There was hubris in my assertion last week that the perfectly formed head-and-shoulders pattern that has been taking shape since April would mutate into a 'surprise' breakout to the upside. However, the chart shows what to expect if this forecast proves to be flat-out wrong. There is that possibility. The August futures would fall to 2204.20, completing the H&S pattern, before they could find traction. Moreover, the Auggies would become a juicy 'mechanical' short if they rally over the next week or two to the green line (x=2408.80). The pattern is quite gnarly because of the double top, but I've seen this set-up work perfectly in the metals before (do NOT tell your friends if you plan to bottom-fish there, as you should). Rest assured, however, that even a $200+ dive as described would not mar the otherwise bullish look of the long-term charts. If you're still worried, here's a continuous monthly chart that shows the ostensibly distributive head of the H&S to be occurring above the 'D' target of a completed pattern stretching back 15 years. That is inarguably bullish no matter how nasty this correction gets.
Silver's correction since topping at 32.75 on May 20 has created a distinctive channel that grows more ponderous and tedious by the day (see inset). If the July contract falls yet again to the lower line and this happens within the next 4-6 days, that would imply a low near 27.50. However, here's a weekly chart that puts that in a long-term context that is clearly bullish. It shows a stall to have occurred in a logical place, a secondary pivot at 32.41. But even a nasty pullback now to as low as x=23.32 would still be technically constructive and generate a juicy 'mechanical' buying opportunity. I strongly doubt silver bulls will need such a rebuke after a nearly two-year consolidation begun two summers ago, however, and that implies the July contract can be bought 'mechanically' at p=27.873 with a stop-loss at 24.84. This is a theoretical 'do', but I'd suggest seeking guidance in the chat room if the opportunity takes shape.
If you're wondering when the miners are going to take off, this week's chart offers a sodden dose of reality. Notice first that GDXJ is currently trading about where it was in 2013. Lows a few years later near $15 followed the cliff dive from 2011's exhilarating precipice at 180. Who could have imagined that, 10 years later, mining shares would still be scuddling lazily along, tormenting investors more or less in proportion to the limit of their patience? Yes, this ETF could take flight at any time, like a bat from hell. And it will -- just not on our time. If there is anything to console us in the meantime, it is the ease with which this vehicle's gratuitous swings can be traded. Now, for instance, you can stay short down to 38.32, or do covered writes until then, and then reverse your position when the target is reached. That would be 2.60 below the so-far retracement low off May's 47.25 peak. Don't sweat the details.
Hey, all you twenty-something, failure-adjusted, peach flavored hard seltzer-drinking, avocado toast-munching, downwardly mobile, squishy-gendered, Robin Hoodie, World-of-Warcraft miscreants: Listen up!! If you're as desperate as I think you are to fatten your crypto wallets, you'll need to pay up to find out exactly where bitcoin is headed next. Hint: The last three digits of my current price target are xx191. This will be a last-chance, bargain-basement retracement low before bitcoin blasts off for hyperspace. I've published the super-secret correction target in my chat room, and you need only click here for a free, two-week trial subscription that will give you instant access to the chat room and all the other nuggets of tradeable information that lie behind the Rick's Picks paywall. No credit card is necessary, since that would only add to the unpaid balance, metastasizing at 21.99%, that has been devouring you limb-by-limb like a flesh-eating bacterium. _______ UPDATE (June 29): I've lowered my precise correction target (hint: it is below 56,000), a modification that has changed its last three digits to xxx709. UPDATE (July 5): Whether you subscribed or not, I hope my warning prepared you for the disaster that has unfolded in bitcoin. It has actually exceeded the original downside target, and so I've posted an 'extension target' in the chat room. It is my worst case at the moment and is below 51,000. Click here to sign up for a free two-week trial, no credit card required.
The disconnect between tight Fed policy and a U.S. economy on the brink of recession is growing more unsettling every day. A key question is which economy we are talking about, since there are two distinctly different ones that Fed actions can affect. The first is the economy of consumer goods and services. It is about to keel over dead. This will be a very big deal, since consumption accounts for 70% of the nation’s GDP. Most of it comes from the broad middle class, which is staggering under the weight of higher costs for nearly everything. Some of those costs, particularly for car and home insurance, must be fully borne no matter how high they go. Other outlays are discretionary and include food, travel and entertainment. Those sectors of the economy are close to being asphyxiated by high prices and high interest rates, even as delinquent payments for cars, homes, credit card balances and rent climb into the red zone. The other economy comprises financial assets, and it is flourishing as never before, dancing in the ether. Soaring stock prices and home valuations have made many Americans think and act like they are rich, and they are continuing to spend freely. An estimated 10% of America’s 131 million households have net worth of $2 million or more. That is an impressive number, but it is not nearly big enough to prop up an economy whose health is determined by the other 90%. These days, the 90% are barely keeping McDonald’s afloat, even if East Side foodies are paying reservation specialists $500 or more to snag a decent table on a Saturday night. A 1930s Spiral The two economies have put the Fed in an inescapable bind. If the central bank loosens, the additional inflation this is likely to cause
Bearishness on the U.S. dollar reached a shrill crescendo last week after the Saudis began accepting other currencies for oil. Some seem to think this will move the world away from the dollar as the global reserve standard, but I strongly disagree. The dollar's indispensability for propagating a $2 quadrillion derivatives shell game is far more crucial to its supreme status in the world's heavily financialized economy. Crude oil is certainly a large market, but it is puny in comparison to the nominal value of derivatives traded digitally around the world. The chart shows the dollar ensconced in the upper range of a wedge formation, An upside breakout without a cyclical correction down to the lower line would be very bullish, however illogical it might seem to dollar bears (aka 'inflationists'). When the breakout occurs, it will leave the punditry, eggheads and bloviators who would consign the dollar to ignominy with some serious explaining to do. Suck it up, dudes!
The September contract looks all but certain to reach the midpoint Hidden Pivot at 5587.75 shown in the chart (inset). The rally has been powered by relentless short-covering and gap-up squeezes on the opening bell, but I doubt it will punch through p effortlessly. There is always that chance, however, and if it does, then we should assume that D=6155.25 is in play. The target may look like it is miles above, but it is only a 12% move from Friday's close. The distance could be traversed in as little as 8-10 weeks, which, looking back to the summer of 1929, would warrant our being on high alert. Wall Street should be pretty stoked by then about Trump's impending return to the presidency, so it would be the perfect time for Mr. Market to pull the plug.
Energized by eight weeks of consolidation, MSFT has fist-pumped past a 430.58 target that had looked capable of stopping the bull in it tracks. It did, and quite precisely, but only for long enough to give bulls a running start on new record highs. They will nearly always be precisely targetable, and I've selected a conservative one for now to give us a confident handle on trend strength. Look for the stock to reach a minimum 452.35 this week, or 455.95 ii any higher. The latter number was calculated by sliding the point 'A' low down to a somewhat lower bottom a few bars to the left. Both numbers are shortable provided you use small-pattern triggers to cut the risk.
August gold finished the week with a second consecutive bottom at the 2304.40 'd' target of the reverse pattern shown. Equally encouraging was a reversal at week's end that left the futures sitting more than $40 above the lows. Someone in the chat room argued that gold's $430 run-up earlier this year needs and deserves more consolidation, and that may be so. However, we should be alert to the possibility that this newly resurgent bull market will not be so accommodating of investors who want more time and better prices to do their bargain hunting. Bull markets in their dynamic stage are characterized by nasty swoons and quick recoveries. In any event, our short-term bias should be bullish as the new week begins, and we should look for minor, uptrending ABCD patterns that reach or exceed their 'D' targets. Correspondingly, we'll also watch for corrective abcd patterns that surpass their midpoint Hidden Pivots. That is the most finely nuanced signal we have for flagging changes in larger trends.
The chart shows how July Silver replicated gold's reverse-pattern low last week. Although the actual bottom slightly exceeded the d=28.815 target, the subsequent bounce on Friday was strong enough to take the futures out of the danger zone. The move would become even more persuasive if the bounce can surpass 29.803, or better yet close above it. That is the midpoint resistance of a reverse pattern that began with a 29.525 low on June 5. The corresponding 'd' target of the pattern is 30.875, and we should expect it to be reached, at least, if p=29.803 is decisively penetrated.
