E-Mini S&P

As has occurred with increasing frequency in recent months, the markets have opened Sunday evening with a timidity that belies their underlying, rabid demeanor. All DaBoyz need to trigger the short squeeze that would officially kick off this season's 'Santa rally' -- I hate that phrase -- is some mote of news that could be construed as remotely bullish for stocks. (Said news evidently won't be coming from Wal-Mart or other retailers that target the down-and-out, however.) My guess is that the futures will reach the 1814.00 target (see inset) overnight. That wouldn't leave much for night owls to trade, but the target can be shorted nonetheless using camouflage. Please note that even a small overshoot of perhaps 1.00 point or more would be warning bears to get out of the way ahead of the opening bell.

What a hot, nasty mess!  Even so, the futures have moved with precise predictability lately relative to our Hidden Pivot targets. That makes the one at 1775.00 enticing as a place to try tightly-stopped bottom-fishing. I won't stipulate that you use camouflage for this gambit, since price movement has been so obliging of our methods lately.  However, if you're inclined to work the order, use a 1775.25 bid for a single contract, stop 1774.50. _______ UPDATE (11:23 a.m.): DaBoyz caught a whiff of the latest, phony unemployment data an hour before the opening, sending this vehicle into a short-squeeze spasm that was over minutes after it began. This will leave regular-session traders with little to do but gaze at their navels all day long as the futures consolidate the move, presumably for another short-squeeze to kick off 'Santa week' on Monday.  We did nothing, since the overnight low got nowhere near the 1775 correction target.

Trading the E-Mini S&Ps used to be as easy as shooting fish in a barrel, but no longer. In fact, the futures have gotten so cunning when they reverse direction that I'd all but given up on using camouflage tactics to corral them. It's not that the turns haven't been occurring precisely where they are supposed to -- just that they haven't been doing so with the kind of subtle abc patterns that yield easy 'camouflage' trading opportunities. My hunch is that this behavioral change is the result of machine trading's growing dominance. From our standpoint, the way around this problem turns out to have been so obvious that I failed to see it until recently. Very simply, we should go back to trading the E-Minis the old-fashioned way -- i.e. without camouflage. This means putting up a bid against the minor trend, which can be scary. But we can mitigate the fear factor by being especially choosy about the kinds of patterns we trade. The one shown in the inset is a case in point. It is what I like to call 'beautiful-ugly', meaning that although it is not very abc-like visually -- it's pretty gnarly, actually -- it meets our abc criteria perfectly, with a point 'B' low that has surpassed out two distinctive 'external' lows. Those who were in the chat room yesterday got a taste of the near-certitude that such price patterns can inspire.  With the futures trading around 1790.00, I stated that the E-Mini was bound for a tradable low at exactly 1785.75.  (A Tradestation quirk caused me to err by two ticks, but several chat-roomers got the 1786.25 Hidden Pivot target precisely right.)  An hour later, with the futures still noodling around a few points north of the target, I posted the following: "[The

The chat room has been deader than Kelso's nuts lately, but that doesn't mean it has been bereft of trading opportunities. Yesterday, for instance, for any subscriber who was awake at his console, I put out a trade in the final minutes of the session that could have been worth as much as $225 per contract on $25 of theoretical risk.  The trade was a winner for anyone who followed this simple instruction (lifted verbatim from a post at 3:52 p.m. EST):  "Easy-way...is to bid 1797.25 for a single contract, stop 1796.75. You'll be on your own thereafter." As it happened, the futures bottomed moments later at exactly 1797.00, a tick below my target, and never looked back.  Four hours later, they were at 1800.50, just off a so-far recovery high of 1801.50 (see inset). Usually, when a trade requires that we catch the proverbial falling piano, I advise initiating it using the 'camouflage' technique in order to reduce risk to a bare minimum. Sometimes, though, when a price pattern is a perfectly ugly beauty like this one, I'll recommend getting aboard with a straight bid and an absurdly tight stop-loss. In this case, the stop-loss I advised lay at 1796.75, two ticks below our bid. In the actual event, the low was 1797.00, and it gave way to a bounce, still in progress as of this writing, that was good for a ride of as much as 4.50 points. Since we habitually keep risk:reward in a 1:3 ratio at all times, the two ticks theoretical that we risked at the outset implied that we could have taken a partial profit (or implemented a trailing stop on a one-contract position) once we'd racked up a gain of at least six ticks (1.50 points). _______ UPDATE (9:08 a.m. EST): The futures

A week of asphyxiating tedium has taken the fun out of this vehicle, at least for the time being. However, night owls can still try bottom-fishing a single contract at the 1803.25 midpoint pivot shown, stop 1802.50. If the stop is hit you could try again near the 1798.75 'd' target, but camouflage may be needed to avoid getting shut out by a premature upturn.

Price action centered on the midpoint pivot (p) shown looks sufficiently precise for us to infer that the 1820.25 target will work. That means not only that it can serve as a minimum upside objective for the near term, but that the target can be shorted with a stop-loss as tight as 1.00 point if you are reversing a long position. (Otherwise, you should use  'camouflage' to pare the risk down to a theoretical maximum of five ticks per contract.)  ________ UPDATE (4:32 p.m.):  Zzzzzzzzzzzzzzzz.  No change.

The 1819.50 target shown can be used as a minimum upside objective for the near-term. Getting long via camouflage will be tricky, however, since the futures are trading in record territory. This means there are no true 'external' peaks that we can use for handholds.  The target itself is shortable, however, with a pattern delicate enough to suggest you may be able to get away with a three-tick stop-loss. If you initiate the position via a straight offer (rather than via camouflage), limit size to a single contract.

I'd forecast a squall ahead if the futures took out a midpoint support at 1773.75, but they went no lower than 1275.75 overnight, once again denying bears a little respite.  This vehicle used to be an easy trade using camouflage, but no longer. In fact, it's become such a nasty, machine-traded little s.o.b. that even applying hindsight in places where we might have expected a price reversal, it's extremely difficult to find a 'camo' entry opportunity (see inset). I'm not going to drop coverage of the E-Mini, but because it has yielded so very few decent trading opportunities lately, I'll feature it less often.

The strong bullish impulse leg that greeted the day turned out to be a rather nasty bull trap.  Because the impulse leg looked so promising, and because the subsequent reversal generated a bearish leg on the hourly chart, the yellow warning flag is out. My outlook had been bullish for the both near- and intermediate-term, but no longer. DaBoyz had an excellent opportunity to distribute stock when short-covering drove stocks toward the previous day's highs on the opening bell. However, rather than exploit the squeeze for a while, they pulled their bids and let the futures fall. The result was the bearish impulse leg shown (see inset). It targets 1765.75, predicated on a breach of the 1773.75 midpoint support. Scalp from the short side, but note that either number can be bottom-fished with a stop-loss as tight as three ticks. If you use a straight bid rather than camouflage, limit position size to a single contract.