I've put MSFT at the top of the list because it is about to provide the clearest test of whether a bear market has in fact begun. No matter how bearish one's outlook is for the stock market following Friday's stunning reversal, MSFT would trigger an irresistible 'mechanical' buy signal if it touches the green line (x=506.06), as seems likely. That doesn't necessarily mean the implied bounce will achieve d=547.12, effectively reviving the bull market. More likely in my estimation is that a weak bounce will carries no higher than p=519.75, the midpoint Hidden Pivot. Whatever happens, the second most valuable company in the world cannot but reveal the health of the bull market, or lack thereof.
Sellers exceeded a compelling 'hidden' support at 6582 that I posted in the chat room on Friday, implying they will likely return in force this week. The reversal off a strong opening was unusually severe, even for a Freaky Friday, and I am therefore treating it as the possible start of a full-blown bear market. My reasons are detailed in the current commentary, but the grim technical implications are shown in the chart (inset). A 6.6% fall to at least p=6120.75 is indicated, but this is admittedly speculative, since the futures have not yet touched the green line (x=6466.50) to trigger a theoretical short. There is an alternative, minimum downside target at 6315.75 that we should monitor closely, but I have decided not to feature such half-baked scenarios because I believe Papa Bear has at last emerged from his lair after hibernating for 16 years. Incidentally, a voodoo number above 6300.00 will be worth bottom-fishing in any case, but since it is proprietary, I have posted it in the chat room. ______ UPDATE (Oct 13, 10:45 p.m.): Check out my 4:45 a.m. post in the chat room for guidance on getting long in this vehicle, and then shorting it at 6741.50. I'd suggest a small-pattern trigger (a.k.a. 'camouflage') for the latter trade. _______ UPDATE (Oct 15, 11:10 a.m. EDT): The trade triggered and was quickly stopped out for a $700 loss per contract. Although the pre-opening, overnight high at 6741.00 missed my Hidden Pivot target by just two ticks, it thereupon became a 'number of interest' when the high sat for an hour-and-a-half to be anxiously contemplated by traders ahead of the bell. The most important takeaway here: ES was a good short only if it was cushioned by profits made en route to the target. The odds of catching a
After a cage fight with a 'hidden' resistance I'd flagged at 4178.00, the futures appear to be back on track for a rendezvous with 4128.10, an important target that has kept us confidently bullish for the last 300 hundred points of the rally. The 5020.20 target of an even larger pattern will be in play if 4178.10 is decisively exceeded, especially on first contact. The chart shows a minor 'reverse' pattern with an outstanding target at 4076.50. Although this falls somewhat shy of 4128.00, it shows that buyers are on a smooth glide path that featured a stress-free 'mechanical' buy on Friday at the green line (x=3987.30. If you've wondered how to get aboard with gold taking only quick, shallow breathers, this chart shows the way. _______ UPDATE (Oct 13, 10:38 p.m.): Bulls vaporized a 4128.00 target that had looked rock-solid last week, and now they appear to have a lock on a minimum 4196.10. Expect the target to be reached over the next 1-3 days. Beware of resistance at exactly 4168.20, the midpoint Hidden Pivot of A=3663.70, but once the December contract is above it, you can raise your expectations to at least 4273.30, or to 4378.40 if any higher. You can also use a pullback to 4063.00 to get long 'mechanically', stop 3957.00. The bullish pattern from which these numbers were derived starts with A=3660.50 on the daily chart on 9/18. _______ UPDATE (Oct 17, 1:19 a.m. EDT): The current upthrust overshot the 4378.40 target flagged above by just 0.3%, so it's hardly crazy to infer that a top of at least middling importance might be in or very close. You can use a 94.50 trigger interval to get short to test this theory on paper, but trade it only if you were long for at least a $10,000-per-contract
The 49.835 target I'd billboarded here caught a nasty top within millimeters, allowing subscribers to get defensive just ahead of a $3.26 downdraft. Now, use the pattern shown to keep in step. It signaled no fewer than three trades on Friday: short at the green line; long on the reversal from the red line (p=46.988), and 'mechanically' short again at x=47.804. That last trade has yet to touch 46.966, where half the short could be covered, and there is no assurance the position will be a winner. Indeed, if bulls seize the advantage as the week begins, they will likely negate the pattern with a very bullish push above C=48.620. Thereafter, use this pattern, with midpoint resistance at 48.828 and a 'D' target at 50.955. Don't pass up an opportunity to buy 'mechanically' if the futures pull back to x after a run-up to our sweet spot.
GDXJ's ballistic rally died midway between two middling targets at 104.25 and 106.84, respectively. A more important one lies at 111.59, and we are using it as a bull-market objective with the potential to stop buyers in their tracks. More immediately, you can play for a run-up to the 107.96 target shown in the inset. The pattern has yet to develop, since a 'buy' signal at the green line gave way to weakness on Friday that nearly stopped out the trade. We'll give bulls the benefit of the doubt for the moment nevertheless, implying p=103.21 can be used as a minimum upside objective when shares start to trade on Monday. If they fall on their face at the starting bell, slide 'C' down to the new low to create a fresh, usable pattern, even if it is beneath the current 'C' at 95.71 (10/2). _______ UPDATE (Oct 17, 1:26 a.m. EDT): Like gold futures, GDXJ topped today close enough to a compelling Hidden Pivot target that it actually might be a decent short, assuming you've stuck with my 'insane' targets most of the way up and made some money . You can test this with a 1.70 trigger interval, but if the trade sevens out, raise your sights to a minimum of 118.08, since that's where this monster will be headed. You can also get long 'mechanically' with a 103.35 bid, stop 98.43. Good through Tuesday.
T-Bonds got a strong lift from Friday's panicky sell-off on Wall Street. TLT became a good bet to reach p=91.24, at least, but a decisive move through this Hidden Pivot, especially on first contact, would imply more upside to p2=92.63, and thence to as high as D=94.02 over the near term. Although the pattern is a conventional one with a 'C' low above 'A', it is sufficiently compelling to lend authority to the bullish case. Assuming D is achieved, look for stocks to continue lower, with hard selling in the institutionally driven lunatic sector (a.k.a. the 'Magnificent Seven') and in Bitcoin.
Although in recent years October has not lived up to its reputation for scaring the pants off investors, we should take Friday's punitive reversal seriously, since it could mark the start of a bear market that is arguably years overdue. Although we have grown accustomed to 'freaky' Fridays producing headline events now and then, there was something especially disconcerting about this latest episode. It was driven unmistakably by news that Trump had threatened to slap a 100% tariff on Chinese goods in retaliation for restrictions they placed on so-called rare-earth exports to the U.S. These minerals, while not actually rare, are essential to the production of powerful magnets that are used in electronic hardware, including components vital to the aerospace industry and the military. The U.S. was already focused on establishing alternative sources for rare earth minerals, but it will take time and money, since extracting 'rare earths' from dirt requires processing that is costly and complicated. Downplaying China's Threat In any event, Western factories and computers are not going to grind to a halt simply because of China's threat. And it is likely to be no more than that, since Trump has cards of his own to play, including access to advanced computer chips that China is presently unable to produce. The foregoing is all secondary to the matter of why U.S. stocks plunged on the news. The broad averages were up sharply in the early going, but by day's end the Dow had reversed by nearly 1200 points. A corresponding reversal took place in the institutionally-driven lunatic sector (aka the Magnificent Seven), wiping trillions of dollars of dubious 'wealth effect' lucre from the macro ledger. Clearly, this was an extreme overreaction to the news, since investors had grown used to Trump's frequent tariff shenanigans. Although the mainstream media
MSFT is in a messy, timid bull cycle that points to 547.12, about 6% above. I am tracking a long position from 506.06, since I'd suggested buying there 'mechanically' ahead of the pullback. (A separate long position from 493 that was initiated on my say-so is being tracked at GoldenMeadow.eu ) Further progress to 547.12 is hardly a done deal, as the stock has yet to decisively penetrate the midpoint resistance at 519.75. But bears look too tired to resist MSFT's inexorable upward drift, and so a move to the target must be regarded as likely. We may know more as the new week begins, since the E-Mini S&Ps ended the week with a moderate selloff from within a split hair of a rally target I'd drum-rolled at 6803.
Although Bitcoin flounces around like the ritalin-dosed kleine kinder who trade it, there are no instances we can recall when its hyperactive movement fooled or confused us. It is headed unavoidably to a record 132,743 at the moment, and do with that information what you may. The rally's decisive penetration of midpoint resistance at 119,996 offers all but ironclad assurance that the target will be reached. A tradable pause is equally likely at that price, since the pattern, although too obvious to depend on precisely, is good enough for government work. Don't pass up an opportunity to get long at 113,623 (stop 107,249) if BTC should swoon gratuitously.
I'm still in San Francisco, avoiding the withering heat of Florida's monsoon season. I am also taking a break from my regular commentaries, since writing about the greed and stupidity that have propped up the stock market and the economy for the last decade was growing boring and repetitive. Instead, I've featured paintings by friends, most recently Geoffrey Leckie and Deborah Oropallo. The photograph above was taken by Victor Riess, whom I met two decades ago in Colorado when he took my trading course. An avid bicyclist and musician, Victor is also the best photographer I know. He took the picture above near his home in Lancaster, PA. It is a wintry Pennsylvania scene that vividly recalls landscapes painted by the Dutch master Pieter Bruegel in the mid-1500s at the height of his powers. All of Victor's photos are for sale, including the picture of the Amish girl featured here last week. The work above, a signed, original print, is priced at $32,000. It is approximately 20" x 30". Considering that a collector paid $68,750 for this appalling Peter Hujar photo of a dead cow at Christie's a few years ago, Victor's beautiful landscape, which makes the heart sing, is a great bargain for $32k. For further details, email me at Rick's Picks.
