So, was it thinking machines that put stocks into a death dive last week, or was it primal human fear? Either way, there’s a neurological disease at work and therefore little likelihood of a cure. Even worse, since these diseases tend to be degenerative, we should expect something still more disruptive in the future. Ham-handed regulations won’t be able to stop it, either. Let the exchanges install all the circuit breakers they want; supply will out someday, catastrophically overwhelming demand when buyers go AWOL. This is inevitable when you create a global electronic trading network connecting ten billion » Read the full article
Early Sunday evening, index futures were caught in a vicious short-squeeze that bids fair to recapture all of last Thursday’s losses. It would seem to be drawing its energy from the latest — and rather large, even by American standards — European bailout package. The loan guarantees just announced amount to some $560 billion, offered to the EU’s most troubled economies. This PR hoax could have legs, but from a trading standpoint it will lay an egg if it fails to push the E-Mini S&Ps above 1136.00. That is Thursday’s recovery high, and it lies somewhat above the 1130.75 peak achieved so far this evening. The futures are currently trading for 1122.50, equivalent to a 140-point rally in the Dow above Friday’s settlement price. _______ UPDATE (2:32 a.m. EDT): DaScumballs are doing what they’ve been doing so very deftly since March 2009: lifting index futures as high as they can get away with on razor-thin Sunday night volume. From a Hidden Pivot standpoint, DaBoyz can get away with as much, perhaps, as 1170.75.
Friday’s robust thrust fell ten dollars shy of a 1224.70 target, subjecting Gold to a little more bullying than usual Sunday evening. We can ignore it as long as the futures hold above 1189.20, but anything below that number will create a mildly bearish impulse leg on the hourly chart. If there’s opportunity brewing for night owls, it would likely come from the 15-minute chart (shown). The modest downtrend has a midpoint pivot at 1195.80 that you can bottom-fish with a three-tick stop-loss, and another Hidden Pivot at 1188.90 that deserves the same treatment. Both lie just below “structural” supports whose breach will be read by most traders as breakdowns. _______ UPDATE (2:21 a.m. EDT): A rally Sunday night invalidated the two downside targets but created two new ones. The first is a midpoint support at 1198.60 that has already been breached; the second, a ‘D’ target at 1190.70 that you can bottom-fish with a stop-loss as tight as four ticks. If it’s hit, look for more selling down to 1187.70, my worst-case low for today and another spot to try bottom-fishing with as tight a stop-loss as you can abide. _______ FURTHER UPDATE (8:57 a.m. EDT): The futures have exceeded 1187.70, bottoming so far at 1184.40 and hinting of still more weakness to come. They’d need to pop above 1206.50 today to undo the damage.
A print exceeding 18.910 today or tomorrow would kick the buying into high gear, creating a bullish impulse leg of daily-chart degree that would turn December’s watershed high at 19.420 into a sitting duck. Anything less, however, could strand Friday’s spike, leaving buyers to cool their heels in the wake of Friday’s spirited charge. More immediately, there are two spots where night owls might try bottom-fishing with a stop-loss as tight as three ticks: 18.235; or somewhat more conservatively, at 18.165. (Please note that numbers in boldface brown are usually ‘D’ targets of downtrends, while brown number in a lighter type-face are midpoint pivots. Uptrending targets and midpoints are similarly given in green, although I will sometimes use brown and green to highlight price points that are important though not Hidden Pivots.) _______ UPDATE (8 a.m. EDT): June Silver bottomed at 18.215, two cents below the higher target but well above the lower. I’ll record nothing done officially, but please note in any case that upside to as high as 19.415 over the near term has been signaled. Key resistance lies at 18.815, the Hidden Pivot midpoint associated with the target.
As of around 10 p.m. EDT Sunday, the futures looked bound for 10670, a shortable Hidden Pivot (albeit a relatively risky one; a more conservative short can be initiated at 10712). That would represent a 335-point gain over Friday’s close, and although it would not recoup last Thursday’s loss completely, it would handily exceed the day’s recovery high, creating an impressive bullish impulse leg in the process. _______ UPDATE (9:09 EDT): The rally now measures to as high as 10937, well above last Thursday’s pre-swoon high of 10865. A pullback in the meantime to (precisely) 10569, the target’s sibling midpoint, would telegraph the next thrust.
If Goldman drifts lower over the next 5-7 days, we’ll look to bottom-fish down at 136.11, the lowest Hidden Pivot target that can be derived from the intraday charts. If I can come up with a way to initiate the trade using a limit bid for some near-the-money call options, I’ll feature the trade as a Pick of the Day for all. _______ UPDATE (May 16): Scratch Goldman from the list of stocks we’ve been watching lately, since it has become too, too boring to deserve our time and attention. My minimum downside objective is now 135.35, and I’ll set an alert there, since the support will be worth bottom-fishing if it’s ever reached — which it will be.
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.
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.