Into Thin Air

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. _______ UPDATE (May 23): The long-term chart shows how the 6.075% target identified above was derived. There is so much thrust in this picture that the target seems likely to be achieved. It’s hard to imagine how the U.S. economy could avoid seizing up under the burden of rates that high. In any event, the rally faces crucial resistance at the 4.839% midpoint Hidden Pivot (p) shown. I expect it to be decisively breached because the corrective retracement begun from the 5% top in October 2023 failed three times to reach its ‘d’ target at 3.675%.  In the Hidden Pivot system I use to predict price reversals and gauge trend strength, the rule is that strong trends tend to produce weak countertrends. Thus, the failure of a correction to reach its D target usually means the dominant trend is likely to continue.

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. ______ UPDATE (May 22): The futures spent every moment of last week vigorously screwing the pooch in a tight range above x=4382.00.  There are no changes or additions to the analysis and guidance above.

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. _______ UPDATE (May 22): No change. The trade ended the week about 30 cents in the red.