By midweek, we had reason to expect a 2% drop to at least 5429.38, the midpoint Hidden Pivot support shown in the chart. Unfortunately, the small penetration of this level in the late afternoon on Friday implies more slippage is likely. Now, you can use the magenta line (p2=5309.19) as a minimum downside objective. But be prepared for additional weakness down to as low as d=5189.00, the blue line) if selling snowballs. There is no reason to believe the dropoff from a range of small peaks recorded over the last two weeks will be any worse than that. However, and nevertheless, we should be mindful of a possibility I first broached here months ago -- i.e., that because the range of small peaks occurred below mid-July's record summit, the S&Ps may be replicating the lower highs and lower lows that occurred in the summer of 1929, just ahead of the stock market's crash in October 1929. Microsoft's performance will be crucial to the way we view these developments, so be sure to read the latest MSFT 'tout' immediately below for more-finely nuanced insights.
We've had our sights trained on a 449.42 rally target for a month. Given MSFT's premier bellwether status, this was sufficient reason to infer that the bull market as a whole had further to go despite a mounting pile of good reasons for its imminent collapse. We also said that if the stock corrected down to 401.54, this would present a back-up-the-truck buying opportunity for an implied 48-point ride back up to 449. The first phase of our plan came to pass last week when MSFT plunged 17 points, or 4%, before settling at 401.82 ahead of the weekend. Although the stock initially trampolined $10 after kissing the target in the early morning, it relapsed to end the day, and the week, with an $8 loss. Although this may have been scary for investors who have ridden the stock down from the record 468 achieved in early July, it still looks like a juicy buying opportunity for those who have been waiting for fire-sale prices. Indeed, the 'reverse abcd pattern' shown in the chart would appear to offer great odds for anyone buying at the green line. A $16 rally to the red line (p=417.50) seems assured, although a follow-through to D=449.42 can no longer be confidently touted as a near certainty. Even if the stock does achieve D=449.42, that would leave open the possibility of a 1929-type secondary top in both MSFT and the broad averages. Alternatively, if MSFT continues to fall, surpassing the C=385.58 low of the pattern projecting to 449.42, that would be strong evidence that the bear market investors have feared for years has begun. _______ UPDATE (Sep 11, 9:49 p.m.): MSFT has now rallied $23 from within a hair of the 401.54 correction target flagged above, in my tout, my weekly commentary and the chat
Two weeks ago, we said this bitcoin proxy would fall to at least 54,701 from around 60,000. And so it has, although the tradable reversal we might have looked for at that Hidden Pivot support failed to materialize on Friday under hard selling. That will have bearish implications for the near-term. Specifically, it implies a further fall to at least 49,543, the pattern's 'secondary' Hidden Pivot support. Odds are about 80% this will happen. However, they are no worse than 70% that there will be further slippage to D=44,386 in order to fully correct this hype-driven, fire-breathing dragon. Although that might sound like a painful outcome for investors deeply immersed in bitcoin, it is in fact scripted to bring cryptos down to levels where it can be safely accumulated more or less indefinitely. It helps that there are no real sellers in bitcoin, let alone shorts; and that its biggest boosters, the money center banks, have precious little skin in the game. They have helped huckster bitcoin mainly because their clients like the stuff, and because it will retain speculative appeal until the inevitable day when cryptos fall to their fair, intrinsic value near zero.
We've been using an ambitious rally target at 2771.70 (newly corrected) for months, but the wait has begun to impact the odds it will be reached any time soon. The midpoint Hidden Pivot at 2549.30 has become a barrier to October Gold's upward progress, and there can be no guarantees the target will be achieved until such time as buyers push decisively past that number. So far, they have failed to breach it, having spent the last month screwing the pooch just below it. A pullback to the green line (x=2438) may be needed to give the futures a rest and a running start. That would generate a 'mechanical' buy signal in theory, although it would not be strong because the pattern's C-D leg has dragged on for long enough to squander the bullish energy created by the A-B impulse leg. For now, though, the longer the futures hover just beneath p, the greater the chance they will relapse 50-100 points to regroup for another try. ______ UPDATE (Sep 12, 11:30 a.m.): No pullback or running start was necessary, since the futures have turned the 2549 midpoint Hidden Pivot into chop suey this morning. The move looks sufficiently powerful to all but guarantee a run-up to at least p2=2680.50 over the near term, and thence to the 2771.70 target flagged above.
I’ve been waiting for the futures to fall to the 27,800 'd' target of the reverse pattern shown so that I can get a reliable and precise handle on trend strength. Can a beaten-down Silver summon the moxie to embark on a bull cycle that would challenge May's imposing high at 33,500? If so, it will need to put up a few strong bars on the daily chart, and soon. My gut feeling, however, is that the December contract has languished for too many days just a hair above d=27.800 to imply that it is gathering such strength. More likely is that the futures are fixing to dip below 'd', then test the key low at 26.885 recorded on August 8. _______ UPDATE (Sep 13, 9:41): The futures have spiked precisely to the D=31.04 target shown in this chart. Expect a pullback, but if not, count on more upside to 31.795, a Hidden Pivot calculated by sliding the 'A' low down to 27.06, recorded on 8/7.
After lightly kissing the 49.02 midpoint resistance of a conventional ABCD pattern projecting to as high as 72.23, GDXJ has lapsed into a retrenchment that threatens to become a prolonged affair before the uptrend can resume in earnest. Such a correction would trigger a 'mechanical' buy signal at the green line. However, with the A-B impulse leg more than four years distant, the likelihood of quick gratification would be slim. My gut feeling is that GDXJ will be 'just a trade' for the foreseeable future, albeit within the context of a bull market designed to test the patience of even the most ardent bulls.
I presented a daily chart here last week that implies chances of a rally to at least 105.49 are excellent. That would correspond to yields of around 3.64% on the long bond. The weekly chart shown is far more bullish and offers a glimpse of what eventually could unfold in the market for Treasury debt. With a potential move in TLT to 150.12 (!), the projected low on rates would be 2.53%. This seemingly could come about only in the context of a very deep recession or a full-blown depression. There is no predicting what the real rate of return would be, although it seems likely that with asset values deflating, a 2.34% rate would impose a crushing real burden on debtors. More immediately, expect a drop in TLT, and a corresponding rise in rates, after the latter touches 3.84%. That is the midpoint Hidden Pivot support of the pattern projecting 2.53%. _______ UPDATE (Sep 13, 11:31 a.m.): A rally to x=100.57 would trip a compelling 'mechanical' short, stop 101.25. The downside target thereupon would be D=98.56.
Finally, a move that warrants changing the marquee! It was steeply downward, almost touching the 66.84 'D' target of the conventional pattern shown. There are two reasons to think crude's 20% plunge since July from the low 80s will reverse here. For one, the pattern associated with the 66.84 Hidden Pivot began with an impulse leg that surpassed an 'external' low. This means that it is not what I call 'sausage', and that the resulting ABCD therefore has a greater chance of producing useful Hidden Pivot levels. Another reason a bottom is likely here is that the D target is located very close to a voodoo number, a proprietary output about which I will say no more.
I continue to believe the bull market's fate can be divined simply by paying close attention to price action in Microsoft shares. The company is not only the second-largest in the world by capitalization, slightly behind Apple; it is also the most important. That's because its huge stream of recurring subscription revenues from Windows and the Office suite is all but impervious to economic downturns. This is not true of Apple, whose iPhone sales will plunge in the next recession. So what is Microsoft saying? We've been expecting the stock to hit 449.42 for more than a month. Although that would be well shy of the record 468.35 achieved on July 5, it would mark a secondary top corresponding to the one that ushered in the 1929 Crash and the Great Depression. There remains the possibility the implied rally from Friday's low could head into the wild blue yonder after achieving 449.42, but we'll consider this scenario more seriously if and when the stock blows past the target. One thing that makes the wild-blue-yonder prospect somewhat less likely is that the E-Mini S&Ps on Friday breached a key support decisively enough to imply they are headed significantly lower, to at least 5189 from a current 5403. We should know by no later than midweek whether they are about to drag MSFT lower, rather than the S&Ps being pulled higher by a resurgent MSFT. Whoopee Cushion Bounce In the meantime, some Rick's Picks subscribers may have taken long positions in MSFT over the weekend, since I'd proffered 401.56 as a perfect place to back up the truck and buy 'em hand-over-fist. When the stock plummeted on Friday ahead of the opening, it kissed that number and Whoopee Cushioned $10 higher before giving it all back by the closing bell. If the
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,
