Rick’s Picks

TLT got hit hard last week, all right, but not in the way I'd predicted. The selling followed a feint to 101.39, a few ticks above a peak recorded back in January.  Actually, the feint that ended the rally was the second, following another that had occurred a week earlier. Very tricky, indeed. However, the bottom line is that buyers have generated a powerful impulse leg on the daily chart. This means that however hard T-Bonds get wacked in the days and weeks ahead, the weakness should be viewed as corrective. My rally target remains 105.49, as previously given here, and a pullback to 91.88 should be bought aggressively, stop 87.33. A red-line 'mechanical' buying opportunity could also materialize at p=96.42; it would require a stop-loss at 93.39.

The stock market went bonkers following the Fed's first rate-cut since March 2020, but it's more than a little tempting to sell the news. A return to easing had been rumored for the last couple of years, but with a pitchfork mob threatening to descend on the Eccles Building, Fed Chairman Powell finally gave in to Wall Street. The mainstream media has given him cover with the lame story that lower rates will help spur employment. Historians are more likely to recall that the central bank's pivot toward lower rates came at a time when stocks were breaking out to new all-time highs, inflation was ravaging the middle class, and home prices were at record levels. Still, it's an election year, and what did we expect?  The Open Market Committee is simply revivifying the American Dream -- not with a scrawny chicken in every pot, but with renewed hopes of a leased Lexus in every garage. What will lower rates mean? For one, they could conceivably delay a crash in home prices and stocks for a while. It has been coming ever since the 2007-08 deflation failed to finish the job. At the time, one might have surmised that the nation's most popular and pernicious delusion -- growing rich simply by owning a home -- had suffered a fatal blow. Alas, whatever lessons the Great Financial Crash held for us were erased by a turbocharged recovery that has pushed home prices higher than ever. And stocks, too. Although Powell's steadfast hawkishness may have disappointed investors every month for the last three years, it did not impede the stock market's steep rise even slightly. Nor did it quell Congressional spending, which is currently adding $1 trillion of debt to the U.S. balance sheet every 100 days.  Historians will recall that statistic,

To the list of trading 'touts', I have added yields on the Ten-Year Treasury Note. There seems to be a great deal of uncertainty about where rates for U.S. debt are headed, but this chart should help bring clarity and concision to the forecast. Ten-year rates have fallen from a post-covid high of 4.97% a year ago to a current 3.65%. This is a hair above a crucial midpoint Hidden Pivot support at 3.57% shown in the chart. The 'reverse' pattern from which the support was derived is a compelling one that doesn't care whether the overall look of the chart is 'toppy' -- i.e., favoring a further fall in rates. We won't pretend to have a crystal ball, since the support has yet to be tested. But if it were to be decisively exceeded, that would shorten the odds of the 10-year rate falling to as low as 2.15% in 2025-26. It would be congruent with my very bullish outlook for TLT elsewhere on this page. _______UPDATE (Oct 6): Yields signaled a move to higher levels with their recent thrust through the green line (x=3.83%).  If they are headed significantly higher, we should see an effortless move past the midpoint resistance at 4.06%.  To be sure, there is an alternative 'a' low at 37.85 that would raise the midpoint resistance to 4.08%.  Let's watch both levels to determine how strong the rally is, and whether it is fated to die. 

The E-Mini S&Ps recouped the previous week's losses so quickly that it's hard to imagine they are not bound for new record highs. Uptrends must be nearly unstoppable for a 'mechanical' buy at the red line (p=5518) to work, but this time it did. The stop-loss would have been at 5402, but the retracement never went lower than 5451 -- room to spare. That said, the daily chart is not without menace. For one, a move to the 5868.50 target would max out the pattern's potential at the very moment every trader and investor on the planet was turning wildly bullish, including short-covering bears. For two, there's a voodoo number at 5757 with just as much potential to trap the herd below the old high. What a fooler that would be! Shorts attempted from the lower number should use a very tight trigger interval (TI) of five points or less.  This implies crafting an  entry set-up with a reverse pattern taken from the 15-minute chart or less. If you don't know what I'm talking about, stick with easier trades like the one in QQQ calls last Wednesday. A simple, limit bid of 0.44 for same-day calls produced a 2900% gain in just a few hours. The calls went to 12.86 as the Cubes commenced a vertical rally that was still going when the closing bell rang on Friday.  Who'da thunk a lowly call option knew exactly when stocks were going to turn?  It was able to call the turn simply because all the eyeballs were focused on the underlying S&P futures, which is guaranteed t bamboozle.

I've been talking about the 449.42 rally target for more than a month, which is probably reason to think it won't work. Still, I cannot imagine the futures blowing past it on the first try. The reverse pattern from which the target is derived is too clear and compelling not to stymie the thundering herd, even if only for a day or two. A shallow pullback that lasts for perhaps 2-3 days and works bears into a state of nervous exhaustion would be warning them to dive for cover. Would they even want to know at that point that there would be another opportunity to lay 'em out at 465.90. That's the D target that maxes out reverse-pattern possibilities with the lowest 'a' that is not part of a conventional pattern.  (Note to Pivoteers: This is what I call a locked point 'a' high or low, a term worth remembering and asking about.)

If anyone doubted gold is headed to the 2771.00 target touted here earlier, their skepticism should have been dispelled by Friday's close at the intraday high, well above the midpoint Hidden Pivot resistance at 2549.30. The previous day's close was above it as well, further shortening the odds that the target will be achieved, and possibly exceeded. Price action has been squirrelly enough with so many skeptics sitting on the sidelines, but we might expect the trend to turn even more evasive now that 'everyone' wants to be on the same side of the trade. Trends that are easy to exploit don't exist, so don't be surprised at whatever gold does to fool the majority. If I were Mr. Market, I would screw laggards and doubters by accelerating the upthrust, giving them yet another reason to remain on the sidelines as they wait for better prices.  Bargains have come all too frequently since April, often in our faces, but you can bet that has changed.

My last update left little uncertainty that the December contract would achieve a minimum 31.795, the Hidden Pivot target of the pattern shown. The uptrend looks too steep to allow the one-level pullback we'd need to get aboard 'mechanically', and the pattern is too obvious to allow us to squeeze off a tightly managed short at the target. That would still be possible, however, if you are proficient at constructing trade triggers on the lesser charts (i.e., 'camouflage').  If buyers push past the target, the next would be a Hidden Pivot not far above, at 31.730.  It is derived from 'locked' a=26.950 on 5/2 -- by definition the lowest low in this chart capable of producing a reverse pattern.

I've put aside Hidden Pivots to consider the simple picture afforded by connecting up the last two important highs on GDXJ's daily chart.  They yield a rally projection to 51.19 as the week begins, but you should factor an additional 0.05 per day (or 0.25 per week) to account for the trendline's rising slope.  That would imply resistance at around 51.44 come Friday. Achieving this height should pose no problem, since gold itself is in a strong uptrend with a target about 7% above current levels. If a commensurate rally were to occur in this vehicle, it would imply upside to 52.40.  Can GDXJ catch up with physical? It is bound to happen eventually, presumably when speculative juices are flowing more copiously.

The seemingly unstoppable rally since Bertie bottomed at 52,619 on September 6 will test the idea that the best shorts occur in places that inspire the most fear in bears. Friday's wilding spree tripped a fearsome but technically appealing 'mechanical' short using the green line (x=59,858). That doesn't mean you're supposed to get short at that price, only that you have a proper signal for setting up a 'camouflage' trigger that minimizes the otherwise 5158-point entry risk of a position stopped above the pattern's point 'C' high. I suggest a trigger interval of 625 points, implying $2500 of entry risk on four lots. This trade is only for those who understand the mechanism and are comfortable with the risk.