Inspired by gold's ballistic move on Friday, I've used an ambitious reverse pattern to project a 42.09 rally target. It is clear and compelling, implying it will work not just for getting trend and targets precisely right, but enabling some profitable trades along the way. The red line (p=36.28) should produce a stall, possibly tradeable, since it closely coincides with a 'voodoo' resistance. Still less uncertain is that GDXJ will achieve the midline, a 7% move from here.
Last week's breakout from an impacted consolidation zone that was in its tenth month brought greater clarity to a big-picture pattern projecting to as high as 124.72. DXY could still fool us with a swoon beneath July's 99.59 low, but this seems most unlikely, given that the dollar has finally caught the scent of a central bank crisis looming in the not-too-distant future. The picture is so grim for the ECB, which issued trillions of euros in snide carrying negative rates, that the Fed is certain to come out on top. That means the dollar will, too, even though the debt deflationary this will produce is an unwanted outcome, especially by Europe. Perhaps they should start gathering firewood now, since there are going to be many cold winters in the future if fuel must be purchased from their good friends Russia and Iran. ______ UPDATE (Oct 20): An imminent close above the green line for a second consecutive month would make p=112.16 our minimum upside target for the near term.
I've altered the picture somewhat to produce an uglier but still logical downside target at 146.25. That's $38 below the one at 164.90 given here previously, and there is compelling clarity to support it, including the precise bounce from the red line, p=172.24. The pattern has already produced a $13 winner from a 'mechanical' short at the green line and would likely produce another if this remarkably vicious short-squeeze can get there. I say 'remarkably' because AAPL swam perversely against the tide for most of last week. Stay tuned to the chat room and your email 'Notifications' for tradeable guidance, keeping the 100-bagger from puts bought a few weeks ago in mind.
Like most rallies, last week's dubious surge drew its power almost entirely from short covering. When war broke out the previous weekend, few traders came to their desks Sunday evening eager to buy stocks. Since there was no institutional selling -- there never is, except for the last few days of each quarter -- it was left to Joe Sixpack and the usual village idiots to dump index futures into a void that the smart money had thoughtfully prepared for them. Sellers were spent by the opening bell, and when stocks failed to go lower on scary news from Gaza, disappointed bears began a short-covering spree that didn't peter out until Thursday's opening. Things went steeply downhill after that, achieving a low on Friday precisely at the top of Sunday's gap. It was a typical week in which sound and fury ultimately signified nothing. Looking ahead, expect stocks to fall in earnest, since the only buyers in town -- panicky bears -- have been decimated. Most immediately, this should produce a test of the 4236.00 low recorded on October 4. _______ UPDATE (Oct 18, 9:23 p.m.): Far from being decimated, it would appear bears have been tortured sufficiently to reinvigorate their worst instincts. Short-covering all day long was painful to watch, let alone experience, and even though the futures finished lower, the rally looks like it's about to get second wind. Use this pattern, with a 4461.75 target, to get a tradeable handle on the futures. The first 'mechanical' trigger off our sweet spot seems likely to produce a winner.
Price movement in this vehicle, a proxy for the biggest, deepest commodity market in the world, is so squirrelly that the chart, stripped of its right-hand axis, could be mistaken for that of a Vancouver penny stock. Even so, there is no trouble discerning the 98.72 rally target, nor in sticking with it through the inevitable feints, swoons, kamikaze dives and bottle-rocket rallies. The target is a presumptive weigh-station enroute to the $117 target of a bigger pattern that was the subject of a recent commentary.
The chart journeys back to 2021 to capture the weight and relentlessness of the downtrend, a full-blown bear market that has cut the price of this vehicle by 53% since its covid-era peak in March 2020. Over that time, interest rates on the long bond went from 0.8% to 5.05%, a so-far high achieved two weeks ago. Was that the top? I doubt it and still think TLT will fall to the 80.84 target before it can turn around. To even hint of a better outcome, the current rally would need to exceed 89.49, an 'external' peak recorded Sep 29 on the way down.
Finally, a rally in gold that looks capable of leaving the $2000 barrier in the dust! This one is being pushed not only by the threat of escalated conflict in the Middle East, but by the dawning realization that a strong dollar and rising interest rates are about to trigger a crisis for the world's central banks. Europe will be even more vulnerable than the U.S., since it cannot loosen credit as long as the Fed is tightening or even just vamping. The ECB will also have to deal with trillions in euroloans it made at subzero rates to give Europe's dying economy the appearance of solvency. Pegging the currency to gold is a logical way to keep the euro from collapsing while Frankfurt's best and brightest cobble together a plan. But hardening their currency so that it can compete with the dollar in the meantime will be enormously costly -- and deflationary, since it will increase not only the cost of borrowing, but the cost of servicing loans already on the books. Factor in the prospect of soaring oil prices and you can see what a mess the world is in. A commentary here three weeks ago featured a chart projecting a rise to $117 a barrel. This was before war broke out in the Middle East, but a surge of that magnitude or worse now seems likely if Iran joins the conflict. The Old AAPL Trick Recall that after the war erupted on Saturday, October 7, with an assault on Israel by Hamas, the markets seemed relatively subdued when trading resumed Sunday night. We can attribute this seemingly absurd behavior to the deft touch of the dirtballs who manipulate stocks, bonds and commodity prices for a living. They are very smart guys, especially in dire circumstances. And even
DaBoyz goosed stocks on Friday as investors took a day off from pondering the darkening implications of high interest rates. Bad news can sometimes take a back seat to the technical forces that drive shares willy-nilly, and this was one of those days. It did not alter the likelihood that the futures will eventually fall to the 3956.25 target shown once investors return to their senses. If Friday's fake rally hits x=4503.00, that would trigger a 'mechanical' short, so stay tuned to the chat room and/or email 'Notification' if you'd like actionable guidance in real time. _______ UPDATE (Oct 12, 8:30 p.m.): The short-squeeze countertrend in ES may have run its course with today's bull-trap high on the opening bar.
AAPL's handlers milked Friday's cluelessness for all it was worth, which turned out to be not much. The rally got past the first of three tightly spaced 'external' peaks going back to early September, meaning the move is not yet impulsive on the daily chart. A print at 180.31 would do the trick, but we should remain skeptical until such time as that happens. If the rally hits x-183.67, that would trigger a 'mechanical's short, stop 189.99, but we'll cross that bridge when we get to it. _______ UPDATE (Oct 12, 8:42 p.m.): If this vicious short squeeze hits x=183.67 tomorrow it will likely be the rally's last gasp, and we'll want to short it. Stay tuned to the chat room and be prepared for guidance via email toward day's end, since getting a good price on put options could be tricky.
Friday's rally was impulsive on the hourly chart and the best we've seen in a week. However, if bulls meant business, they would have taken out the 1849.30 peak recorded on October 3 to complete a hat-trick of 'priors'. Instead, they stopped a hair short of it, presumably too out-of-breath for a final-hour sprint to the finish line. We should give them the benefit of the doubt nonetheless, since the shallow correction off the intraday high suggests that at least somewhat higher prices are coming. My advice is to keep your expectations low until we've seen how the rally interacts with a couple of minor Hidden Pivot resistances. _______ UPDATE (Oct 12, 8:55 p.m.): A sharp rally reversed just as sharply this morning when the regular session began, but not before buyers had pushed the futures above some external peaks recorded at the end of September. This generated a bullish impulse leg on the hourly chart, shortening the odds of another leg up once the correction has run its course.
