The Morning Line

You’ve heard from ‘Formula382’ before. A longtime Rick’ Picks subscriber, he manages wealth in the Ozarks, using puts and calls aggressively, with a dollop of good timing, to keep clients happy. He has also shown uncanny skill at rotating out of sectors just before they peak. In a recent chat room discussion, Formula wondered whether the recent sharp break in the price of Walmart shares might be a harbinger of trouble – and not just minor trouble, either. He is concerned that when the bull market ends, possibly as soon as spring, it will usher in an economic depression worse than the 1930s. I not only share his pessimism, but also believe that a bust of such magnitude is unavoidable. Here’s the discussion thread from the Trading Room, lightly edited: Formula 432: We’ve all been wondering which stock would lead the market higher now that MSFT has fallen out of bed. Is price action in Walmart perhaps the canary in the coal mine? Is the stock not the largest indicator of overall consumer health? WMT’s dive following the recent earnings report was pretty severe — and fascinating. The company’s CFO expects suppliers to “take price” — i.e., suck up costs associated with inflation and/or tariffs. It turns out WMT doesn’t even factor in the effects of potential tariffs on revenue and earnings. Sounds bonkers to me. The company’s shares have been trading at a 40 multiple, and Costco’s at a nose-bleed 60! These names historically have traded with multiples in and around the mid- to high-teens, much like the S&P. In short, WMT is commanding the multiple of many tech names with just 4-6% same-store sales growth. And not in a hundred Sundays do I believe that the upper crust of the U.S. is now shopping at Walmart. I live

I'm tracking Nvidia shares closely because they can tell us whether China's DeepSeek threatens America's lead in AI development.  The Nasdaq-listed stock got pummeled a month ago when the Chinese revealed they were developing an open-source chatbot that can easily compete on performance and price with the most advanced models offered by OpenAI and other U.S. developers, including Elon Musk. Investors who have bet trillions of dollars on relatively costly solutions were so spooked by the news that they batted NVDA down to $113 not long after it had traded as high as $153. At the time, I said the stock would be an opportune short sale if it bounced from $113 to $140. It did so last week, hitting a recovery high of $143, but I'm no longer so enthusiastic about betting against the stock. It is the chart that has changed my mind, not the aggressive attack on DeepSeek by investors, analysts, pundits and scientists.    They said China had spent considerably more developing the technology than they were acknowledging and that its smarts were extracted from Nivida chips the Chinese had purchased despite a U.S. embargo prohibiting them from getting their thieving hands on certain high-tech hardware. Eating America's Lunch So, who's lying? I doubt we'll get a straight answer from the news media since they are rarely up to the challenge of reporting on developments that seem to upset the status quo. The question remains crucially important nonetheless, since there are literally trillions of dollars of bets and side-bets on the relatively capital-intensive, proprietary approach that American-based companies have taken toward AI development. NVDA's stock chart is probably as good an answer as we'll get, since a graph cannot lie. In that regard, a move to new all-time highs above $153 would imply that America's edge

Trump promised everything but a cure for cancer during last Thursday's press conference, and there was no doubting his sincerity or his commitment to helping to shape a better world. Can he do it? One thinks of Teddy Roosevelt, who possessed seemingly limitless energy and zeal for taking on big projects, including building a national park system and the Panama Canal. Trump has big ideas too, and by all evidence the diligence to see them through. It was therefore disappointing that the stock market failed to show much feel-good energy on Friday. Chalk it up to Wall Street's cynicism toward politicians with big ideas other than large tax cuts. Investors, of course, will always be more concerned about Fed monetary policy. This suggests that Trump's successes, if they are going to have a major impact on the economy, will need to align themselves with the central bank's purposely beige and often murky agenda. For the present, however, any wonk, talking head or left-tilting economist is unlikely to 'get' Trump. Will the mainstream media, the political left, the academy, and a popular culture shaped by babbling ideologues like George Clooney, Jimmy Fallon, and Whoopi Goldberg eventually come around? it is encouraging that Meta's Zuckerberg was the first celebrity from the business world to kiss Trump's ring/ass. Although Zuck's $440 million gift to local election boards indisputably stuffed enough ballot boxes to swing the 2020 election to Biden, it was just business. He has demonstrated that he will sleep with anybody, including Trump, if the payoff is big enough. Facebook shares went vertical after Zuckerberg's White House visit shortly after the election, presumably because Wall Street sensed the company's karma was coming into alignment with Trump's America. The same could be said of Tesla's shares, as trust and friendship between Musk and

Get the forecast for Microsoft right and you cannot go far wrong guessing where the stock market is headed next. This has been an article of faith at Rick's Picks for years, and it has served us well. The chart shows MSFT either moving in lock-step with the Dow Industrials, or sometimes leading the Indoos with pullbacks and upthrusts that were relatively more pronounced and energetic. In July, however, after notching a record high at 468, Microsoft shares began a gentle decline that so far has gone unmatched by the Indoos. The latter corrected moderately for a couple of months, then pushed back up to the highs, where prices have hovered stubbornly since the beginning of the year. Based on the chart comparison above, I assumed until recently that MSFT was about to lead stocks lower. Now I'm not so sure. Suppose Microsoft shares are simply taking a breather while the broad averages continue higher. This possibility was suggested to me in the Rick's Picks chat room the other day by a subscriber who goes by the handle Formula432. An Ozarks-based financial advisor who specializes in high-net-worth clients, he manages their portfolios aggressively for yield, often with covered writes that have been astutely timed. "Where should our focus be now?" he asked. "I don't think MSFT has the relevance it once did. The rotation is real, growth is breaking, and value is going to be in leadership IMO, if only on a relative basis." Hemlock Cocktail, Anyone? I had to agree. Why should the stock market require Microsoft's leadership if there are other companies with greater growth potential? As long as the software giant can continue to pile up mountainous revenues without spectacular growth, it will remain a safe "hold" for portfolio managers. As much could be said of some

Bloggers were revved up when last week began, trumpeting a warning that China's DeepSeek R1 threatened to crush America's capital-intensive effort to lead the world in AI development. ZeroHedge was among the first to jump on the story. "The future of humanity is being decided as we speak," wrote Mark Whitney. "This is a full-blown, scorched-earth free-for-all that has already racked up a number of casualties, though you wouldn’t know it from reading headlines that typically ignore recent ‘cataclysmic’ developments." What had the Chinese done to upend the status quo?  Mark Button, a technology expert quoted in the article, describes the situation:  "Imagine we’re back in 2017 and the iPhone X was just released. It was selling for $999 and Apple was crushing sales and building a wide moat around its ecosystem. Now imagine, just days later, another company introduced a phone and platform that was equal in every way, if not better, and the price was just $30. That’s what unfolded in the AI space today. China’s DeepSeek released an open-source model that works on par with OpenAI’s latest models but costs a tiny fraction to operate. Moreover, you can even download it and run it free (or the cost of your electricity) for yourself." An Ostentatious Yawn Predictably, the mainstream media threw everything they had at DeepSeek in the days that followed. The Wall Street Journal led the charge with an ostentatious yawn and a list of bullet points intended to suggest that China's supposedly killer solution was about as impressive as a set of Lincoln Logs assembled into a working toaster oven. By week's end, Wired chimed in with a pantywaist report that university researchers had baited DeepSeek with 50 malicious prompts, and that it failed to block even a single one.  If this story had broken

I still expect Bitcoin to notch one or two more record highs on the hourly chart, but they will likely be the dying gasp of the bull market that began in 2009. There is reason to doubt that the broad averages will be swept up in this fetid blast of flatulence. That would create a technical divergence of sorts, but we'll leave it to Microsoft, a peerless market bellwether, to help us gauge its significance. For now, the white-shoed crime syndicate that manipulates the stock for a living is doing its utmost to push MSFT above July's record 468.35. That's 5.5% north of Friday's close, a spread the stock is capable of covering in a mere week. However, it will require a short-covering panic to first punch through the layered peak at 456 that MSFT created in December. Realize that short covering is the main source of buying power in all bull markets. The cash that portfolio managers throw haphazardly at stocks helps keep them buoyant. However, only bears threatened with potentially ruinous margin calls can muster the kind of urgent buying that is capable of pushing the broad averages past heavy seams of supply. To make this happen, DaBoyz have always employed the same trick: pulling their bids overnight so that a stock falls low enough to exhaust sellers. With no supply weighing on the opening, the Masters of the Universe simply step aside, lending explosive power to even a smattering of buy orders entered just ahead of the bell. 300 Chickens The result is shown in the chart.  Over the last two weeks, Microsoft has begun the day significantly higher than the previous day's close mp fewer than three times. Almost no stock changed hands in these gaps, and yet they accounted for $35, or nearly 100%, of

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

Although the major indices were down just 1.6% on Friday, it felt like a big day. Everything that matters to the U.S. economy was moving the wrong way: stocks were falling across the board; interest rates and energy prices were climbing; dollars were growing dearer, especially for debtors; and gold, perhaps imagining a bevy of black swans, was stressed with fear, up as much as $60 intraday. Cumulative losses for the week totaled nearly 3%, adding to the feeling that the granddaddy of all bull markets is over. I am taking this possibility seriously, in part because the S&Ps topped a month ago a hair above a 6136.25 Hidden Pivot target of mine that had been nearly five years in coming. Similarly, Bitcoin, the hophead that has been inspiring speculative excesses in all markets, apexed in mid-December within 0.1% of a $107,343 Hidden Pivot target first identified here when the price was $15,000 lower. If any chart provides a reason for hope, it would be Microsoft's. Shares of the recession-proof software giant ended the week on a thin ledge, $3 above a key Hidden Pivot support at 415.57. A closing bar decisively beneath it would announce the almost certain start of a bear market. MSFT would be on its way down to at least 374.18 at that point, presumably the first wrenching drop into an unimaginable abyss. Why This Time? Why would this market top differ from the mostly minor ones that have occurred routinely over the last 16 years?  Mainly because it is happening with Southern California in flames. Ordinarily, we might expect investors to buy stocks aggressively, as they always do in the wake of natural disasters, since it will require enormous sums of capital investment to rebuild. This time, however, there is a palpable feeling that the

The party is over, or so says the chart above. It is a long-term picture of the E-Mini S&Ps, and it shows the futures rolling down after touching a 6136 target that has been nearly five years in coming. Actually, it has taken nearly 16 years to get there since the longest bull market in U.S. history began in March 2009. The economy was emerging from the devastation of the Great Financial Crash, ready to embark on a fresh cycle of foolishness that has put Americans much deeper in hock. The major stock indices have more than quadrupled since then, and anyone who has stayed fully invested in index futures or a few high-flying 'lunatic stocks' would have achieved long-term gains that no portfolio manager in decades past could have imagined. My analysis has utilized a standard ABCD pattern to project the 6135.25 top.  However, it should not be expected to work precisely for two reasons. For one, it is a blended chart, with key highs and lows derived from many successive contract months. Although the coordinates are matched closely, the result is not seamless, and the 'D' target could therefore be off by as much as 10 to 15 points. For two, the pattern is so in-your-face obvious that every Tom, Dick and Harry who fancies himself a chartist would have spotted it more than a year ago and used it to ride the bull to the top. Obvious, but Potent Assuming they did, more than a few would have reversed their positions and gotten short at the recent peak. If so, we shouldn't be surprised to see a short squeeze rip them a new orifice in the weeks ahead. The result would be a jagged top littered with the bodies of intrepid traders. Whatever happens, I strongly doubt