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February 17, 2020 | Be Sure You’re Strapped in Before the Bell!

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

 

Index futures were getting drubbed Monday night on news that Apple’s Q1 revenues will take a hit from coronavirus-related work slowdowns and lower iPhone sales in China. However, it remained to be seen whether this so-far controlled selloff will become an avalanche when stocks open Monday morning. If it were a Sunday night, the FAANG/lunatic stocks would be moving lower in tandem with the E-Minis. However, it would appear that exchange rules governing holiday trading have left stocks temporarily frozen at Friday’s record highs. Will they plummet on the opening bell in order to catch up with the overnight selloff? My hunch is that they will and that the plunge will be unusually nasty.

Ordinarily the arse bandits who work the night shift tend to let stocks fall hard on Sunday night when there has been disquieting news over the weekend. Their strategy is to take prices down low enough to dry up sellers, making it easier to run stocks back up the old wazoo after the bombed-out opening bar. This can be a tricky engineering feat, but it invariably succeeds when DaBoyz flip the switch to send short-covering bears into a full-blown panic. In this case, though, at the opening bell, the pros will be hard-pressed to predict the exact extent of the FAANG selloff about to unfold.  But once it begins they’ll need to let it run its course and bring the broad averages down even lower in sympathy.

Their One-Trick Pony

It’s a feedback loop that is bound to be worse than on a Sunday night, when stocks are free to trade on the news rather than having to wait half a day to catch up with it. The Masters of the Universe could find themselves deeply underwater by mid-day, but don’t expect them to sit for long on all the shares they’ve had to suck up. They will attempt to goose bears as viciously as possible to get the obligatory short-squeeze going. Given the circumstances, this squeeze could be memorable — the moreso, perhaps, if their one-trick pony should go lame in the attempt.

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February 17th, 2020

Posted In: Rick's Picks

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