Stick It!

We’ve been using 4.82% as a minimum upside projection, but it’s time to shift the target to the 5.09% Hidden Pivot shown in the chart (see inset). The erratic ascent of long-term rates has been making headlines lately, but Rick’s Picks subscribers have been expecting them to hit 5% for nearly a year. The crazed bull market has acted as though it doesn’t care, but it soon will—or rather, must—demonstrating its concern with a stunning decline. Nothing spells big trouble for the U.S. economy like 7% mortgage rates that coincide with the highest home prices in history. The Ten-Year Note hasn’t been at 5% since the Great Financial Crash of 2008-09. Although the crash itself caused rates to recede quickly to 4%, we may not be so “lucky” this time. If you haven’t done so already, time is growing short to secure your assets—and your household—against a catastrophic  event that will rebuke financial excesses that have been piling up over decades.

Crude has pulled back sharply three times since its moon shot to 120 last March. The first two times, the subsequent rallies died precisely at their respective Hidden Pivot midpoints. If the third pullback to early July’s 67.04 low produces the same result, which is what I expect, the current rally will sputter out at exactly 99.34, a Hidden Pivot midpoint just like the others.  The only other scenario worth pondering at the moment would be for buyers to rip through 99.34 with such ferocity as to practically guarantee more upside to the 131.63 target. It’s possible, but only if something truly horrendous occurs to curtail the global supply of oil.  Take the odds on that outcome only if you can get at least 10-to-1.  Finally, if the uptrend exceeds p=99.34 without impaling it, that could mean there will be yet another leg up following a deep retracement, possibly into the 50s. ______ UPDATE (Jul 27, 12:30 p.m.): Oh, yeah, right, a fourth scenario –and who could not have seen it coming? There is word tonight of a ‘pause’ in U.S. air strikes, and of new ‘talks’ in Oman. Oil quotes have responded with a 7% drop to 83.10. Don’t get your hopes too high for ‘peace,’ though, since the chart says prices for the September contract will fall no lower than 82.11. It is only if they crush that Hidden Pivot support, implying more downside to as low as 70.72, that you should believe the news is anything more than the usual Sunday night spin, calculated to slow the relentless rise of prices at the pump.  The 93.50 target that I suggested shorting (see my 11:29 post) on Friday has caught the exact-to-the-penny top of a $10 decline. If you still hold a position, use a ‘dynamic’ or impulsive trailing stop to manage the risk. Both techniques are covered in the Hidden Pivot Course that is available free to legacy subscribers and newbies who have signed up for a year. _______ UPDATE (9:15 p.m.) : My latest target, a bearish one drum-rolled above, scored yet another a dead-center bullseye when the futures fell to exactly 82.12, then turned up hard for a $2.28 rally so far to 84.40. Any shorts should have been covered at or near the low, but if you reversed a position and went long, cash out some of the implied $10,100-per-contract profit now.  

I’ve set a high bar at 4403.70 to signal the possible end of a bear market that began in January, when the August contract hit a record 5700.  Otherwise, we should expect the weakness to continue at least until the 3793.40 target shown in the inset is achieved. There are two more Hidden Pivot supports you should be aware of, since either is capable of reversing the trend at least temporarily:  3822.70, the target of a smaller pattern that was featured here last week; and 3603.40, a worst-case projection derived from sliding ‘A’ up to the 5513.00 ‘marquee’ high recorded on March 2. Of the three possibilities, I favor 3793.40, which is why I have boldfaced it. The other two will work for careful bottom-fishing, however.

Last week began with a doomed two-day rally that left our 82.46 target unchanged. It has now been five months since shorting an upthrust proved to be a bad bet, and that will probably hold true at least until GDXJ finds a bottom at or near our target. It is a Hidden Pivot support too compelling to simply give way. It is also commensurate with a 3630 target I’ve provided for August Gold where a significant bullish reversal seems most likely to occur. Alternatively, we’ll set the bar at 120.06, just above an external peak recorded on May 29, to alert us to the possible ending of the bloodletting. _______ UPDATE (July 25): Unlike gold and silver futures, GDXJ rallied last week to create an impulse leg on the hourly chart. I suspect this is a false alarm, but we’ll give it the benefit of the doubt for now. The rally would gain credibility if and when it vaults the midpoint resistance at 101.55 and then goes on to trash D=107.22. We’ll monitor these obstacles closely, since a move through them has the potential to lead a similarly bullish move in gold.