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The Morning Line

Yet Another Reason Why the Tax Bill Stinks to High Heaven

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Ain’t it just like Wall Street (and its official house organ, The Wall Street Journal) to get all lathered up over supposed tax reforms that have little more substance to them than the usual, stinking heap of manure we’ve come to expect from Congress?  I made a similar point recently in discussing some fine print in the tax bill that would retain the alternative minimum tax for corporations. It were as though the Magna Carta had featured a provision to draw and quarter anyone caught stealing a loaf of bread.  So what else is in the fine print?  On Tuesday we learned about a provision that would deny equity investors the ability to choose which shares they sell to reduce a position. In the future, if the Senate has its way, any shares sold will be reckoned for tax purposes on a first-in, first-out basis. This is guaranteed to raise one’s tax bill if the shares have been rising.  The proposed change is certain to stimulate significant year-end selling ahead of the new law.

Business as Usual on the Hill

And here’s the kicker: If we needed further proof that we are represented solely by jackasses on Capitol Hill, it is this: The FIFO measure would raise a paltry $2.4 billion over the next ten years.  And that’s assuming taxpayers do nothing to end-run the levy.  Adds the Journal, “Some money managers and analysts say there has been so little discussion of the [change] that investors may be surprised to learn that [it] could reduce — or even wipe out — what they would save from an income  tax reduction.”  In the meantime, the spectacle of the stock market climbing vertically in anticipation of all the wonderful things the tax bill supposedly will do for the economy would be a joke if it weren’t going to prove so costly for so many.  When Congress promises “tax cuts for the middle class,” we should skip the celebration and grab our wallets.

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$GCG18 – February Gold (Last:1245.30)

EST

Gold’s long dirge has had a 1237.40 Hidden Pivot support as its no-brainer target since mid-October. In the interim, the only useful advice I’ve been able to give you was to treat each rally as a cruel tease. Now, with the February contract closing on our number, it’s okay to become slightly interested, since there may be a bottom-fishing opportunity. Specifically, I’ll recommend bidding 1237.40 for a single contract, stop 1235.90. Ordinarily I would suggest doing four contracts, and you can certainly do so if you know how to reduce theoretical entry risk to 0.50 or less per contract with a ‘camouflage’ entry set-up. But in this case the falling piano we would attempt to catch has been falling for so long that I can only recommend a single-contract bid against the trend. If the order fills and goes more than $4.50 in-the-black, check back here for updated guidance. Otherwise, take your loss with firm confidence that there will always be another opportunity. ______ UPDATE (Dec 12, 2:16 p.m.): The futures bottomed this morning at 1238.30, scant millimeters from my longstanding target. For explicit instructions, please refer to my posts in the chat room around 13:17. The gist of it is that if you did not buy on gold’s first approach to the target, you should not do so now. _______ UPDATE (7:18 p.m.): The futures have rallied $7 from the 1238.30 low. I am not establishing a tracking position because  only one subscriber reported getting long with a bid placed just above the downside target. Whatever the case, anyone long from near the low has built enough cushion into the trade that it will be hard to lose.

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$BRTI – CME Bitcoin Index (Last:16427)

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Bitcoin tripped a ‘buy signal on Friday at 16,045 for a bull play to as high as 22,104 over the next 2-3 weeks. These prices are based on CME’s Bitcoin Real-Time Index, which tracks the order books of numerous constituent exchanges. The chart shown, with the Tradestation symbol $BRTI, indicates minimum upside over the near-term (i.e., 2-4 days) to 18,065, the ‘midpoint Hidden Pivot’ of the ABC rally pattern.  Ordinarily we do not use ‘raw’ buy or sell signals such as the one noted above to initiate trades; rather, we convert them to proprietary ‘mechanical’ trades that rigorously control risk:reward in a 1:3 ratio. If you are interested in learning more about this or receiving Rick’s Picks intraday trading alerts, consider subscribing to the daily online service via a free two-week trial subscription at www.rickackerman.com.

This is a free forecast (Tout) by Rick. Get a free trial of Rick’s Picks to see full member content.

$DJIA – Dow Industrial Average (Last:24329)

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$ESZ17 – Dec E-Mini S&P (Last:2661.75)

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$VXX – S&P VIX Short-Term (Last:29.26)

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VXX’s relentless sell-off to historical new lows continued with last week’s plunge, mirroring the equally sensational and extremely overbought condition of the bull market itself.  If VXX goes on to achieve the 26.32 downside target shown, it would imply that the S&Ps over that same time will continue their ascent with little or no hesitation, presumably to the 25113 rally target we’ve been using or even higher. We’ve refrained from trading this vehicle unless it is at or very near a major Hidden Pivot level. That means that if and when 26.32 is reached or very closely approached, we’ll try to buy some near-the-money calls with a week or two left on them. In the meantime, we’ve spared ourselves money and anguish by not chasing the several upward spasms that have occurred over the last month. The thing to notice is that even if you had bought calls just hours before these volcanic eruptions occurred, booking a profit would have required quick reflexes, since each thrust gave way to a fleeting peak that lasted not days or even hours, but minutes. _______ UPDATE (Dec 11, 6:24 p.m. EDT): Volatility’s historical collapse continues apace.  VXX could conceivably reach the longstanding target at 26.32 within the next 5-7 days. If this event were to coincide with Dow 25113, my current minimum objective, it would by the Rick’s Picks equivalent of a Hindenburg Omen (or some such mysterious indicator).

This is a free forecast (Tout) by Rick. Get a free trial of Rick’s Picks to see full member content.

Would You Trade Bitcoin for Gold?

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The bottle-rocket trajectory of bitcoin’s rally has required me to put out increasingly ambitious Hidden Pivot targets several times each day. Currently I am using 18436 to project a top of some sort, although I hesitate to suggest it will be THE top. Actually, I’d be happy merely to see BTC pull back from that number for more than a few hours — as long as it has taken for this vehicle to obliterate Hidden Pivot resistances that we might have expected to contain the jubilation for a few days if not longer.

This evening, BTC has plummeted more than $3000 since peaking several hours ago at 17171, a new record. Most of those who have benefited from the cryptocurrency’s breathtaking climb are not traders, just hoarders who may be starting to wonder whether it’s time to get off.  But how? The best way for them to take profits would be to convert bitcoin to cash or to buy something ‘real’ with bitcoin. Something like physical gold — about as real as investables get. At one point on Thursday afternoon, a single bitcoin could have purchased ten St. Gaudens $20 double eagles — and then two more later in the day when bitcoin peaked at 17171.  Would you do that deal? Of course you would.

Coin Dealers Not Leaping to Do the Trade

So why isn’t everyone swapping bitcoin for gold? Well, even if they wanted to, they’d have a tough time finding coin dealers eager to take the other side of the trade. If it were otherwise, the price of gold futures would be rising, not falling as it has for the last month.  Bitcoin hoarders can be forgiven for thinking they’ll make much more money by staying in bitcoin than if they convert their digital lucre to bullion. Realize that the price of gold has been languishing for more than four years near $1250 since peaking in 2011 just above $1900. Even so, can there be any doubt that at some point in the future, bitcoin speculators will regret not having swapped their digital money for gold or some other tangible asset? Even with bitcoin’s value rising a thousand dollars or more per day, this seems like a no-brainer to me.

This is a free forecast (Tout) by Rick. Get a free trial of Rick’s Picks to see full member content.

$AMZN – Amazon (Last:1141.58)

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Could AMZN, currently trading for around $1140, fall to $400 a share or lower?  You bet.  Not tomorrow, next week or even next month or year. But eventually. Investors should prepare for it, since Amazon Inc. seems destined to become a scapegoat for our collective miseries during the next economic downturn. For now, however, the company’s increasing dominance in retail is widely regarded as a plus for the price of its shares. Why exit AMZN stock, the reasoning goes among its institutional sponsors, if we’ll all eventually be buying nearly everything we need from Amazon and its vendor partners?  But try picturing Americans in the throes of recession-or-worse, unable to summon the old shop-till-you-drop zeal that has powered the incredible growth of online retail.

At that point Amazon will be viewed less as a world-beating seller of all things than as a greedy monopolist using its dominance in retail to gouge customers and reap unconscionable profits. Try as they will to spin themselves as a tireless champion of the consumer, the Seattle-based giant might not have enough competitors by then for that narrative to seem credible. And that’s when their troubles will start. The news media will feed us a steady stream of consumer horror stories that will turn otherwise docile shoppers into a lynch mob. Will the company ultimately be held responsible for providing life’s necessities at ‘reasonable’ prices?  Quite possibly, yes. And that’s why it’s not farfetched to imagine a political movement seeking to regulate Amazon as we do companies that provide electricity and water. If Amazon can barely turn a profit now, imagine what a struggle it’ll be to boost margins when they’re flanked by Big Government and a pitchfork mob.

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$JYZ17 – December Yen (Last:0.88745)

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$BA – Boeing Co. (Last:290.39)

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$AAPL – Apple Computer (Last:169.33)

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Tuesday, January 23, 2018

The consistent accuracy of Rick Ackerman’s forecasts is well known in the trading world, where his Hidden Pivot Method has achieved cult status. Rick’s proprietary trading/forecasting system is easy to learn, probably because he majored in English, not rocket science. Just one simple but powerful trick -- managing the risk of an ongoing trade with stop-losses based on ‘impulse legs’ – can be grasped in three minutes and put to profitable use immediately. Quite a few of his students will tell you that using ‘impulsive stops’ has paid for the course many times over.

Another secret Rick will share with you, “camouflage trading,” takes more time to master, but once you get the hang of it trading will never be the same. The technique entails identifying ultra-low-risk trade set-ups on, say, the one-minute bar chart, and then initiating trades in places where competition tends to be thin.

Most important of all, Rick will teach you how to develop market instincts (aka “horse sense”) by observing the markets each day from the fixed vantage point that only a rigorously disciplined trading system can provide.

The three-hour Hidden Pivot Course is offered live each month. If it’s more convenient, you can take it in recorded form at your leisure, as many times as you like. The course fee includes “live” trading sessions (as opposed to hypothetical ‘chalk-talk’) every Wednesday morning, access to hundreds of recorded hours of tutorial sessions, and access to an online library that will help you achieve black-belt mastery of Hidden Pivot trading techniques.

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