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Topic of the Week
TODAY'S ACTION for Wednesday
Rick's Picks for Wednesday
The update to yesterday’s forecast caught the top of an entirely unremarkable session that was all noise and zero conviction. If and when this trading vehicle breaks out, look for confirmation of a 1097.50 rally target by way of a stall at 1074.50, its midpoint sibling. Alternatively, it would take a print at 1057.25 to turn the hourly chart bearish.
I’ll stick with the 1029.10 rally target flagged in yesterday’ s update, although a leisurely buy on a pullback to the 1012.70 midpoint associated with that number does not appear to be forthcoming. The print at 1029.10 would be a big deal, since, as noted here earlier, it would surpass a high at 1028.00 from July of 2008, refreshing the bullish impulse on the weekly chart. That high is no less relevant because it occurred in thin trading, by the way. To the contrary, it is all the more legitimate as an “external” peak because it was recorded by the December futures, not by a continuous contract.
There are no DJIA patterns that I particularly like, but the whimsical rule-breaker shown in the chart will do in a pinch. I’ve decided to legitimize it because of the oscillations around the 9290 midpoint pivot, and also because the most recent phase of bear-rally hysteria launched from a low not far beneath it. Anyway, the bottom line is a Hidden Pivot target at 10493. Although I wouldn’t try to go short the world at that price, I’m pretty confident about using it as the first number above 10000 where I might believe a top could form. One thing we can be nearly certain of is that 10000 itself will show no particular stopping power. If such an occurrence were even remotely possible, the stock market would cease to be the engaging carnival that it is. At 10493, however, Dow 11000 would be a glimmer in bulls’ eyes — and Kudlow’s wet dream.
With a rally target at 553.87, the little arse bandit hasn’t given us much in the way of Hidden Pivots to bottom-fish. Nevertheless, we can attempt it this morning if the stock pulls back to 497.19 in the first 15 minutes, bringing the December 550 calls (GOPLY) into bargain range. You should try to buy one of them for around 9.10, using a stop-loss at 496.99. With the stock in such a strong rally, it will probably be easier to try and enter with-the-trend on camouflage; so if you are familiar with the technique, you should try to buy the call on the first ABC rally from near 497.19. ______ UPDATE: We can return to this trade if and when GOOG shows a little more gumption, but for now, cancel the order.
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The futures spent the entire day playing toe-sies with an 1881.50 rally target disseminated on Wednesday. Some subscribers reported getting short, but they’ll need some luck to hang onto the position. Although it took this gas-bag several days to hit our number, suggesting that short-covering is weak at the moment, this is unlikely to last. Pullbacks have been shallow, keeping bears pinned to the ropes, and it will take a nasty downdraft as the week draws to a close to put bears in the comfort zone come Monday. Stranger things have happened, of course, but it would be passing strange for a downtrend to unfold that lasts for more than a few days.
I’ve broached a 1945.00 target if DaBoyz should bully their way to new highs in the week ahead. Although I am unable to imagine a good reason for such an explosion, I’ve learned over the last five years that no reason is needed. More immediately, since the E-Mini ended the day in the throes of a pattern that was impulsively bearish on the 15-minute chart (targeted on 1872.50, where A=1880.50 at 1:10 p.m. EST), night owls should trade with a bearish bias. (Please note, however, that this endeavor could prove dicey, since bears are having an awful struggle holding this little sonofabitch down in after-hours trading.) Another tactic would be to bottom-fish the target — or ‘a’ target — with the goal of racking up sufficient gains on any ensuing rally to cushion the stop on the next short.
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We got a clear and decisive answer yesterday to the question that has been on every tiny, fevered brain up and down Wall Street: How long do we have to feign concern over the situation in Ukraine? The Dow finished up 228 points after being up as much as 250 points intraday, proving yet again that the stock market, fed by a limitless stream of easy money, has absolutely no connection to the world of events. Unfortunately, traders had little opportunity to grab the rally by the tail, since it was effectively over on the opening bar (see inset). And by day’s end, it had left bears pinned to the ropes yet again, ready if unwilling to energize the next freakish, short-squeeze to who-knows-how-high.
Actually, we do know how high, since there’s a clear-as-day Hidden Pivot target at 16437 on the intraday charts, and another at 16607 if the first fails to contain the opening-bell stampede. A move exceeding the lower number by as little as 4 points should be regarded as the go-ahead for achieving the next. Traders looking to get long using the ‘camouflage’ technique should focus on the 10-minute chart, since it was bullishly impulsive at Tuesday’s close. You should also view a retracement to 16339 as a possible buying opportunity, since that is the midpoint Hidden Pivot of the rally pattern yielding the target at 16607. Either of the two targets is shortable using the Diamonds, and the second can be shorted with a micro-tight stop-loss instead of camouflage. If you’re lucky enough to have been long on the way up, I’d suggest using a portion of your gains to short 16607 more aggressively. For a simple strategy using put options, check out today’s tout for the Diamonds.
This popular gold mining vehicle is taking its sweet old time consolidating, but when it develops sufficient thrust for takeoff, expect the move to reach the 50.71 Hidden Pivot target shown in the chart. That would represent a move of nearly 20% from these levels, but if it unfolds with the speed of the initial leg we could be there by April. The rally should be considered under way when GDXJ has decisively exceeded the 45.55 midpoint (i.e., by perhaps 20 cents) or closed for two consecutive days above it. Traders looking to ‘camo’ their way aboard with minimal risk should do their hunting on the 15-minute chart, where there are some decent ‘external’ peaks to be found in price action over the last two weeks.
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Facebook has just paid a whopping $18 billion for an instant-messaging application that evidently has caught on with the kids. The company, WhatsApp, has 55 employees, and its two founders are now billionaires. It would hardly surprise if their clerk-typist and janitor have become multimillionaires. No one knows what kind of revenues the company has been generating because that’s a secret. But they do not use an advertising model, and subscriptions are free for the first year, rising to $1 a year thereafter. Zuckerberg paid about $40 per for each of WhatsApp’s 450 million users — supposedly the going rate. Frankly, we view these valuations as absurd. However, such concerns didn’t stop Wall Street’s OPM stewards from goosing FB sharply higher yesterday, pushing the stock well past a 67.43 Hidden Pivot target that we might have expected to contain FB for more than a few days. Keep the number 75.82 in mind, because Hidden Pivot analysis says that’s where this gas-bag will bump up against something solid. We’ll be looking to short aggressively up there, so stay tuned to the chat room and to the tout updates if you’re interested. _______ UPDATE (February 28, 2:50 a.m. EST): Yesterday’s detour south could take the stock down to 67.66 if the intraday low, 68.85, gets taken out. The target can be bottom-fished with a limit bid and a stop-loss as tight as 5 cents. ______ UPDATE: Friday’s 67.38 low overshot my target by 28 cents, stopping out any bidders who played it by-the-book. The overshoot of the target suggests that still-lower prices may impend.
Until yesterday, this stock was the obedient slave of Hidden Pivots, rallying over several weeks to within 21 cents of our longstanding target at 205.79. That changed after Wednesday’s close, however, when the stock took a manic leap to $225 (see inset) on word that Q4 earnings of 33 cents per share had beaten the usual suspects’ estimates by a dime. We should probably be thrilled to see the shares of a company that makes actual products in an actual factory do well relative to companies like Facebook and Netflix, which add little or nothing tangible to the economy. Still, one can only shake one’s head and wonder whether the 400% appreciation in TSLA shares over the past twelve months is a tad overdone.
Be that as it may, we are obliged to identify a new target now that the old one has been demolished. The weekly chart offers one at 222.35 that is tied to an 88 low made back in June. Since that number, too, has been exceeded this evening, albeit by only a few dollars, there must be a still-bigger bullish pattern at work. Although there are no clear beginnings to define one, we can still use a tiny, single-bar low at 33.80 recorded last March as the point of origination (aka ‘A’). Accordingly, our new target is 276.96, using these coordinates from the weekly chart (see inset): A=33.80; B=194.50 on 10/4; and C=116.10 on 11/29. The midpoint pivot of this pattern lies at 196.53, and so any pullback to that number should be regarded as a buying opportunity. Because our point ‘A’ is not of the highest pedigree, ‘camouflage’ is an absolute must when bottom-fishing. ________ UPDATE (February 26, 12:48 a.m. EST): And now we have something to explain why TSLA has been making its way to our target via leaps and bounds. From the Rick’s Picks chat room, here’s an illuminating post attributed to the Financial Times: “Adam Jonas, Morgan Stanley analyst, said the investment bank no longer viewed Tesla solely as a niche premium auto manufacturer following the company’s announcement that it would construct its own lithium ion battery factory. Mr Jonas says a plant – named the ‘+’ – that can produce more than 1bn cells a year has the potential to disrupt the US energy storage business and the country’s electrical grid.”
The drumbeat of dollar bears has grown louder in recent months, with some of my colleagues suggesting that a collapse is imminent. Technically speaking, I’m just not seeing it. The Dollar Index has in fact been one of the world’s most boring trades for the last three years and is currently thrashing around near 80, about where it was ten years ago. In the intervening decade, although there have been some big swings, it has crossed trendlessly up and down through 80, the approximate midpoint of a 20-point range, no fewer than 15 times. If I had to bet which direction the next, presumably insignificant, move will be, I’d give 6-5 odds that it will be up.
Don’t’ get me wrong: I completely agree with those who tirelessly assert that the dollar is crap. Even so, it is the crap the world chooses to hoard against the threat of financial collapse; it is the crap that financiers bet on whenever some geopolitical crisis causes a global tremor; and it is the crap that the paper shufflers bet with — to the tune of a quadrillion dollars — whenever they want to make big money with relatively little work. These factors greatly outweigh any reservations they may have about taking dollars in exchange for all of the things that Americans consume. Crap or not, the dollar will remain buoyant until the day the rest of the world realizes the U.S. economy is kaput and that the confidence that supports the financial shell-game was egregiously misplaced. This will happen with the swift, destructive force of a nuclear blast, by the way, rather than via a comfortable and more or less predictable process of depletion. _______ UPDATE (March 2, 9:56 p.m. EST): The dollar has bounced precisely from the 79.68 target shown (see inset), but if the support gets taken out within the next couple of days it would be evidence of further weakness to come.
Google’s dithering at an important rally target (see inset) is indicative of larger uncertainties weighing on Wall Street at the moment. I’m on record with a prediction that the broad averages will rally to at least marginal new highs before they can collapse in earnest. If the same holds true for GOOG, we might expect a false breakout to the Hidden Pivot midpoint shown, p=1192.73; or if any higher, to its ‘D’ sibling, 1204.20. We should pay close attention to these targets — either is shortable if tightly stopped – especially the latter, since an indisputable bellwether stock can offer greater clarity than the broad averages for purposes of picking a tradable top. _______ UPDATE (February 14, 11:23 a.m.) Google hit a high today of 1204.46 — 26 cents above our target. It has since fallen to a so far low of 1198.08. _______ UPDATE (February 18, 12:03 a.m.): The 1204.20 target is not chopped liver, as I like to say, but we cannot dismiss the possibility that GOOG is fixing to blow past it. The Whoopee Cushion bounce Friday off the lows implied DaBoyz are surely game to try. If so, expect the rally to continue to at least 1229.57. If you’re intent on shorting that Hidden Pivot, you are obliged to try your hardest to be long on the way to it. _______ UPDATE (February 19, 11:02 p.m.): The rally sputtered out at 1212.87, well shy of my target. Google’s lesser charts are now bearishly impulsive, and the stock will be telegraphing more weakness if it overshoots ‘d’ targets of corrective patterns. _______ UPDATE (February 24, 1:44 a.m. EST): If, on the other hand, bears are unable to wrestle this beast to the mat — meaning, take it below C=1197.50 (see inset) — we should presume that a new leg to as high as 1214.11, or perhaps even D=1230.71, impends. Pay close attention to any tussles with p=1214.11, since an easy move past it would telegraph further upside to D, creating an enticing trading opportunity in the process. _____ UPDATE (February 28, 3:12 a.m.): The stock has put in a possible top at 1228.89. If it’s eventually going to turn out to be an important one, this correction should slice through Hidden Pivot supports today at 1216.79 and 1209.30.
SIDE BETS for Wednesday
December Silver appears to be consolidating above a Hidden Pivot midpoint at 17.150, and a close above it today would likely clinch a push to its ‘D’ sibling, 17.775 (or 18.155 if any higher). Night owls could try bottom-fishing at 17.175 using a three-tick stop-loss.
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Of Green Shoots and Broken Windows
by Rick Ackerman on September 23, 2009 4:12 am GMT · 6 comments
Our memory stumbles whenever we try to recall any recent sightings of “green shoots” that would support the officially promoted illusion of a U.S. economy in recovery. Actually, this vision is more of a hallucination than an illusion, since one’s mind needs to venture beyond the pale of rationality, light years beyond the fringe of statistical evidence, to conjure up supposed signs of sustainable growth. Does “recovery” square with the reality that you, personally, see all around you? Indeed, whatever picture the government and the news media want us to see will be unconvincing at best, since a » Read the full article