Do new record highs lie just ahead? There are three possibilities I broached here and in the Rick's Picks chat room over the last several months: 1) the supposed dog days of summer produce a powerful bear rally that fails to exceed any record peaks achieved in June or July; 2) the rally achieves a marginal new high similar to IBM's take-no-prisoners trap in 2008; or, 3) after a brief pause, the endless buying stampede gives way to yet another manic surge. At the moment, number two seems the most likely to me: new highs are coming. However, and as I have implied, this should make us more cautious rather than more bullish when the next breakout occurs. As for the two other scenarios, the more likely in my estimation would be #3, a ballistic launch into the wild blue yonder. The permabear in me could puke just thinking about so ridiculous an outcome, since there are zero good reasons for the aging bull to keep chugging along indefinitely. But as we know, having 'zero good reasons' is reason enough for the rampage to continue. This is contrarian logic you won't hear from the punditry's army of navel-gazing shills, let alone from demon-possessed, midway barkers like Jim Cramer. But it is nonetheless true: stocks are climbing not because of the economy, or corporate earnings, or the election cycle, or the prospect of Fed easing, but because investors are out of their greedy fucking minds. Nor would it be the first time mass insanity has persisted for much longer than any of us could have imagined. As for the remaining scenario (#1), which implies last week's secondary peak will replicate the fatal top that occurred in August of 1929, it looks like it is about to come a cropper. If so,
The stock remains an odds-on bet to achieve the 449.42 rally target shown. This is one reason why, in the ES tout above, I've favored the scenario in which the futures make a marginal new high before a bear market begins in earnest. If MSFT should pull back to the green line first, however, that would set up a 'mechanical' buying opportunity that would be too juicy to pass up. It would be good for at least a one-level ride, but probably more, as my target forecast implies. ______ UPDATE (Sep 5, 3:10 p.m.): This is still the only stock we need follow for an accurate, high-confidence read on the bull market. The 449.42 target is still very much in play; moreover, the stock would trigger a back-up-the-truck 'mechanical' buy if it falls just a little more, to x=401.54 (stop 385.57). ______ UPDATE (Sep 6, 9:05 a.m. EDT): I was barely stirring when MSFT took a Whoopee Cushion bounce this morning from within a hair of my back-up-the-truck number. But if you were alert to the opportunity, it's time to cash out half of the position for around 409, the current price. Check the chat room for some Howard Cosell commentary on all the excitement. Here's what a Whoopee Cushion bounce looks like in stop-motion.
Gold's ascent toward the 2760.70 target shown has paused in a logical place, at the p=2543.90 Hidden Pivot midpoint of the pattern. Although the strong push the futures got last February when they left the launching pad is reason to expect the target to be reached, we'll be better able to assess the odds once we've seen how buyers handle resistance at p. A stab through it would all but guarantee more upside to at least p2=2652.3, the secondary pivot. In the meantime, we should alert to the possibility of a correction to the green line, x=2435.40, since that would create an excellent 'mechanical' buying opportunity.
December Silver has spent the last four months basing for a presumptive shot at D=37.249, a 28% climb above last week's close. Bulls gave up some ground last week, but only after exceeding the 30.00 'd' target of a reverse-pattern rally by enough to suggest the uptrend still has plenty of vigor. That doesn't rule out a nasty correction, even to as low as the green line (x=23.61), but we'll treat this possibility as a longshot bet unless a correction takes the futures beneath the recent low at 26.885.
Gold futures and this ETF proxy for mining exploration companies have stalled synchronously at Hidden Pivot midpoints tied to significantly loftier targets -- the latter to as high as 72.23, a 53% move from here. There is no judging yet whether such a leap is imminent; that will require a decisive push past red-line (p) resistance. For now, though, we shouldn't assume anything, since the red line has yet to be breached in either vehicle. Please note that GDXJ would become a bankable 'mechanical' buy if it were to return to the green line (x=37.41), as well it might.
More bad news for permabears, it would seem. At the start of last week, the futures easily pushed past d=5573 of the reverse pattern shown; then they spent the next few days frolicking above it before head-butting a stubborn voodoo resistance to end the week. All of this was doubtless propagated by shorts intent on torturing themselves, and there evidently are way too many for stocks to collapse at the moment. The potentially good news for all you collapsitarians is that my forecasts from months ago foresaw this presumably doomed bounce with a chart of IBM that shows how, just ahead of the Great Financial Crash of 2007-08, Mr Market set the hook. He did this so cleverly that the bear market took everyone, bulls and bears alike, down with it. As you can see, wreaking havoc on investors required a feint to marginal new highs after the broad averages seemingly had topped two months earlier. That is what I foresee now, as autumn approaches. Stay closely tuned to Rick's Picks if you believe that the stock market is long overdue for the wrenching correction that alone can return investors to sanity and prudence.
MSFT is taking its sweet old time getting to D=449.42, but it will get there. That's very significant, because as long as there's an outstanding rally target in this bellwether, the broad averages will continue to waft higher. A pullback to the green line (x=401.54) would offer an excellent opportunity for bottom-fishing or augmenting a long position. However, I doubt we'll see such weakness before the stock takes another leap skyward. I will signal any impending swings if they have tradable consequences, but there is little in prospect at the moment.
Sellers crushed the 102.4o downside target featured here last week, so I've substituted a longer-term chart with a more significant target at 93.79. We'll know better whether it is likely to be reached once we've seen how the midpoint support at 100.57 fares. It held precisely back in December, but I wouldn't bet on it to hold this time. If DXY trades significantly below it (i.e., 99.50 or lower), however, or closes below it for two consecutive weekly bars, that would make further downside to p2=97.18 an odds-on bet.
You don't need to be a chartist to see how bulls masticated major trendline resistance last week, setting up October Gold for a push to at least 2589.60 over the near term. If that Hidden Pivot doesn't stop the rally, 2597.80 will be the next stop, and thence 2752.20. The provenance of those last two numbers can be seen in this chart. In the meantime, any one-level pullback on the second chart would signal a 'mechanical' buy for a presumptive ride to D=2597.80. Intraday buying opportunities abound on the lesser charts.
September Silver spent the week munching on midpoint resistance at p=29.700 ahead of a presumptive push to at least p2=31,298, and thence D=32,895. There's always the chance Mr Slammy could bludgeon the futures lower for a few days, but a fall to x=28.103, however unlikely, should be regarded as a great buying opportunity. Silver moves much like crude, which is to say, with wicked, gratuitous feints in both directions that could unnerve anyone not proficient at interpreting charts. Focus on impulse legs of varying degree and you'll never go far wrong.
