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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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$ESZ17 – Dec E-Mini S&P (Last:2668.00)

EST

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$GCG18 – February Gold (Last:1258.40)

EST

With today’s thrust, February Gold has extended its rally from 1238.30, a bottom recorded on Monday that could prove to be important. It occurred less than a dollar from a target we’d used that had been three months in coming. A bounce lasting another 3-4 days would be appropriate if the larger downtrend is fated to resume. In any case, the rally would need to surpass the 1321.00 peak labeled in the chart to demonstrate real staying power. The futures should be traded with a bullish bias in the meantime. I haven’t established a tracking position because getting long at the low required bidding a few ticks above where I’d suggested. Subscribers who traded my guidance aggressively and got long nonetheless have enough of a cushion by now to relax and do as they please. The so-far high of the move is 1259.70, representing a $21.40 reversal.

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$BRTI – CME Bitcoin Index (Last:16492)

EST

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. ______ UPDATE (Dec 13, 8:44 p.m. EST): The ‘mechanical’ buy signal mentioned above triggered today on the pullback to 16042. Since the required stop-loss at 14021 implies entry risk of at least $2021, I’ll suggest paper trading this one to get a feel for my tactics before you use real money to tango with this rabid weasel. It means to hurt.

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$DJIA – Dow Industrial Average (Last:24329)

EST

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

EST

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).

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$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)

EST

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$BA – Boeing Co. (Last:290.39)

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$AAPL – Apple Computer (Last:172.31)

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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.

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