|
-- Posted Tuesday, 19 May 2009 | Digg This Article | | Source: GoldSeek.com
Rick’s Picks Tuesday, May 19, 2009 “Phenomenally accurate forecasts” The bear rally that wouldn’t die frolicked once again yesterday, leaving shorts badly bloodied and hanging from the ropes. The Dow Industrials, for one, opened sharply higher on a 100-point gap, then just kept going with only tepid pullbacks along the way. The buying spree had been telegraphed the night before when the E-mini index futures appeared to struggle to reach a minor pullback target off Friday’s highs. Because of this, around 1 a.m. Monday, with the June E-Mini S&Ps trading around 878, we warned subscribers with short positions to brace for more insanity: “Bears would be wise to run for the hills if the futures pop above 897.00 today,” we advised, “since that would turn the hourly chart unambiguously bullish. A subtler bullish signal would occur on the 15-minute chart at 885.00.” Not long afterward, both of these Hidden Pivots gave way, overpowered by short-covering on thin volume. And here’s more bad news for bears: The short-squeeze appeared likely to continue into Tuesday, since there was a whiff of panicky buying in the closing minutes of the session. On the 15-minute chart, the Dow tacked on about 50 points on the final bar, suggesting that at least a few shorts had thrown in the towel. Ordinarily, a price spike on the final bell implies that the last bear has been wrung out. In this case, however, the spike was not quite steep enough to suggest this was the case. In any event, we took a small bearish position in the call options of FAZ, a trading vehicle that allows one to leverage the downside in the Russell Financial 1000. We bought for a pittance (1.20) some October calls that traded as high as 97.30 (!) just before the bank stocks took off in early March. At the time we initiated our small position on Monday, the underlying vehicle was in a death dive that lopped nearly 20% off the FAZ since Friday. Our out-of-the-money options ended the day down a mere 14 cents, however, and the bank stocks would need to soar to deepen our loss significantly from this point forward. We view this as unlikely, considering that the financial sector’s unseemly rally has been impelled thus far by the kind of delusional thinking that spawned the South Sea Bubble and Tulip-o-mania. Under the circumstances, we’ll bet the “Don’t Pass” line and take the odds. *** Rick's Picks publishes a daily trading newsletter for gold, stock, commodity, and mini-index traders 240 times per year. Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers' initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 19 May 2009 | Digg This Article | Source: GoldSeek.com
Previous Articles by Rick Ackerman
|
