Gone Fishin’…

Friday’s powerful thrust was global, and it put rates on the U.S. Ten-Year note on course for a run-up exceeding 5%, the highest they’ve been in nearly two decades. It is market forces driving the rise in yields, and although Trump may be able to convince some that the consequences will be short-lived, this can only create a credibility problem for him as mortgages head toward 7%, or perhaps even higher.  The highest 10-Year rate I can project beyond the 5.09 ‘D’ shown in the chart is 6.075 on the monthly (A=2.52 in Aug 2022). That would be hard to square with the very deep recession that would occur long before it costs The Guvmint (i.e., taxpayers) that much to borrow.

June Crude has broken above the 104.64 Hidden Pivot Midpoint where I’d told you to expect a crucial test of resistance. The intraday peak on Friday was just marginally higher, but it is sufficient to imply the 120.62 per barrel target is no worse than an even bet to be reached. We’ll stipulate that a two-day close above p is needed to confirm the rally is strong enough to reach D. Trump has been pushing the idea that energy prices will drop sharply when things settle down in the Middle East, but I’d suggest putting your trust and confidence in these charts, which I will update as warranted.

The chart imagines that Friday’s impressive selloff was just the start of significantly more weakness to come. But notice that the worst case is 6795, a 10% haircut that wouldn’t even qualify as a bear market. This scenario is a step ahead of reality, however, since the downtrend has yet to trigger a conventional sell signal at the green line. If that happens, we will have been onboard from within a hair of the top, since we purchased SPY 720 puts for 0.89 near the high of the previous day’s rally. Although the options ended the day a few cents underwater, they vaulted to more than twice our cost when stocks opened sharply lower on Friday. Even better, taking some profits off the table early in the session gave us room to buy more puts toward the end of the day, when they 22 May 720s came back down to 1.00. (Please note that Rick’s Picks recommends buying options only when we expect them to at least double in price quickly, usually within two hours.)  The cherry on top was their exhilarating surge to 1.65 in the final 30 minutes of the session, when stocks dove. A comment I’d made in the chat room an hour earlier explicitly  anticipated this: “With crude quotes not backing off as they usually do,” I wrote, “can you guess which direction the stock market will take when the obligatory, end-of-week nitwitting commences?” Loaded with cheap puts, we’ll be looking forward to Monday’s opening instead of dreading the effects of rising oil prices, an ominous breakout in interest rates, and whatever other troubling headlines greet the day.

Friday’s dive added to the insufferable tedium that has characterized the bullish pattern shown. Its 5144 target has been a guiding feature for two months, not that that has helped much.  A strong dollar has been weighing on gold and will likely get worse, according to some prognosticators. Bullion prices have endured this pressure before and are likely to do so again, but it could mean the 5144 target will be a long time in coming. In the meantime, a pullback to the green line (x=4382.40) should be regarded as a good opportunity to go bottom-fishing. The huge, 4128.40 stop-loss demands a ‘camo’ trigger if you are game, since the ‘textbook’ stop would entail entry risk in excess of $25,000 per contract. Using Hidden Pivot tactics, you should be able to reduce that by at least 95% to less than $800.