[This corrects the earlier version, which referred to yields on the 30-Year T-Bond.] Stock market bulls could catch a break if the retracement in Treasury yields continues for a while. The chart shows yields on the Ten-Year Note to have peaked last week at 3.25%. The correction has since hit 3.12% and could conceivably go lower. Although my rally target at 3.32% lies significantly above, that target comes from the weekly chart, and charts of lesser degree look maxed out for the time being. If so, the bulls had better make hay while the sun shines, since a move in yields to new cyclical highs will weigh heavily on stocks and stifle their upward progress. Mortgage rates are already at their highest point in years, and it won’t be long before the negative impact on home sales that has already occurred will spread into auto leases.
Lower Yields Are Bulls’ Best Hope at the MomentPosted Monday, October 15 2 comments
$DJIA – Dow Industrial Average (Last:25339)Posted October 14, 2018, 5:07 pm
The Dow looks primed to fall at least another 750 points, so it’s no time to let your guard down. Thursday’s obligatory bounce came from just inches beneath the 24,965 benchmark I’d proffered Wednesday night as a minimum downside objective, but it didn’t get very far. By day’s end the Indoos were falling anew, on track to hit the 24,298 target shown. That’s a Hidden Pivot support of intermediate degree, and if it fails to contain the selling, expect more slippage to at least the 23,997 low recorded in June. We’ll be looking for a ‘counterintuitive’ bounce from somewhere near there, so stay tuned to the chat room for real-time guidance if you’re keen to bottom-fish. ______ UPDATE (Oct 14, 4:08 p.m.): The bounce off Friday’s sold-out low generated a ‘mechanical’ short at 25,284 (i.e., the green line shown in the chart), stop 25,612. The trade is predicated on the 24,298 target given above. If and when the Indoos slip beneath Midpoint Pivot p=24,955, particularly if they close beneath it, that would imply more slippage straightaway to the target.
$AMZN – Amazon (Last:1760.87)Posted October 14, 2018, 5:06 pm
HUI – Gold Bugs Index (Last:153.23)Posted October 14, 2018, 5:06 pm
$AAPL – Apple Computer (Last:217.28)Posted October 14, 2018, 5:05 pm
$ESZ18 – DEC E-Mini S&P (Last:2760.25)Posted October 14, 2018, 4:07 pm
$DXY – NYBOT Dollar Index (Last:95.04)Posted October 11, 2018, 7:04 pm
$GCZ18 – December Gold (Last:1232.90)Posted October 11, 2018, 6:49 pm
I’ve greeted rallies in recent weeks with unmitigated skepticism, and dissed gold every chance I got, but today’s powerful upthrust did everything I’d asked of it, turning me — and the hourly chart — mildly bullish. The move was uncorrected as of the close, and so it’s possible the impulse leg will become even more impressive, exceeding additional peaks without pulling back. For the time being, though, I’ll suggest using the 1237.90 target shown as a minimum upside objective. It is woefully illegitimate because the A-B impulse leg clearly did NOT surpass any significant prior peaks. However, the pattern itself is sufficiently comely for us to use for targeting purposes. The move would become downright impressive if it surpasses the 1244.70 ‘external’ peak recorded on July 23, especially if this were to occur without a significant correction en route._______ UPDATE (Oct 15, 9:53 a.m.): The December contract has fallen back sharply after rallying $15 overnight to within 1.00 of the 1237.90 target I’d furnished. For purposes of establishing a tracking position, I’ve asked subscribers in the chat room for details concerning any positions they may have held or still hold. The downturn has come precisely, and coincidentally, from the midpoint resistance of the pattern shown in this chart. If it is brushed aside by buyers, look for the rally to continue to at least 1254.10.
$VXX – S&P VIX Short-Term (Last:34.02)Posted October 10, 2018, 9:28 pm
Twelve days ago, on Facebook and in my chat room, I recommended buying the Oct 19th 30/35 vertical call spread for 0.50 or less. The Facebook video was presented under the headline Leveraging an October Disaster with Cheap Calls, and you can view it by clicking here. The spread subsequently traded as low as 0.21 before stocks began to fall last week, launching the position skyward. It doubled, then tripled in value earlier in the week, shooting up as high as 3.00 today with the S&Ps in a 100-point dive. Anyone who followed my simple guidance could have made between five and fifteen times his or her original investment. As is my custom, I recommended cashing out half of the position when it doubled in value, allowing subscribers to hold the remainder for a risk-free swing at the fences. I also recommended keeping one or two contracts until expiration day, since, if VXX is trading above 35 at that time, the spread would be worth its maximum value of 5.00. To all who took a position based on my guidance, good luck! _______ UPDATE (Oct 12, 9:08 p.m): VXX ran up to 37.38 around mid-day, making the last remnants of the spread an easy sale for 4.80 or higher. Subscribers who held out for top dollar should take some their gains and splurge on something you’ll enjoy.
$BRTI – CME Bitcoin Index (Last:6464.97)Posted September 13, 2018, 5:20 pm
Bloomberg news is out with a breathless dispatch tonight that suggests digital currencies have bottomed. If so, I can find no compelling evidence of it in the charts. Their expert is a guy named Michael Novogratz, a former Goldman Sachs partner who likes the current look of Bloomberg’s Galaxy Crypto Index. It measures the performance of the largest cryptocurrencies versus the dollar and was compiled jointly in May by Bloomberg and Novogratz’s investment fund, Galaxy Investment Partners. I use the CME’s Bitcoin Index (Symbol: BRTI) myself, and it looks brain-dead to me. I would turn quite bullish if BRTI were to thrust above the 8594.57 peak labeled in the chart (see inset), but until such time as that happens, I’m inclined to think it will dip first to the 4396.32 target shown in the chart before warranting our serious attention.
TSLA – Tesla Motors (Last:308.44)Posted August 20, 2018, 9:11 pm
My gut feeling is that Tesla shares have seen their highs for a long while. Usually I let the charts do the talking, but in this case I’ve jumped the gun to sketch out a bearish head-and-shoulders pattern as it might develop over the next 15-20 months (see inset). This is just speculation, of course, but it’s not farfetched to “see” a left shoulder and head already in place on the weekly chart. Although the SEC is likely to rough up CEO Elon Musk for his ill-considered tweet about taking the company private, legal troubles will probably be the least of his problems. He has flatly asserted the company will be profitable from this point forward, but it’s hard to take him seriously, since there are reportedly serious design flaws and manufacturing problems besetting Model 3.
The Upside of Failure
Tesla sales are down in Europe and likely to fall further as formidable competitors such as Jaguar, Mercedes Benz and BMW enter the market for cars powered by electric motors. Musk could pull a rabbit out of the hat with some startling development in battery storage, but that is not an odds-on bet either. It doesn’t help that, from a financial perspective, the automaker has been skirting bankruptcy.
If the head-and-shoulders pattern plays out as sketched, the stock is headed below $200, well beneath the recently revised price targets of some high-profile analysts. Tesla fans shouldn’t despair, however, since a collapse in the share price would force Musk to get his formidable mind back on the basics rather than on the stock’s ups and downs. Somewhat removed from the limelight, he would have the breathing room to do what he had started out to do — i.e., sell enough expensive cars to generate the cash needed to produce a true mass-market vehicle.
TNX.X – 10-Year Note Rate (Last:3.225%)Posted August 19, 2018, 5:05 pm
J.P. Morgan Chase CEO Jamie Dimon recently raised his forecast for rates on the Ten-Year Note, currently trading just below 3%, to 5%. He’d predicted a rally to 4% back in May but now thinks the bull market in stocks could run for another two or three years, putting additional upward pressure on long-term yields. For its part, Rick’s Picks has told subscribers to expect a push soon above the 3.11% peak recorded back in May — a peak we had foreseen five months earlier when the Ten-Year Note was paying around 2.35%. We offered no specific target at the time but will now: 3.32%, as shown in today’s chart (see inset).
It’s hard to square Dimon’s interest-rate forecast with the notion that the bull market in stocks has a few more years to run. Our gut feeling is that anything above 3.25% will asphyxiate the U.S. economy and send it into recession. The housing sector is already in a sharp downturn as reported here last week., and even a small turn of the interest-rate screw could asphyxiate it, along with auto leases. This would be a double whammy for the stock market, since mortgage rates have been held for a long time at levels that allow Americans to buy more home than they can afford. Similarly, car leases are structured so that we can drive more car than we can afford. The silver lining here turns out to be an unappealing scenario: rates go no higher than 3.50-4.00, but only because the U.S. economy has nosedived. _______ UPDATE (August 19, 5:07 p.m.): The uptrend stalled at 3.106% and in the three weeks since has receded to the middle of the 2.72% – 3.11% range in which rates have fluctuated for the last six months. My bias is neutral for now. Here’s an updated chart. ______ UPDATE (Sep 24, 10:46 p.m.): Rates on the Ten-Year Note are breaking out following a four-month consolidation. My minimum upside projection, shown in this chart, is 3.157%, but an easy move past that Hidden Pivot would imply yields are headed still higher._______ UPDATE (Oct 3, 8:28 p.m.): The uptrend impaled our 3.157% target, opening a path to the 3.319% Hidden Pivot resistance of an even bigger pattern. When it gets there — and it will — the February 2011 peak at 3.744% will beckon a test. Were the rally to fail at that level, the financial system would still be under considerable stress at that point to pay the going rate on debt._______ UPDATE (October 7, 5:53 p.m.): Two big thrusts last week have shortened the path to the 3.319% target. If it’s decisively exceeded, look for more upside to at least 3.469%, the Hidden Pivot resistance shown in this chart.
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Tuesday, November 13, 2018
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