The Morning Line

Is the stock market on its way to new record highs? The thought would have seemed preposterous just a week ago, when the Dow’s still-presumptive bear rally had yet to exceed even a single peak on the daily chart. But it did so last Wednesday, with a gap-up opening that demonstrated how spectacular daily gains can be engineered by Wall Street’s wizards to require little bullish enthusiasm or even much cash. As detailed here last week, this has been especially true of AAPL, the Titanic of the securities world and a crucial bellwether for investor sentiment. One might have thought it would take hundreds of billions of dollars to float the stock back to the surface following its nearly 30% plunge from a record $183 in January to a Mindanao low of $129 in mid-June. So many investors lost so much money as AAPL plummeted that their eagerness to recoup at least some of it should have turned the stock leaden the entire way up. Suckers Never Learn Instead, DaBoyz last week succeeded with little effort in driving AAPL to within a hair of a $172 target I’d disseminated to subscribers more than a month ago. Along the way, no fewer than a dozen times, they employed a trick that has never failed to work, even though the same suckers have been played countless times. The pros simply pulled their bids overnight, letting Apple shares fall sharply enough to dry up sellers. When bears realized at the opening bell that there was little or no supply to cover their shorts, panic buying into ghost offers did the rest. Thus did the resulting price spikes in the early moments of numerous sessions accomplish what merely bullish buying never could – i.e., goosing the stock past imposing peaks and thick layers of

[The following went out last month to clients of my friend Doug Behnfield, a wealth management advisor and senior vice president at Morgan Stanley in Boulder CO.  Like your editor, he is skeptical that consumer inflation can persist for long with the U.S. economy in recession and a bear market in progress. Deflation is coming, he says, along with a further decline in stocks of at least 20% from early July's lows. Doug has been recommending long-dated Treasurys both as a defensive investment and for potential long-term capital gains from falling interest rates. RA]  On January 11, 1987, the Denver Broncos played their last playoff game of the season at the Cleveland Browns. It was rainy and muddy. With 5 minutes left to play, the Broncos had the ball on the two-yard line after a muffed kickoff return and the score was 13-20, Cleveland. Legend has it that as the huddle was called on the two, ProBowler and offensive lineman Keith Bishop said to the team; “We got ‘em right where we want ‘em!” Through a series of runs and passes, sacks and scrambles, John Elway led his team 98 yards to score a touch-down to tie the game. The Denver Broncos won in overtime and went on to the championship game. The first half of 2022 is characterized by a bear market in stocks with the S&P 500 down 20.58% and the NASDAQ down 29.51%. While shorter maturity bonds were down much less, the longest duration Treasury and municipal bonds were just as bad as stocks. The Index of long Treasury Strips was down 27.90%1 and the CEF Connect Index of National Leveraged closed-end Municipal Bond Funds was down 20.1%2 . Here, at the end of the first half of 2022, we are staring at the worst start to

Last week's price action served to remind us that big rallies and even entire bull markets are driven mainly by short covering. This doesn't happen by accident; Wall Street's quasi-criminal masterminds set short squeezes in motion using news as a catalyst. The booby traps they employ are more or less predictable, but they succeed anyway because DaBoyz can count on short-covering bears to panic every time under certain conditions. On Friday morning, for instance, in the wake of a 75-basis-point rate hike by the Fed, trade-desk capos jockeyed index futures into position so that a tough resistance that had thwarted them a day earlier and overnight could be dynamited into oblivion. The chart shows more than 14 hour of head-butting at a 4109.25 'hidden resistance' I'd disseminated to subscribers a day earlier. The target had worked precisely, allowing them to jump on the trend. Some reported exploiting it in two ways: 1) getting long for the ride to it; and 2) getting short when it was hit. This could have produced a profit of as much as $1,400 per contract. However, profiting from a short at the top would have required waiting until an hour prior to the opening bell, since that's when the Street's lieutenants began to work their carnival midway illusions. How to Exhaust Sellers It was a piece of cake, since they've been practicing ever since the Grandaddy of All Bull Markets took flight in 2009. They simply pulled their bids, just as they've done hundreds of times over the last decade, allowing index futures to plummet ahead of the opening bell. This trick completely dried up selling, leaving stocks no way to go but up when the opening bell rang.  At that point the carny men simply stepped aside and let short-covering panic accomplish what mere

There was a point last Thursday when virtually all of the hundred or so market symbols I track were 'red' except for the U.S. Dollar Index. This was unusual and unsettling but hardly mysterious, since the dollar's strength was the reason everything else was falling in value. The trend unfortunately is only just beginning and eventually will overwhelm the global economy and banking system. Any observer could have seen this coming, although few did. Even now, only hard-core deflationists understand the dire implications that a strong dollar holds for mountainous debts that have piled up around the world. Nor is it generally understood why hyperinflation is an extremely unlikely option for liquidating this debt, since it would destroy creditors – i.e., the Masters of the Universe – as a class. Deflation is not only far more logical, it already appears to have begun sucking asset values toward worthless singularity with power that ultimately will grow irresistible. The possibility of a ruinous debt deflation was once considered looney-bin talk. I was virtually alone in writing about it in the early 1990s. I even suggested at the time, in think-pieces published in Barron's and the San Francisco Examiner, that a short-squeeze on the dollar could bring on deflation precipitously. My floor-trading background made this scenario seem not merely plausible, but likely. It still is, I believe, and it seems predictable that it will begin with a small disturbance in the credit markets that quickly causes short-term lending to dry up. Borrowers unable to roll their loans as usual will be forced to settle in cash, an unfamiliar medium of exchange in the world of finance. This will cause ripples of panic overnight, but don’t bother lining up at the door of your bank before dawn, since the $25k to $50k that branches

How high is the bear rally begun in mid-June likely to go before buyers run out of gas? The 4029.75 target shown in the chart is a logical answer, even if the hubris of billboarding it here could queer its voodoo magic. A run-up to 4029 would represent a 3.1% gain over Friday's close and a 10.7% move off the June 17 low. Since January, when the bear first showed its fangs after hibernating since 2009, rallies have been relatively subdued, implying shorts have yet to be spooked into covering. Perhaps it's because the outlook for the U.S. and global economies is so dark that there are few good reasons to be discovered for buying shares. Not that buyers have ever needed reasons, let alone good ones. But even bad ones lack persuasiveness these days, what with the 'experts' debating how much recession we're likely to get. Triggering off short-covering stampedes will always be a primary concern of the stock market's institutional sponsors. That's because short-covering is the only source of buying powerful enough to push the broad average past previous peaks. It also has the miraculous ability to make investors temporarily forget about the wall of worry no matter how mountainous. The effect can produce spasms of mass insanity so overwhelming that even now, with the U.S. economy about to tank, a stock market rally to new all-time highs is not inconceivable. Post-Blowoff Behavior It  is extremely unlikely, however, given that residential real estate has completed a blowoff top; the auto sector is being suffocated by high prices and material shortages; and consumer credit growth has turned down as interest rates rise across the yield curve. Under the circumstances, even if a punitive bear squeeze is overdue, investors shouldn't get their hopes too high that it'll come before stocks

Bullish seasonality was at gale force last week, but just look at the tired chart! Is this the best that Wall Street's quasi-criminal masterminds can do? Have they grown so despairing that they can't even detonate a 100-point short squeeze when Jerome Powell is bloviating on TV? That was manifestly the case, and torpor could not have struck them at a worse time. With dark-purple clouds massing on the economic horizon, the securities world's thimble-riggers are in a bind, seemingly unable to rally stocks into order to dump them at brutally inflated prices into the hands of rubes, pensioners and widows. The window of opportunity for this is narrowing as economic signs point toward very hard times. Even so, triggering off a rip-roaring bear rally should have been a piece of cake, considering all the help DaBoyz have gotten. The news media, for one, is still playing along with the in-joke about whether a recession is coming. In plain fact one has already begun, accompanied by anecdotes sufficiently troubling to shame the Street's paid army of deniers, glad-handers and shills. Additional cover has been provided by stockbrokers and financial advisors. Observing a time-honored tradition, they've been telling clients to sit tight, since stocks, they assure everyone, are certain to turn around. Trusting clients will do exactly that, sitting on stocks until they finally sell everything with the Dow crashing below 10,000. Troubling Anecdotes Here are a couple of anecdotes that concern manufacturing bellwethers with global reach, Tesla and Boeing.  Regarding the former, a friend who owns Tesla's high-end Plaid model, a luxurious rocket-sled that can smoke a Lamborghini Veneno, was having trouble with a seat belt that wouldn't retract. His dealer said the electronic part needed to fix the problem was not available and simply gave him a brand new

The chart above is intended to take some of the guesswork out of determining how high this presumably doomed stock-market rally is likely to go. Not very, would be my guess. I say the rally is doomed for a few reasons, none of which has anything to do with a U.S. recession that began months ago, or a real estate collapse that is still in the anecdotal stage but quite real and menacing nonetheless. My assessment is based purely on certain subtle technical signs evident in the chart. First is the S&Ps' breach of a 3656  'external' low recorded back in February. The overshoot was just 17 points, or 0.46%, but that was sufficient to generate a strong impulse leg of weekly-chart degree. What it implies is that any rally off the June 17 low will turn out to have been corrective -- or to use a more descriptive word, distributive. Since we 'know' the rally is just a bear squeeze, predicting where it is likely to apex is possible. I have used a 'reverse-pattern' feature of the Hidden Pivot Method to calculate prospective rally targets at, respectively, 3966 and 4028. If the S&P mini-futures were to exceed the first by more than 5 or so points intraday, that would imply more upside to the second. Both are bound to show stopping power sufficient to be short-able, and that is what I would suggest to Rick's Picks subscribers. Sidestepping a Possible Stampede This scenario is by no means chiseled in stone, and I would be inclined to give the rally wide berth if it impales the higher number the first time it is touched. That would suggest that a bear rally worthy of the name is under way. If so, it could be expected to continue to whatever height is

Copper's long-term chart suggests that the global economy could have one last hurrah once the bear market begun in January has run its course. Copper is reputed to have a PhD in economics because of its supposed ability to predict major turns accurately, In actuality, its track record is pretty impressive. The chart above shows its upturn in 2008 had a months-long head start on the bull market that followed the Great Financial Crash of 2007-08. Copper again proved prescient when the Covid selloff in the first quarter of 2020 turned into one of the steepest bull-market run-ups in history. So what is it saying now?  There are a few things to notice in the chart. Most important is the ease with which buyers pushed past the 'midpoint Hidden Pivot' resistance at $3.63/pound (shown as a red line). A decisive move past this impediment is usually a reliable sign that the trend will reach the pattern's D target, in this case $5.33, It didn't, however, and that implies the sideways move that has occurred over the last 14 months is a bearish distribution, not a consolidation. To use a Groundhog Day analogy, we will likely face six more months of winter, give or take a couple of months, before the bear market and a still unacknowledged recession have run their course. The downwave could be steep and the recession brutal, since Doc Copper's expected dive looks all but certain to crush the red line. That makes a further fall to the green line likely. It would amount to a 40% correction from the $5 high and a 33% correction from the current $4. A Screaming Buy At $2.78 (the green line), Comex Copper would become a screaming buy, technically speaking. That's because, under the simple rules of the Hidden Pivot

As if the thimble-riggers at the Fed didn't have enough to worry about, the dollar turned rabid last week, threatening to transform America's still-undeclared recession into a downturn for the history books. The greenback's rally pushed the price of U.S. goods even higher for foreigners while increasing the cost of fuel that they pay for mostly in dollars. In theory the dollar's strength should have alleviated pain at the pump for U.S. consumers. Unfortunately, however, with the cost of gas and diesel fuel thrusting to mind-numbing new highs each week, the effect has been so muted as to be barely noticeable. Wall Street has noticed the gathering storm, however, and is doing everything possible to distribute stock to the rubes before pulling the plug. Last week, for instance, Amazon was trading down around $110 a share following a 20-for-one stock split. The idea that stock splits are bullish is a pernicious lie that has gained currency because most investors tend to think that more of anything is better. Now widows and pensioners who owned just a few shares of AMZN at $2000-plus per now have twenty times as many shares. How fabulous is that? They naturally expect those shares to rise eventually to their pre-split price, which would not be unusual in a prolonged bull market. But we are quite possibly in a bear market now, and the outcome may not be so felicitous as AMZN's peanut gallery might imagine. Whatever the case, you can count on insiders to unload as much of the stock as they can now that shares have become affordable for the masses.