THE MORNING LINE
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 450 recorded less than a month ago. MSFT could easily do that in a week, and we should not bet heavily against it.
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 record 108,334. The rally came within 0.1% of a compelling Hidden Pivot target, and that’s why I was willing to lay 3-to-2 odds that the top was in. However, the merciless short-squeeze that powered Friday’s wilding spree was cause for doubt. Although it topped slightly above a technical resistance that I call a ‘voodoo’ number, Bitcoin would need to start the week with a 3349-point dive to suggest bears are about to get a breather.
But they needn’t throw in the towel if Bitcoin explodes to new record highs in the days ahead, especially if MSFT seems reluctant to join the party. That could be considered a bearish divergence, although not the kind you’re likely to find described in a textbook. There are too many other signs that the broad averages have topped, including breadth numbers that have turned ugly. So be on your guard against Bitcoin going it alone for the bull’s last hurrah. That would keep bulls bullish, at least for a while, setting the hook for a new crop of speculators who have never experienced a bear market, let alone a take-no-prisoners killer like the one that’s coming.
Rick's Free Picks
$TLT – Lehman Bond ETF (Last:87.07)
Is this move for real? I doubt it, but we’ll let the chart tell us what to think. So far, last Wednesday’s bear-trap opening looks only superficially impressive, since the follow-through failed to get past the 87.61 midpoint resistance (p=87.61) shown in the chart. TLT is a lock-up to reach
$CLG25 – Feb Crude (Last:77.88)
We’ve come to expect crude’s rallies to go nowhere, implying they will tend to reverse before breaking out. This one came close, though, before it smacked into a voodoo number that sent it reeling. The reversal occurred just a hair short of the watershed top at 81.53 recorded in June
$ESH25 – March E-Mini S&Ps (Last:6033.5)
The chart shows a possible path to as high as 6704.25, about 11% above current levels. Although it would seem to flout the solidly bearish implications of a longer-term SPX chart I presented here recently, the two can be reconciled by allowing most immediately for a hard selloff to the
$TNX.X – Ten-Year Note Rate (Last:4.60%)
Last week’s spike surpassed an important peak at 4.74% recorded last April. On its way to a presumptive high at 5.55%, the rally will face additional resistance at 4.87%, a ‘voodoo number’: and at the 4.99% peak notched in October 2023. If these invisible impediments do not put up a
Rick's work has been featured in
Monthly
Annually
Rick’s Picks Subscription
If you are looking for trading recommendations and forecasts that are precise, detailed and easy to follow, look no further.-
‘Uncannily accurate’ daily trading forecasts
-
Real-time alerts
-
Timely commentary on the predictions of other top gurus
-
Timely links to the world’s top financial analysts and advisors
-
Detailed coverage of stocks, cryptos, bullion,
index futures and ETFs -
A 24/7 chat room where veteran traders from around the world share opportunities and actionable ideas in real time
Rick’s Picks Subscription
If you are looking for trading recommendations and forecasts that are precise, detailed and easy to follow, look no further.-
‘Uncannily accurate’ daily trading forecasts
-
Real-time alerts
-
Timely commentary on the predictions of other top gurus
-
Timely links to the world’s top financial analysts and advisors
-
Detailed coverage of stocks, cryptos, bullion,
index futures and ETFs -
A 24/7 chat room where veteran traders from around the world share opportunities and actionable ideas in real time
Mechanical Trade Course
A very simple set-up that will have you trading profitably quickly even if you have never pulled the trigger before, and even with a small account.-
Leverage violent price action for exceptional gains without stress
-
Select trading vehicles matched to your bank account and appetite for risk
-
Reap fast, easy profits by exploiting the ‘discomfort zone’ where most traders fear to go
-
Enter all trades using limit orders that avoid slippage, even in $2000 stocks
-
Learn how to read the markets so that you no longer have to rely on the judgment of others