The lazy drift of stocks has become almost too boring to watch, although we dare not avert our eyes for fear of missing Wall Street’s next wilding spree. During the last four sessions, the broad averages have hit bottom early in the day after easing lower overnight. In each instance, the Dow Industrials were down about a hundred points before the selling dried up.  Then, four hours worth of see-saw action ensued. Finally, in the last hour or so, with bulls and bears alike quite frazzled, shares recouped most of their losses in a flurry of short-covering, settling near their intraday highs. This pattern is shown in the chart below.

Usually, when the stock market’s behavior becomes so repetitious as this that we see easy opportunity in betting on it, the game changes. And that’s about where we are now – i.e.,  all but certain that, in order to reap effortless gains today, we need only buy an E-Mini index contract an hour into the session, when the Dow is down around a hundred points, and then sell it at a higher price five hours later.

‘Curing’ Greed

So, how might the game change in order to thwart us from making money so very easily as that  – or, nearly as likely, cause us to lose our shirts by betting on the obvious?  One plausible answer is that stocks will continue to fall after reaching in the first hour what we -- meaning you, I and nearly everyone else -- will mistake for the day’s low. That is a common way by which such greedy expectations as we have come to hold are often “cured.” A second imaginable way would be for stocks to open higher and then continue up, up and away, stranding and confounding the multitudes who had planned to buy the dip. However, we doubt conditions are right for that: shorts are not quite nervous enough, and earnings news not quite bullish enough.

There are of course numerous other ways in which Mr. Market could trick us. But the one thing all of the scenarios we might imagine will be found, after-the-fact, to have in common is that they will trash our expectations so badly as to cause us to expect almost nothing so confidently, at least for a while.

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Midnight Briefing

There’s good news for traders who were unable to attend the Morning Briefings that Rick held in June before the opening bell. To gauge demand for a late-hours briefing, especially from traders in Europe and Asia, Rick will hold a Midnight Briefing on three successive days next week: Tuesday, Wednesday and Thursday, August 4,5 and 6, starting just after midnight EDT. Click here to sign up.

These 20-minute sessions will begin at 12:01 a.m. EDT (GMT-5:00).  During this time, we will attempt to identify timely trading opportunities mainly in the E-Minis and Comex Gold.  Last month’s briefings were enormously popular, drawing as many as a thousand traders on some mornings.  To reserve a place, register now.

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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 Thursday, 30 July 2009 | Digg This Article