I’ve reinstated MSFT as our top market bellwether because other symbols that have served in that role look too punk to count on. The shares of Apple, which couldn’t innovate its way out of a wet paper bag, will be extremely vulnerable when recession hits, while Bitcoin’s canny handlers lack the guts to lead stocks higher. DaBoyz turns the cryptos loose to run wild whenever the broad averages climb sharply, but this is just go-along price action incapable of exciting traders’ animal spirits. ‘Doc’ Copper doesn’t work, either. Although it looks capable of reaching $6.18 a pound, a 20% climb from current levels, that scenario is not believable in the context of a global boom in manufacturing. More likely, it would be a blowoff for the copper-intensive EV story, which has become less compelling as electric-vehicle resale values have plummeted.
For better or worse, we should focus on Microsoft to gauge the strength and staying power of this nascent bear rally. With a little more than $3 trillion capitalization, the software behemoth is the third-largest company in the world, just behind Apple and Nvidia. Unlike those companies, however, Microsoft is not especially vulnerable to an economic downturn, since such a large portion of the firm’s nearly $200 billion in revenues is derived from recurring subscriptions to cloud computing facilities, personal and business software. Microsoft will remain a cash cow in the hardest imaginable times, even if the supply of dollars implodes in a deflationary bust.
A ‘Buy’ Signal
So what does MSFT’s chart say? Last week, a rally tripped a theoretical buy signal at 394.56 that implies the stock will reach a minimum 412.20. We should expect a tradable pullback from that number, but if a nasty relapse follows instead, taking out the March 11 low at 376.91, that would suggest the bear market is about to resume with irresistible force. Alternatively, the most bullish scenario imaginable would be a fist-pump through 412.20 on first contact. If the stock can close for two consecutive days above that Hidden Pivot, the odds of a further run-up to as high as 447.49 would shorten significantly.
Even then, with MSFT lying within easy distance of July’s record 468.35, we’d need to be on our guard against a head-fake that would catch bulls and bears alike with their pants down. Given Microsoft’s exalted status in the corporate world, its chart cannot but tell the truth about the direction of the global economy.
