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.

MSFT swam against a heavy tide Friday, apparently because Bill Ackman ann0unced he has built a $2.1 billion stake in the company. That’s chicken feed relative to MSFT’s immense cap value, but it was manifestly enough to touch off a headless-chicken scramble of short covering. The pattern within which the stock’s 3% rally occurred is bullish and projects to 464.66, a 10% move from here. I have my doubts the stock deserves that kind of mark-up, but I will not let this bias cloud my judgment if buyers tear through the midpoint Hidden Pivot at 431.34,  That would imply ‘D’ is likely to be reached, which, given the company’s premier bellwether status, would have bullish implications for the stock market as a whole. _______ UPDATE (May 21, 8:50 a.m.): Far from tearing through the 431.24 pivot, the futures retreated $20 after exceeding it slightly. Yet another attempt (the first failure was on May 7) would imply the rally off the 356.28 low recorded on March 30 is merely corrective and unlikely to exceed the 464.66 target of the upwardly corrective pattern. New record highs are therefore unlikely coming any time soon.

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.

Before Friday’s kamikaze dive, GDXJ looked like no worse than an even bet to reach the d target at 139.45. Now, however, even though we should plan to attempt bottom-fishing at the green line (x=112.02), we should expect no better than a one-level bounce to p=121.17. This is similar to the outlook I’ve detailed in the current Silver tout (see above), although it doesn’t preclude the possibility of both vehicles eventually reaching their respective d targets. For now, use 112.02 as a minimum downside objective for the near term. Keep in mind that it is neither a target nor a ‘hidden’ support. ______ UPDATE (May 19, 10:44 p.m.): The trade has triggered. See my 22.41 post in the chat room for details.