I seldom use a 'marquee' low to project a target, but in this case, A= 3933.20 caught Friday's spike high almost exactly. The high overshot the target by $4.30, which is not enough to guarantee that higher prices are coming. They will, though, so let's keep this chart in mind as the futures make their way higher in the days and weeks ahead. It implies minimum upside over the near term to the red line (p=4532.70, the pattern's Hidden Pivot midpoint), and to as high as D=5132.20, a target that will become an odds-on bet if bulls bulldoze past p.
Friday's punitive reversal breached p=61.910 decisively, so the yellow flag is out. A tradable implication is that a rally now to the green line (x=63.497) would trigger a 'mechanical' short. The pattern could also prove useful for bottom-fishing the decline using the lesser charts to set up 'camo' triggers at p2=60.322 and d=58.735. We should also be alert to a possible breach of d. Although I don't expect it, that would signal a potentially bigger correction than the $6.35 selloff I warned about in the trading room.
With its weak point 'A' low and its obviousness, the pattern shown should not be considered reliable for predicting a precise top. However, it can still serve us in several ways. For one, the easy move through p has shortened the odds of a rally to at least D=135.90. Also, a pullback to the green line would trigger a 'mechanical' buy sufficiently enticing that we should not want to miss it. And if p2=123.76 shows stopping power, that would validate the pattern itself and its target.
I hesitate to call Bitcoin's laborious 36% selloff from the $126k top in mid-October a correction, since there's a good chance it's in a bear market and that it will never exceed that high. That will almost surely be the case if stocks have entered a bear market. It would likely be the worst since the 1930s, creating an investment environment in which a purely speculative hobgoblin such as Bitcoin could never survive, let alone flourish. Trump's MAGA narrative would also be a casualty, since merely scraping by, rather than achieving greatness, would become the central concern of most Americans. Regarding the weekly chart that I've displayed this week, it leaves little room for doubt that Bitcoin's selloff will continue down to at least d=73,076. Moreover, a rally from current levels to as high as the green line (x=112,993) would trigger a 'mechanical' short, presumably amidst high-fiving by Bitcoin fans excited by the possibility of new record highs.
The futures looked so heavy on Friday that I was tempted to switch to a bearish, big-picture chart that requires a drop to 6654 to trigger a theoretical sell signal. Instead, I've focused on a smaller time frame that can give us a more nuanced picture without the drama. The midpoint Hidden Pivot at 6864.25 will not likely be useful for bottom-fishing because it coincides with Friday's low. However, we can still monitor price action closely at p2=6838.00 and D=6812.00 closely to determine whether bears might be gaining the upper hand. An easy breach of D on first contact would be evidence of this, so be alert to the possibility.
T-Bonds have been treading water since Trump took office. His eagerness to stimulate growth with a gusher of fiscal spending and consumer credit has increasingly weighed on fixed-income markets. However, this has been more or less offset by the President's ability to attract buyers of Treasury debt from outside the U.S. The chart says this precarious balance is about to end with a fall in bond prices and a corresponding rise in long-term yields. At a minimum, TLT is headed down to the red line, a midpoint Hidden Pivot support at 78.05. If yields on the long bond were to rise commensurately, they would hit 5.33%, up from a current 4.79%. That might not seem like much, but it would squeeze the last breath from a consumer economy already suffocating from debt fatigue and persistent inflation. The already shaky housing and auto sectors would collapse, presumably led by a stock market that is filled mostly with hot air. Nor are there any guarantees that the red line on the chart will hold. If it doesn't, and TLT falls to the next logical plateau at 62.23, the damage this would do to the U.S. economy and to our way of life is distressing to imagine. Any spike in rates would be short-lived, since it would quickly deflate the economy into deep recession. Since this would be fundamentally a deleveraging event, investors should not be looking for opportunities at this moment; rather, they should secure their capital in safe-haven assets such as Treasury paper, bullion and utility companies with strong dividend histories. The burgeoning healthcare sector's ability to withstand hard times is not a given, since it thrives now only on the illusion of prosperity. _______ UPDATE (Dec 14): Friday's vicious reversal, which featured the gap-down penetration of a 'hidden' midpoint support,
Friday's dirge provided yet more evidence that the bull is dying. With weekly options expiring, even undercapitalized pishers can do 100,000-share conversions and reversals all day long without risk. And yet, for all the phony volume, the day was over by mid-session, when the E-Minis peaked three-hundredths of a percentage point shy of a 6907.50 target that had been drum-rolled here for nearly two weeks. It was nearly seven weeks in coming, and so we might have expected a significant reversal when it was hit. Instead, the futures fell a measly 40 points, caught a tired bounce, then leveled off for the rest of the day. I hesitate to say a top is in, much less the top. But if the irresistible force that has been pushing stocks skyward since 2009 re-emerges on Monday, as is likely, be prepared for more-of-the-same up to at least 6925.00, a Rick's Picks voodoo number.
Microsoft spent the last two days of the week churning a weak 'mechanical' buy signal. It is considered weak because the pullback to the green line where we typically do our buying followed a high along c-d that barely reached the midpoint Hidden Pivot, let alone the 'sweet spot' midway between p and p2. How the stock treats the signal has consequences for the broad averages, since the company trades with a value of around $3.6 trillion. If MSFT dips below c=464.89 without punching through p, that would add to the evidence that stocks are in a bear market. _______ UPDATE (December 14): Traders and the, um, 'investment community' spent the week screwing the pooch, so nothing has changed in the analysis above.
Last week's tedious scuddle left the futures on-track for a run-up to at least 4347.30 over the near-term. This Hidden Pivot resistance is just a weigh station en route to the 4529.80 target of a much larger pattern given here earlier. The D target of that pattern is 5126.10, the first I've identified above $5k. I expect potentially tradable resistance at 4347.30, but if buyers punch through it easily, that would shorten the odds of an eventual move to the higher targets given above.
Although Silver broke out around mid-morning on Friday, it spent the remainder of the session idling in a shallow pullback. This behavior reflects the preference of strong, confident buyers who could use a little rest. The quiet end to the week was deceptive, since it featured a decisive push through a 58.45 midpoint Hidden Pivot associated with a 'D' target at 70.81. (Please note that this number was incorrectly given here last week for the January contract as 63.39). A pullback to the green line (x=52.27), however unlikely, would be a screaming 'mechanical' buy. Here's a chart showing the futures' crucial progress last week.
