Stocks have been in an all-out sprint since the first trading day of the new year and are overdue for a correction. Whether frenzied buyers are ready to oblige, if only to preserve a veneer of sanity, should become clearer as the week draws to a close. They looked winded on Thursday but still managed to close the broad averages off their intraday lows. If the Dow were to close unchanged or down slightly on Friday, especially after trading underwater intraday, I’d expect next week to begin on weakness, accelerating into mid-week or beyond. We’ve become so accustomed to seeing every dip get bought with such vigor that we can be certain stocks will fall with unusual steepness the first time bargain hunters are perceived as spent. Any guru predicting this will happen “soon” is not going very far out on a limb.
Big Selloff Is Surely Coming ‘Soon’Posted Thursday, January 18 1 comment
$ESH18 – March E-Mini S&P (Last:2798.00)Posted January 18, 2018, 8:15 pm
$GCG18 – February Gold (Last:1341.30)Posted January 15, 2018, 9:48 pm
$GLD – SPDR Gold Trust (Last:126.96)Posted January 12, 2018, 5:05 pm
CLG18 – Feb Crude (Last:63.56)Posted January 11, 2018, 5:05 pm
Crude Oil has broken out with a sharp rally that easily surmounted a daunting-looking Hidden Pivot target at 63.08 (see inset) on the weekly chart. We’d been using a 63.59 target for the December contract to stay comfortably on the right side of the uptrend. Shifting to the February futures, we see that this week’s so-far high at 64.77 surpassed the target by a whopping $1.69. If the rally continues, moving above a zone of resistance between 62 and 69 created early in 2015, it would augur more upside to $75 or even higher in 2018. This could not possibly be due to the mere curtailment of supply by OPEC et al. What it implies is an upsurge in the global economy that has yet to live up to the by-now constant hubris of the financial press.
$AAPL – Apple Computer (Last:174.29)Posted January 10, 2018, 8:50 pm
Apple shares have held their own (see inset) against a spate of negative press, including most recently mounting concerns that iPhones, addictive as crack cocaine, are harming our children. Would Apple become less profitable if its social consciousness extended to the well-being of kids who are spending half their lives texting, browsing and streaming? The inescapable fact is that such a change would dampen profits for the entire business world, since so much of it is tied to digital devices, social media and the virtual world of the Internet. Television stoked similar fears about addiction in the 1960s (and thereafter), but those fears never seemed to impinge on the medium or its profitability. The Internet did, however — ironically because it has proven far more addictive than the TV medium itself, commanding an even greater share of viewers’ time than TV ever did, even in its heyday.
As for the stock, from a technical standpoint AAPL still looks to be consolidating for a shot at a 184.10 target we’ve held in mind for months. The fact that the stock has maintained altitude and will undoubtedly continue to do so until the negative press blows out to sea suggests that its institutional sponsors are blithely unconcerned about the effects of social pressures on Apple, Inc. A downturn in iPhone sales is all they care about — and even then, it has always been assumed that such weakness would at worst prove temporary. It is only recession that DaBoyz should fear, since it would take a heavy toll on sales of Apple’s ridiculously overpriced hardware, most particularly iPhone models snapped up by Apple-cult buyers for $1000 or more.
TNX.X – Ten-Year Note Rate (Last:2.55%)Posted January 10, 2018, 7:36 pm
Uh-oh. I’d said bond bulls would be in trouble if this vehicle were to pop above 2.57%, and so it has. It tracks interest rates on the Ten-Year Treasury Note, and signs are not good. On Wednesday TNX breached the key threshold mentioned above, putting a possible further move to 3.11% in play. The breach of 2.57%, a ‘midpoint Hidden Pivot’ resistance, shown as a red line in the chart, would need to be more decisive for me to rate a move to 3.11% as an odds-on bet, but I’d call it a near-certainty if the rally were to go just a tad higher, surpassing the key ‘external’ peak on the weekly chart at 2.615% without taking a breather. We’ll probably know soon what’s coming, but it’s hard to imagine how a U.S. economy so completely dependent on vast excesses of credit will function if this key rate is in fact headed to 3.11% or even higher.
$DJIA – Dow Industrial Average (Last:26,115)Posted January 9, 2018, 4:48 pm
Buyers demolished yet another middling Hidden Pivot resistance Tuesday, much as they’ve been doing for the last nine years. I’d have laid odds that the 25,392 target (see inset) would show some stopping power, but it didn’t. When the dust settled, the Indoos had topped 47 points above it at 25439. When a Hidden Pivot as clear and compelling as this one is so easily brushed aside, it strongly implies that bulls have sufficient buying power to push the blue chip average much higher. I’ll back off targeting for a while until I can offer you a fresh one with the ability to shorten our odds for a successful trade north._______UPDATE (Jan 9, 11:41 p.m.): Back to the old drawing board. The 27,251 target shown should tide us over for a while, since it leaves nearly 1900 of upside for the Indoos to cover before they hit something ostensibly solid._______ UPDATE (Jan 17, 5:39 p.m.): If you enjoy hoping that each and every Hidden Pivot rally target could conceivably produce the Mother of All Tops — I know I do — then keep the number 26,416 in mind. That’s a dark-horse-candidate ‘hidden’ resistance of somewhat lesser degree than the one at 27,251, and I would be remiss if I didn’t at least mention it. For some of you, it could make Thursday’s obligatory upthrust more interesting to watch. On the 120-minute chart, here are the coordinates that produced the target: A=22,219 on 9/25/17; B=24,534 on 12/4; and C=24,101 on 12/7.
$+VXX – S&P VIX Short-Term (Last:26.96)Posted January 8, 2018, 5:48 pm
I haven’t given up on the lottery ticket we still hold — four 19 Jan 28 calls acquired for 0.67 last week when VXX touched a longstanding bear-market target at 26.32. On Monday, after noodling around near that Hidden Pivot support for three days, VXX slipped below the water line, trading as low as 25.76 intraday before closing at 25.98. The overshoot may not look like much on the chart, but it amounts to a so-far 2.1% fall beneath my benchmark. It is astounding to me that such a clear and compelling Hidden Pivot has evinced no bounce whatsoever. In any event the options are keepers, bought as a high-leverage speculation that VXX would trampoline from somewhere very near 26.32. If it does not we will have exhausted all possible targets of interest, and it’s unlikely we will try bottom-fishing again in the foreseeable future.
There are some bigger downtrending patterns than the one I’ve used to project 26.32, but all of them yield D targets below zero. In the past, this has sometimes implied, as it did in case of Bear Stearns and Lehman shares in 2007, that the companies were bound for bankruptcy. However, in this case it likely means VXX will continue to fall toward zero until it is reverse-split yet again by the DaBoyz so that more retail suckers can be enticed to buy put and call options from them. They’ve been making enviable money with this shell-game for years, but it is predictable that most of it will be wiped away in just a few days when VXX finally explodes, as it surely must. But with the magic power of our 26.32 support very nearly spent, there is no point in our dreaming about catching that bottom and being on the profitable side when VXX’s day of reckoning finally comes. _______ UPDATE (Jan 10, 5:49 p.m.): The volatility gods abhor nothing so much as a failed sell-off attempt that gives way to a weak rally. That’s exactly what happened on Wednesday, and it caused VXX to collapse intraday, reversing downward by a whopping 1.10 points so far. I will stick with the suggestion that VXX be treated, traded and disrespected as though it were headed to zero. That is what it was designed to do and will continue to do until such time as the Masters of the Universe reverse-split it. Once VXX has been newly re-fattened like foie gras, DaBoyz will be able to sell option juice against it just like in the good old days. Whatever the case, we have no exposure now and are unlikely to have any, any time soon. _______ UPDATE (Jan 16, 2:03 p.m.): For whatever mysterious reason, VXX has popped today, so far by 1.29 points. Consider this a bulletin to remind you that we still have a horse in the race in the form of an out-of-the-money-but-not-by-much call option with three days left on it. If it should rise from the dead, sell out your position as you please. ______ UPDATE (Jan 18, 8:23 p.m.): Our calls were keepers to begin with, so plan on playing it down to the wire. Check with your broker to determine when you’ll need to be out of them.
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The Scent of Dow 30,000
Bears Just Couldn’t Finish the Job
MLK Day Forces Bulls to Cool Their Jets
Treasury Rates and Crude Break Out
Ten-Year Note Exceeds a Crucial Threshold
A 27,251 Dow Target to Tide Us Over
Oprah for President?
Exuberance — or Fever?
Are the Big Guns Just Warming Up?
A Chart Nerd Wets Himself