Rick’s Picks

The week ended with a ratcheting, brain-dead rally inspired by a relative dearth of "news".  The Wall Street Journal led with this grabber:  Fears Over New Luxury Jet Forced Trump Back to an Old Air Force One After Israeli Warning.  The stock market's excruciatingly modest gains didn't quite reach the 7682.25 target shown, but we should expect it to be achieved early in Monday's session. The target is worth shorting with a tight stop, especially if you can do it with a 'camo' trigger to limit risk. If this somewhat obvious Hidden Pivot gives way easily, don't assume that the new record highs that follow will leave the market's shills and cheerleaders groping for superlatives.  In fact, we'll turn extra-cautious, since this would be a great opportunity for Mr Market to spring a bull trap worth remembering.

The stock, still a sensible bellwether for the bull market, has bounced 12.5% since bottoming two weeks ago at 349.  The low fell somewhat shy of a 339.27 target, but I expect it to be achieved nonetheless before the stock can put in a solid low.  That's because sellers made such short work of the 402.80  midpoint Hidden Pivot support the first time they encountered it on the way down from on high. Alternatively, if the stock comes bolting out of the gate when the new week begins and then closes above 402.80 for two consecutive days, take it as a sign that it's headed for a minimum 434.56 (x, the green line).

Last week's strong two-day rally generated a lot of bullish talk, but from a Hidden Pivot standpoint it merely triggered an enticing 'mechanical' short at the green line (=73.44). The position was theoretically profitable when the week ended, since the futures were trading $2 below the entry point and nearly $7 from the 78.15 stop-loss.  There are no guarantees the downtrend will reach D=59.35, since sellers have still yet to decisively penetrate the midpoint support (p=68.75). But the hypothetical trade looks likely to produce a profit with a dip to at least p, or even p2=64.05.

The futures triggered a 'mechanical' buy signal last Wednesday when they dipped to the green line. This implies they are no worse than an even bet to achieve the 4312.80 'd' target in the chart shown. They'll have to do at least a little better than that to suggest the rally is capable of getting legs. Most immediately, that would mean pushing past the 4403.60 peak recorded in mid-June. That would generate an impulse leg on the daily chart capable of hitting 4746.60, if not necessarily new record highs.

If there is reason to think gold prices are finally recovering, it is Silver's bounce from near a D correction target at 55.56 that took four months to reach. Neither got as close as we should have preferred, but silver's 60-cent miss, amounting to 1.1%, is probably close enough to offer a hopeful sign, even if the jury is still out on gold. Its corresponding low fell fully 4.2% shy of the target, a shortfall that allows less room for encouragement. The next impediment on Silver's chart is a middling 'external' peak at 67.72 recorded on June 21, and an easy pop through it would be reason to take notice -- and heart. _______ UPDATE (Jul 12): Silver offered little to encourage last week when it failed to extend the previous week's moderate bounce. It will still need to surpass the June 21 peak at 67.72 to hint of a turnaround, but getting past yet another at 72.185 would be far more bullish.

GDXJ ended the week with a tentative double bottom at the 96.05 secondary pivot of a large corrective pattern. The rally was not impulsive, however, since it exceeded no 'eternal' peaks. That would require a leap to 120.06, a penny above a high recorded on May 29. This is somewhat more ambitious than what I am requiring of silver and gold futures, but the picture is sufficiently ambiguous to require it. The good news is that if this vehicle relapses to D=82.46, you can confidently load up the truck there. _______ UPDATE (Jul 12):  Sellers continued to pound the 96.05 'secondary support' of the pattern shown. A two-day close beneath it would likely clinch more downside to the 82.46 'D' target. Alternatively, it would take a rally exceeding June 17's 118.19 peak to put bulls back in charge.

Yields on the Ten-Year Note ended the week just beneath a Hidden Pivot resistance at 4.49%, but the damage had already been done with the slight penetration of the resistance earlier in the session. If the rate had settled above it for a second consecutive day, I'd have shortened the odds of a further run-up to the 4.75% target to even money. As things stand, I'll use a voodoo # at 4.62% as a minimum upside target for the near term. We'll be better able to assess the odds of new highs at that time.

On the weekly chart, the futures have been on a 'mechanical' sell signal since mid-June. They seem in no hurry to do what they ought -- i.e., fall to the modest, 6959.00 target of the pattern shown.  That would equate to a 7.5% correction from these levels and 9.5% from the record-high 7694 notched in the first week of June. That's the worst I could see at the moment, and it would be the kind of garden-variety correction that would draw in buyers who have been waiting for a token discount. But fear? Not hardly. The low would likely come in the middle of August, however, leaving enough time for plenty of fear to develop ahead of the November elections. Fear of what, you ask? The possibilities are too numerous to predict, so let's focus instead on ways to chase boredom during what promises to be a dull, glum summer on Wall Street.

The two-day rally that ended the holiday-shortened week was a stage-managed fake and destined to fail, based on how easily sellers crushed the midpoint Hidden Pivot support (p) at 402.80 on the way down. That clearly implied that D=339.27 eventually will be achieved and that the rally can be shorted. But where? My hunch is that a 'mechanical' entry using p will work. It would take a stop-loss at 423.98 to keep risk and reward in balance with 339.27 as the objective. Since that would risk $1050 per contract initially, the trade is recommended only to those who know how to cut that down by as much as 95% with a 'camouflage' entry set-up.