short position over the weekend, however, since the futures seem all but destined to close within spitting distance of December's all-time high.

For the fifth straight day, bears grabbed hold of their own scrotum and yanked it as hard as they could.  The result was a 200-point short-covering rally that put the Dow within easy distance of all-time highs achieved on the final trading session of 2013. It will probably take a few weeks for the news media to reverse the bloody tide of downbeat stories they've spewed in the last few weeks. But with some help from screaming stock prices, it shouldn't be long before we are reading once again about supposedly boom times around the world.  Assuming business writers pick up where they left off a month ago, when the music stopped, it'll be with stories about how investors are flocking to, of all places, Spain, the apparent "in" spot for bargain hunters. Despite the foregoing, and reinforced by gut feelings, I'll be inclined to try shorting again at whatever juicy Hidden Pivot rally target materializes just above December's highs.  Let me explain.  It's safe to assume that gutting and disemboweling bears, as has occurred these last few  days, will not suffice to quell demand for stocks.  A more fitting top for the five-year bull market would be one that sets up bulls for equal devastation. And that is why I favor the bull-trap scenario of a stock market imploding after it has rallied to a marginal new high.  Bulls would be "all in" at that point, and an avalanche commensurate with the scope of a global deflation that has been gathering irresistible force could then commence. Fortunately, we have a substantial paper gain to play with from a short position initiated by subscribers before stocks plummeted in January.  A chunk of the theoretical profit ($1920) was deployed buying some DIA puts last week, but we took our lumps exiting

Shorts continue to wring each other's necks, driving stocks into a parabolic rally that threatens not only to erase January's hard-won gains to the downside, but to send the broad averages into new record territory. In after-hours trading Monday night, bears looked ready to extend the vicious short-squeeze begun last Wednesday into a fifth straight session. Action earlier in the day had been subdued, with the Dow finishing little changed. But with few sellers around at the moment and on very light volume, the futures are steadily inching toward the 1800.50 target (see inset), a Hidden pivot. It is clear enough that I would ordinarily suggest getting short there. You can try it, but only via a 'camouflage' entry strategy that would subject you to initial theoretical risk of no more than five ticks per contract. If the target gives way easily, however, a further run-up to the mid-1840s, where the E-Mini made its highs in January, would become likely.  Alternatively, traders looking for a ride higher should try to leverage a B-C pullback from a tick or two above late January's 1801.25 peak. The entry trigger would likely come very quickly off the 'C' pullback low, so be ready to act if the opportunity presents itself. _______ UPDATE (10:30 a.m. EST): For purposes of getting long, today's price action has dished up only garbage, even for the most diligent and alert trader.  To get long anyway, I'd suggest using only set-ups that are perfect or very nearly so from a 'camouflage' standpoint.

Friday's employment news held no clear meaning for anyone, but that didn't stop the usual suspects from freaking out for five minutes anyway. The tracks they left on the 5-minute chart (see inset) pointed to a further rally to at least 1800.00, but bears shouldn't count too heavily on that Hidden Pivot resistance to quell the histrionics. Sunday night-owls, on the other hand, may be able to grab this rabid weasel by the tail, since there is an implied seven points of upside to trade between here and the target. The futures could very well get there on the opening bar, so don't sweat it if you miss the move.  The next appealing bull trade would probably have to wait until 30 to 60 minutes before Monday's opening bell.

Bears have shown little patience for holding back since Monday's refreshing cascade. Their eagerness to cover short positions is understandable, since they're coming off a nearly five-year losing streak. It is predictable nonetheless that they will have squandered most of their ammo by the time they've grown comfortable with the idea that stocks are in a bear market. And it is at that point that the broad averages will begin to fall in earnest, making 2014's worst days so far look relatively benign. Assuming bears begin the day as nervously as they did yesterday, look for short-covering to push the futures through the 1751.25 midpoint pivot, and thence to 1759.50, its 'D' sibling.  Any higher could be problematical, however, since even the kind of faintly bullish news necessary to goad bears into buying is not likely to be forthcoming.  More immediately, night owls should plan to do their buying at pullback targets, since handholds for 'camouflage' trades that go with-the-trend have already been depleted, even on the one-minute chart, as of early Wednesday night. ______ UPDATE (12:19 p.m. EST): The futures have ratcheted up to a so-far high today of 1766.75, implying that bears began the day ready and eager to mutilate and torture themselves no matter what the cost. Because the short squeeze has occurred via an accretion of paper cuts, it seems likely to end in a mini-blowoff that tops just above the stops of the most cleverest and most courageous bears. _______ UPDATE (February 7, 2:33 a.m.): Bears were getting squeezed mercilessly in the wee hours, obliterating a midpoint resistance at 1771.50 tied to a 1781.50 target. A subsequent pullback has brought the futures back down to the midpoint, where buyers are encouraged to board via camouflage. The move through the midpoint on the way up was

DaBoyz are exploiting short-covering hysteria for all it's worth Monday night, goosing the futures 7 points so far. This was to be expected, but no one should be fooled into thinking bulls are going to come roaring back after taking such a powerful body blow. Even so, they'll have a chance to initiate a vicious counterattack from the 1724.25 target shown. You can bottom-fish there for a single contract, using as tight a stop-loss as you can abide; however, if there's a solid opportunity to get long via camouflage, four contracts would be okay.  Please note that if the target, a Hidden Pivot support, gets demolished the futures could fall to as low as 1705.50 (a hidden support that also could be bottom-fished. It is derived by using the lowermost B-C pairing available: 1761.25 and 1788.25, respectively.)

The drift was lower last week, but the gratuitous swings that punctuated it --  low...high...low...high...low  -- must have taken a toll on bulls and bears alike.  The former appeared to hold a small edge at the final bell nevertheless, although they'd need to achieve a minimum 1794.00 today to solidify it. Night owls can use the 1770.00 target shown to bottom-fish, but you'll be on your own if the order fills in the wee hours.

The curiously orderly gyrations of the past week have thus far held above a crucial low at 1754.00. Its breach would create a technical storm cloud that we haven't seen in a long while -- i.e., a bearish impulse leg on the daily chart. My gut feeling is that the mess will resolve to the downside, but that the next important low will set the futures up for a rally to new record highs. We'll be better able to judge the likelihood of this once we've seen this vehicle either break down, or break out (ever so mildly, to start with, via a push on the hourly chart above above 1816.00).  For the time being, however, the E-Mini is for day traders only.