Is this move for real? I doubt it, but we'll let the chart tell us what to think. So far, last Wednesday's bear-trap opening looks only superficially impressive, since the follow-through failed to get past the 87.61 midpoint resistance (p=87.61) shown in the chart. TLT is a lock-up to reach it, but the upthrust would still need to vault an 'external' peak at 88.28 recorded on December 3 to demonstrate staying power. A decisive move through p would shorten the odds that d=90.32 will be reached while also lending credibility to the rally. If it is more than just flash-in-the-pan, performance measured against this pattern cannot but tell us the story.
We've come to expect crude's rallies to go nowhere, implying they will tend to reverse before breaking out. This one came close, though, before it smacked into a voodoo number that sent it reeling. The reversal occurred just a hair short of the watershed top at 81.53 recorded in June 2022. The long-term picture remains bullish nonetheless, and it's only a matter of when, not if, crude pushes above 81.53. So why have quotes held stubbornly above $65 for the last three years? Because it's a dangerous world, would be my guess.
The chart shows a possible path to as high as 6704.25, about 11% above current levels. Although it would seem to flout the solidly bearish implications of a longer-term SPX chart I presented here recently, the two can be reconciled by allowing most immediately for a hard selloff to the green line. That would set the stage for a powerful rally, although not necessarily one that would reach the D target. We'll worry about that when the time comes, but anyone who has watched dozens of 'mechanical' trades unfold in various time frames will see nothing unusual in the way I've drawn this chart. To avoid muddling the two scenarios, let me note that the more bearish one looks like a 70% shot, meaning this is probably THE top, even if it becomes a raggedy one.
Get Microsoft right, as I continue to remind you, and your forecast for the stock market can't go far wrong. The tech giant is among the most valuable companies in the world, with extraordinary profit margins tied to an 80% market share in operating systems. The subscription-based revenue model the company has put in place over the last decade is built to withstand a severe economic downturn. And as long as the shares continue to make new highs regularly, it's safe to assume the stock market will, too. The trouble is, MSFT hasn't made a new high in six months, raising the possibility it has entered a bear market. This would have occurred last summer when shares topped at 468 on July 5. The steep plunge that followed over the next 30 days took the stock down $83, or about 18%. That's two percentage points shy of a statistical bear market, although investors who have stuck by Microsoft - i.e., every portfolio manager on earth -- would find scant consolation in this statistic. Still, most of them probably have little doubt that new all-time highs await, and they could be right. But a chart stretching back to 2023 suggests persistent distribution, along with ponderous supply that has prevented a run-up to new heights. The chart would take on a rosier look, however, if the stock were to pop just 22 points, or 5%, surpassing an important peak at 455 recorded less than a month ago. MSFT could easily do that in a week, and we should not bet heavily against it. What About Bitcoin? A second, nettlesome concern for bears who have already placed their bets is the feisty performance of Bitcoin. Like Microsoft, it appeared to have made a very important top a month ago when it hit a
The chart shows a timely scenario with details that last week's view lacked. The emphasis is not on the price at which the S&Ps appear to have topped, but on what the first stage of the bear market might look like. It is a single-month chart rather than a blended one, and it shows the March contract falling to at least the green line (x=5589.38) on an initial drop. This would create a 'mechanical' buying opportunity, although we would surely attempt it only with a trigger pattern of small degree (aka 'camouflage'). I've promised you that we have little to fear from violent swings, since the Hidden Pivot Method excels at predicting their tops and bottoms; or even if failing at that, to allow us to trade extreme volatility without risking our shirts. I don't expect the week to start with a rally, but if DaBoyz pull out all the stops to distribute this hoax in the opening hour, don't pass up the opportunity to get short at 5990.38 with a tightly crafted rABC trigger.
Here's a view of the precarious ledge I mentioned in the current Morning Line. MSFT has twice pounded on the 415.57 midpoint Hidden Pivot support without penetrating it. The pattern is too obvious to be precisely dependable, but as I have mentioned repeatedly, midpoint pivots often work well even in lousy patterns. This p midpoint is well located to give us confidence in its prescience, since there is nothing structural to the left of it that our dull-witted competitors will conflate with 'our' unique support. If it is breached decisively, or the stock closes for two consecutive days beneath it, expect the selling to continue to at least p2=394.68. Since MSFT is still the world's most important stock, that would have quite bearish implications for listed stocks on exchanges around the world.
Last week's spike surpassed an important peak at 4.74% recorded last April. On its way to a presumptive high at 5.55%, the rally will face additional resistance at 4.87%, a 'voodoo number': and at the 4.99% peak notched in October 2023. If these invisible impediments do not put up a fight, it will increase the likelihood that the 5.50% target will be achieved. The two years TNX spent head-butting the midpoint resistance at 4.01%, then trying to break free of its gravitational pull imply there's a chance the rise in rates will abate somewhere close to the 5.13% midpoint between p2 (47.59) and D. ______ UPDATE (Jan 18): Rates on the 10-Year have rolled down from somewhat below the 4.87% voodoo number, but I'm not ready to infer the uptrend is weakening. Let's see if this presumptive minor correction can catch a bounce from this pattern's 45.22 'D' target.
Friday's move above my 2728.30 target was bullish and implies that a pullback would be merely corrective. I posted guidance that could have produced a profit shorting the retracement from the intraday high at 2735.00, but the position should have been covered before the close. This week, we could see more upside to as high as 2765.80, or even to 'voodoo' 2793.80, but more likely would be a pullback to 2678.60 first. You can try bottom-fishing there with a small rABC trigger to limit entry risk.
Although Silver looks likely to achieve the 32.380 Hidden Pivot rally target shown in the chart (and in last week's as well), it is not quite a done deal. Nevertheless, a pullback to the red line (p=30.763) could be bought 'mechanically' with a 30.244 stop-loss. It is unusual for me to suggest this trade, since we usually wait for a pullback to the green line. But there was such control and confidence in last week's ratcheting rally that we ought not to look for the exceptional opportunity that a retracement to the green line would provide.
The rally could go a little higher, but it would likely be corrective. The initial downside penetration of p=45.62 in December was sufficiently decisive to imply that GDXJ will eventually fall to D=40.21. In fact, the breach was brutal enough to warrant trying a 'mechanical' short from the red line. If so, it would take a stop-loss at 47.42. That trade has already triggered and is slightly profitable, so I'll suggest enjoying it from the sidelines.
