Thursday, March 23               Published daily Receive a free trade each day
The Morning Line

When Millionaires Worked for Their Money

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Neither bulls nor bears had a very satisfying day, stocks having spent the entire session screwing the pooch. Despite this, I remain mildly optimistic that the stock market is near the point of collapse. So why should this be cause for optimism? Well, if the Dow were to be cut in half, it would crush the banksters, the money managers and all of the other money-grubbing evildoers of the financial world, setting the stage for the revival of honest business. Imagine that! You’d have to have grown up in the Fifties to remember such a time, when millionaires worked, rather than schemed, for their bread. Since then, the paper-shufflers have made a fine art of pursuing easy, undeserved success, raking in seven- and eight-figure bonuses just for pumping up stocks with digital cash that has come nearly free and without  strings from the Federal Reserve. This Ponzi game has come to look more and more like a perpetual motion machine, with rising stock prices boosting CEO salaries, turning paper stock-options into gold and incentivizing share buybacks that have added economically meaningless trillions to the stock market’s valuation.  What could cause this seemingly virtuous, self-perpetuating cycle to end? No one knows. However, end it will, and badly.

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Touts

$+VXX – S&P VIX Short-Term (Last:16.49)

EST

Subscribers who followed my recommendation to-the-letter to buy call options in this vehicle over the last two days held 16 April 7 16s for an average 0.56 just before VXX took off like a banshee this morning. I updated in the chat room and via an email notification intraday with an instruction to sell half of them when the price doubled. Since numerous subscribers reported buying the calls for as little as 0.45, some may have exited on the ensuing rally to an intraday high at 1.03. Officially, however, we still hold the entire 16-option position, with an offer to sell eight of them for 1.12. An offer at that price should be entered before Wednesday’s opening. Marked to market at the 1.00 closing price, the paper profit on the position so far is $704. _______ UPDATE (Mar 22, 9:19 p.m. EDT): The calls hit 1.25 making them an easy sale at our 1.12 price. That leaves us with eight calls that have effectively cost us nothing. For now, offer two of them to close for 1.42.

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

$GLD – SPDR Gold Trust (Last:118.84)

EST

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$+DIA – Dow Industrials ETF (Last:206.35)

EST

Before the broad averages started to plummet this morning, subscribers who followed my earlier guidance had acquired eight March 31 208 puts for an average price of 0.92. I advised taking a profit on half of the position when their price doubled to 1.82 early in today’s session. This leaves us with a tracking position consisting of four puts that effectively cost us nothing.  Based on the recent closing price of 2.18, our theoretical gain is $872. For now offer a single put (or 25% of your position) to close at 3.10, and another at 3.70. This guidance could change, but if it does I will post the modification in the chat room and send an email bulletin in timely fashion. To receive this and other such updates, make sure you’ve checked ‘Email Notifications’ on your account dashboard.

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

$ESM17 – June E-Mini S&P (Last:2346.50)

EST

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$SIK17 – May Silver (Last:17.550)

EST

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$GCJ17 – April Gold (Last:1234.30)

EST

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$DXY – NYBOT Dollar Index (Last:100.30)

EST

I’ve included the Dollar Index in today’s list of touts not just because the U.S. dollar’s ups and downs affect the economic world more than any other trading vehicle, but also because the greenback is moved by market forces far bigger than the eggheads, navel-gazers and charlatans at the Fed could pretend to control. The long-term chart is unambiguously bullish, notwithstanding the stall since December. This stagnation presumably is corrective, since the Nov/Dec peak exceeded a prior high at 102.15 recorded back in 2003.  That makes the rally itself, from last May’s 91.92 low to the recent high at 103.82, bullishly impulsive — an analytical distinction whose significance would not be lost on our Elliot-Wave colleagues. While I would not hazard a prediction about how long it will take for the dollar to consolidate in order to achieve the 113.40 target shown, when the move finally happens, as I very strongly expect it will, bullion prices, U.S. manufacturers’ overseas profit margins and all who owe dollars will come under renewed pressure. _______ UPDATE (Feb 26, 7:57 p.m.):  Last week’s pullback tripped a ‘mechanical’ buy signal at 100.83 off the pattern shown. If this bounce achieves and then exceeds the 102.09 target, it will shorten the odds that the Dollar Index is on its way, eventually, to 113.40. _______ UPDATE (Mar 2, 8:52 p.m.): Today’s thrust somewhat exceeded the 102.09 target, implying that still-higher prices are coming, presumably to 113.40 eventually. _______ UPDATE (Mar 19, 6:00 p.m.): With last week’s moderate selloff of the dollar, traders seemed to be betting that France’s election on April 23 will go the way Holland’s went — i.e., with a less-than-decisive victory for the ‘Trump candidate’, Marine Le Pen.  This strikes me as a dangerous bet, but we shouldn’t be surprised if the trend continues for the next few weeks as pollsters and the news media do their disingenuous best to knock Le Pen down. The juiciest odds to bet it the other way will likely come on Friday, April 21, but we should stay on the sidelines for now.

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

$TLT – Lehman Bond ETF (Last:120.61)

EST

This proxy for T-Bonds has quietly slipped into no man’s land with the recent breach of December’s bombed-out lows near 116.80. Even before this occurred, TLT looked like a good bet to fall to at least 111.97, the midpoint Hidden Pivot support of the pattern shown. But it would require only a breach of the July 2015 low at 114.88 to do very serious damage to the long-term chart. If the 111.97 target is hit, it would correspond to a rise in long-term interest rates to about 3.37% from a current 3.19%.  And if TLT were to fall all the way to the D target at 100.79, yields would be around 3.84%. For borrowers in the U.S. and around the world, this would be more than just a turn of the screw. Indeed, if stock prices were to fall simultaneously as seems logical, it would crush them beyond any hope of recovery. Meanwhile, any counter-stimulus equal to the problem would be tantamount to hyperinflation. _______ UPDATE (Mar 20, 8:41 p.m. EDT): Is this rally fated to go nowhere like every rally since July? We’ll know if and when it interacts with so clear and compelling a target as the one shown, at 119.97 (click here for chart). Merely reaching this benchmark will tell us little; however, if buyers can demolish it, that would give TLT a fighting chance to probe the resistance of peaks made in January and February as high as 123.14. _______ UPDATE (Mar 22, 9:55 p.m.): TLT impaled the 119.97 ‘hidden’ resistance noted above, implying that the pullback currently under way is likely to generate another bull leg. It  will need to be a doozey, however, since it must surpass Feb 28’s 122.07 peak to generate a fresh impulse leg on the hourly chart. (Click here to see this graphically).

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

RINF – Inflation Expectation (Last:28.84)

EST

RINF is the symbol for an ETF trading vehicle that tracks inflation expectations. This is of more than passing interest to me, since I’ve been a hard-core deflationist and written on the topic for more than 30 years. RINF has yet to break out on a long-term basis (see chart above), and I am extremely skeptical that it will. Incipiently deflationary forces arising from debt, and from the substitution of machines for workers, are vastly more powerful than any catalyst one could imagine for inflation. As such, those hitherto intractable engines of inflation — government, healthcare and college tuition — have hit a wall. Quite clearly, none of us can afford to pay more for those things than we are already paying. A surge in wages seems most unlikely to alter the equation.

Meanwhile, private pensions and the Social Security system are headed toward certain bankruptcy. This is one problem that cannot be monetized by having the Fed purchase Treasury debt, since it involves actual cash dollars that would get spent by recipients each month on real goods and services. Someone would have to pay for those things, and that someone would have to be working stiffs who, perforce, would be taxed to death. Nothing could be more deflationary than a collapsing pension system. Unfortunately for us all, it is inevitable. The only reason we are not as worried about it as we should be is that the financial psychopaths at the Fed have pumped up the stock market to assuage our fears.  To complete the delusion, our actuaries are hard at work factoring pension returns for the next 50 years as though the bull market in stocks will continue forever. It won’t, of course, and when it finally ends — which it will — the epiphany of our bankruptcy will come literally overnight.

Concerning RINF’s chart, it is inconclusive on the matter of whether an inflationary spiral awaits. I have given my reasons why I think this is nearly impossible.  However, a dead-cat bounce to the 31.34 target is not beyond the realm of possibility. If it happens, I would expect it to be the last hurrah for both inflation and Fed hubris. It might even prove to be a precise marker for the onset of a deflationary debt collapse that long ago became unavoidable.

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


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