The Dollar Index came down hard last week after topping to-the-exact-penny at a 106.84 target that had been advertised here. The rally was due for a rest, but I doubt the peak will endure for long. The ABCD rally pattern shown should help us gauge the health of the dominant uptrend. If DXY achieves D=106.64 without providing any single- or two-level pullbacks for a 'mechanical' buy, that would affirm that pent-up demand for dollars remains strong. This is going to create big problems for the world's financial system, particularly for debtors who owe dollars, and for a central bank that remains committed to tightening.
Gold is close enough to the depths of despair that we might hope for a rally. However, since hoping is for losers, we'll just watch and learn to like it as the futures swirl down the crapper. Ordinarily, Friday's slight overshoot of D=1865.20 would be no cause for alarm, but in this case we'll infer the worst -- i.e., that the support should have held if gold were ready to turn. If you want a slim reed to grasp, use the 1855.40 target of this gnarly pattern. It's okay to back up the truck there, but only if you use a very tight stop-loss. (Note: I have not boldfaced and colorized the target because I don't want to draw attention to it.) _______ UPDATE (Oct 2, 9:19 a.m.): The $7 rally from within less than a dollar of the number given above would barely have paid for a Soho lunch, although the very tight trigger interval (TI) I'd advised would have prevented a loss. The subsequent relapse means gold is still in gold-is-garbage mode. A little overdone, don't ya think? _______ UPDATE (Oct 2, 11:07 p.m.): The futures look bound for the 1777.10 target of the reverse pattern shown here. I am awed by the viciousness with which the bullion bankers and their scummy friends in high places have defenestrated, drawn-and-quartered, impaled and flayed those who might have intended to take delivery on September COMEX contracts. When there's no 'physical' available to supply, Their solution is to crush demand.
Putting aside the depressing question of how low Silver could go, the 21.75 downside target of the pattern shown is pulsating with opportunity. It's the legit (i.e., non-sausage 'B' low) that brings this picture together. I have not boldfaced the target (or a similar one in gold) because I don't want to queer its potential magic for purposes of bottom-fishing. The daily chart requires a large trigger interval of 37 cents, but I'll suggest looking for a smaller 'natural' trigger on, oh, the 15-min chart when the futures get within 25 cents of the target. _______ UPDATE (Oct 2, 11:28 p.m.): This chart shows how the trade suggested above could have produced a $1,200 win on four contracts going against today's overwhelming downtrend. The 'natural' trigger shown was the only available choice, and it yielded an interval of 5 cents. However, the trade was signaled at 6:15 a.m., well before the regular session began, and many of you have been asleep.
GDXJ was headed higher when the week ended, but the chart suggests this was no reason to celebrate. Although a strong rally to the green line would set up an appealing 'mechanical' short, I doubt it will get there. That means we could try to squeeze off the short at the red line, a type of trade we don't do that often. The stop-loss would be at 34.87, calculated by taking a third of what we stand to gain if this vehicle eventually drops to D= 30.36. Eagle-eyed Pivoteers might notice that the impulse leg is not strictly kosher, since the would-be 'external' low at 34.04 recorded on March 16 is in the shadow of June 29's 33.95 low.
Price action last week in the charts of three bellwethers suggests that this year's 'October surprise' could arrive right on schedule and that it could be a doozy. The first shows the dollar's so-far shallow correction off a minor Hidden Pivot rally target. This portends yet more strength, threatening to turn Powell's tightening regime into a globally ruinous debt deflation. Second, rates on the 30-Year Bond topped at 4.81%, precisely matching the prediction featured here last week. And now let me add this detail: If yields pop above 4.81%, they should be presumed headed for exactly 4.98%, a top that I regard as very unlikely to be surpassed. Interest rates presumably would fall thereafter -- for a long, long time -- discounting a weakening economy bound for, if not depression, then at least a very severe and prolonged recession. Don't expect falling rates to stimulate economic growth, since asset values will be falling even more steeply. That means rates will actually be rising in real terms, as occurred during the nearly fatal debt deflation of 2007-08. One of the updated charts packed quite a surprise: NYMEX Crude. We've been quite bullish on oil since early this year, when quotes were lingering around $72/barrel. However, the rally turned unusually steep in May and hit a high last week at 95.03 that fell a few dollars shy of a $98 target we'd been using as a minimum upside objective. This prompted a look at a longer-term chart. Lo, the weekly bars imply an impending run-up to $117 a barrel. Moreover, last week's decisive move through the pattern's Hidden Pivot midpoint at 90.67 implies that a surge to $117 is no worse than an even-money bet. Could this mean that a long-anticipated war in the Middle East is about to break about?
I've been bullish on the dollar since...forever, always rationalizing my bias with a deflation-based argument. However, Tom Luongo's latest newsletter provides a simpler answer, at least for the near term, to wit: Fed chairman Powell and Eurobank President Christine LaGarde are in a policy battle that the latter can't win. Although Power undoubtedly is serious about staying tight, LaGarde has gone wobbly out of fear that Europe's already faltering economy could go down the tubes with another turn of the screw. We'll be betting aggressively on Powell, and therefore a strengthening dollar, in the weeks ahead, so stay tuned to the chat room (and to your Rick's Picks email 'Notifications') for timely strategic guidance. _______ UPDATE (Sep 26, 6:40 p.m.): We've been using a Hidden pivot at 106.32 as a minimum upside target, hut here's a pattern I like even more that projects to 106.84. As always, an easy move through it would imply the uptrend is likely to continue. _______ UPDATE (Sep 27, 3:41 p.m.): Following a steep upthrust in the early going to exactly 106.84, DXY head-butted the Hidden Pivot several times before turning sharply lower. 'Where to next?' will depend on how impulsive the pullback is and how long it lasts, but we can read the trend accurately (and, perforce, profitably) in real time as the retracement lengthens on the lesser charts. The target was two months in coming, so it should not be a pushover. If it is, that will be telling us the uptrend is, and remains, quite strong.
The dinky little 'A' high I've selected does not provide a worst-case low for this cinder block, but the 88.93 downside target shown will do for now. Only a powerful rally that creates an island-gap reversal could prevent a further fall, but we would first have to imagine its cause to become believers. It's easier and arguably more plausible to picture 'A' at the 102.95 high recorded in mid-July. That would give us a new, lower target at 86.31. It would equate to a 4.81% yield on the long bond, by the way. See this week's 'Morning Line commentary for further details.
The futures were saved by the bell on Friday after a deftly faked show of strength in the first two hours succumbed to gravity as the afternoon progressed. After being up more than 30 points, the December contract finished the week down nine points, just off the intraday low. There was discernible anxiety as the reversal unfolded, but no real urgency until the final 3o minutes. Fear is bound to carry over into Sunday evening, so look for a further fall to at least 4321.75, the Hidden Pivot target of the bearish pattern shown. Bottom-fishing when the futures get within a point of that number would require a trigger interval (TI) of 18 points, so the trade is recommended only for those of you who can pare that down to 6 points or less using a 'camouflage' set-up or your own trick. As always, an easy breach of so compelling a support would portend still lower prices to come. _______ UPDATE (Sep 26, 6:45): The futures caught a 15-point bounce from 4321.75 that last for two hours before succumbing to gravity. I am now focused on a 4220.49 downside target for the S&P 500 cash index that lies 53 points below. See my chat room post for further details. Here's the chart.
It has taken the stock two weeks to return to lows where we cashed out of puts for as much as a hundred times what we'd paid for them a week earlier. The trade came off an appealing 'mechanical' sell signal generated by the pattern shown, and there is no reason why this pattern cannot continue to work for us. For starters, that means we can expect more slippage to at least p2=159.95 once the midpoint Hidden Pivot at 172.24 gives way. This looks unavoidable, although I don't expect the dirtballs who manipulate AAPL for a living to go quietly into the night. The 164.90 downside target given here earlier remains viable and can be bottom-fished with a reverse pattern trigger interval of 4.50 points. Ask for guidance in the chat room when appropriate if you're unsure about how to whittle this down to a reasonable number.
I've reproduced a chart that goes back to 2019 in order to show clearly that there has been little drama in more than three years. Comex futures are trading about where they were in the summer of 2020, meaning there has been no net gain since then. The chart is unmistakably bullish and projects to as high as 2326.30 (basis the August contract), but that doesn't mean gold couldn't fall by $200 or more before it heads into, if not the wild blue yonder, then perhaps toward a towering cumulus cloud on the horizon. A pullback to x=1864.10 in the meantime would trigger a 'mechanical' buy with excellent odds for success, but we'll wait until it gets there before we discuss entry tactics.
