The ‘lunatic stocks’ had better catch fire soon or the bull-market illusion is going to be in deep trouble. I refer to the high-fliers as ‘lunatic stocks’ because they have the undying, conspiratorial support of buyers who make their living throwing other people’s money at shares. Now that the formerly uber-dependable CMG (Chipotle) is indisposed with food poisoning, and AAPL is busy doing designer wristwatch deals with the likes of Hermes, the lunatic group has dwindled in recent months to just a few leaders: AMZN, GOOG, MSFT, NFLX and FB, and even they are starting to sputter out, as the chart of Facebook, a key member of the group, shows (see inset). FB has been head-butting a 107.75 Hidden Pivot midpoint since mid-November, to no avail. Had it succeeded in getting past this relatively modest resistance, the stock would have become an odds-on bet to reach 111.30, or possibly even 114.84. Considering that the stock is capable of rally $3-$5 in a single day, these targets are not very ambitious. And yet, bulls have been repelled by the midpoint pivot so many times in the last month that there is reason to doubt they can get past it. Now, if they should fall beneath the point ‘C’ low of the pattern first, that would suggest not mere fatigue, but resignation and possible failure. When a stock like Facebook is unable to forge boldly higher in the current stock-market environment, then no stock can. The company has a billion-and-a-half subscribers, with a database that the NSA can only envy. With that kind of “story,” and Wall Street’s sleaziest, most capable hucksters to hype the stock, FB could just as easily be trading for $500 as for $100. Meanwhile, if FB is ready to roll over, it’ll be Katie-bar-the-door time for the bull market. My immediate downside target if the stock falls in the days ahead is 98.47, a Hidden Pivot support. If it’s exceeded by $1.50 or more the first time it’s hit, look out below!_______ UPDATE (December 20, 9:38 p.m. EST): Last week’s impressive short-squeeze slightly exceeded December 4’s peak at 107.73 before the stock got schmeissed on Friday. The rally was therefore bullishly impulsive, with a pullback that could conceivably set up a ‘counterintuitive buy signal. I’ve sketched this hypothetically for the guidance of traders (see inset).
