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THE MORNING LINE
Index futures were wafting higher Tuesday night, evidently unfazed by mounting evidence that coronavirus has already slowed the pace of global economic growth significantly. Such worries as occupy portfolio managers’ tiny, fevered brains these days centered on Apple, the most valuable company in the world. (I don’t count Aramco because, well, who cares that it’s actually bigger?) The Cupertino manufacturer of egregiously overpriced cellphones and accessories, and of late an aspirant in the overcrowded streaming-content business, announced Monday afternoon that Q1 results would take a big hit from work slowdowns and weakened sales in China. Apple shares had to play along with the announcement, since it would have been unseemly and even a little bizarre for the stock to have risen on such news, emanating as it did from Apple’s own PR desk.
Other stocks in the FAANG/lunatic sector were not so deferential, however. Most chalked up solid gains on the day, implying they are chomping on the bit as they wait for Apple’s troubles to be perfunctorily discounted and forgotten in perhaps a few more days. (Note: Technically, AAPL looks primed to fall for reasons covered in my latest tout, below.) That the FAANGs and other multinational giants are themselves vulnerable to the same virus-related forces affecting Apple will not likely be a concern on Wall Street, where the sole imperative is to throw Other People’s Money at a relatively small handful of stocks. Actually, Apple’s bearish guidance may ultimately help this Ponzi scheme along, since it will afford analysts an easy opportunity to do what they are paid to do: underestimate earnings ahead of each new round of quarterly reports. _______ UPDATE (Feb 19, 8:30 p.m.): I hadn’t imagined Apple’s bearish announcement would be forgotten in mere hours. While I’d expected Sunday night’s selloff to continue for at least a few days, what actually happened beggars belief; for in fact, a short squeeze begun Monday morning on the opening bar has now pushed the stock to within inches of new all-time highs. Incredible! But be sure to see my tout (below) for a put-buying strategy if you distrust the rally as much as I do. If you don’t subscribe, click the ‘Free Trial’ button near the top of this page.
On February 2, based on reports from subscribers, I established a tracking position of 400 shares @ 28.39. I am still suggesting that you exit half at 29.42, but we’ll keep the remainder for a shot at much higher prices (see chart inset). If GDX eventually reaches the 36.66 target, we could book a profit of as much as $1,886. It could take a while, but we’ve already proven we can endure a brutal grind waiting to collect our first payoff. It is not yet in the bag, though, since the stock was still 27 cents shy of the 29.42
I like the 301.60 target shown in the chart enough to suggest a play linked to it. Buyers took a couple of days to get loft above the 291.61 midpoint pivot, but it looks now like it is about to become support for a shot at D. If we assume that it will take perhaps two weeks to get there, we can use the target to set up an option trade that will risk very little if we are wrong but produce a substantial gain if we are right (aka ‘leverage’). Accordingly, I’ll recommend buying the March 6 299/302/305 butterfly
The dollar’s steep rally this month is close to generating a powerful impulse leg on the daily chart. Just another 0.15 points (see inset) and DXY will exceed an external peak at 99.25 recorded back in early October. That would refresh the bullish energy of the chart while increasing the odds that any weakness, unless severe, would be corrective and therefore a buying opportunity. This scenario is congruent with my bullish outlook for T-Bonds, but it would also keep gold under pressure. This could turn out to be less threatening than it sounds, since precious metals have held up well
Gold continues to bide its time, coping with seemingly limitless strength in the stock market. Precious metals have held up well, considering that even two-day selloffs on Wall Street are becoming an endangered species. The chart shows nearly a month’s worth of tedious oscillations punctuated by a couple of gratuitous feints higher. One of these days buyers will catch fire and complete the pattern shown in the chart, pushing this vehicle to a target at 1690.20 flagged here earlier. In the meantime, unless there’s a dip beneath the 1542.80 point ‘C’ low, our minimum upside objective will remain p=1616.50. We
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