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The Morning Line

Watch Out for THIS Trap Over the Weekend!

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How high does this bear rally have to go to fool us into thinking it’s the real deal? You don’t have to be a technician to answer that question — just look at the chart. From a visual standpoint, a  move up through the red line would surely get investors’ juices flowing. The reason is not just that the Dow would appear to be within shooting distance of the old record high, it would also have pushed past two important peaks created during December’s steep plunge.

Do we trust our lying eyes at that point? Not unless we want to get slaughtered with the rest of the bullish herd. For as convincing as the rally might seem, it could easily fail above 25,000 due to the bountiful supply that accumulated between 25,500 and 26,000 last year in the February to July period.

Mr. Market’s M.O.

Allow for the additional possibility that the bear rally could fail at any time — i.e., now — and the risk could be particularly high if the broad averages end Friday strongly on the upswing. The Dow looked unstoppable at Thursday’s close; if the binge were to continue for another day, it would leave bulls feeling giddy and bears nauseated. What a beautiful trap that would set! It would perfectly fit Mr. Market’s M.O., which unfailingly makes important tops all but unshortable.

To heighten the deception, Mr. Market would avoid ending Friday with stocks at their highs; otherwise, it would be tempting for bears to short into what they’d perceive as an unsustainable burst of exuberance. A measured correction off the peak of a powerful rally would leave them less eager to challenge the mood of the day. Conversely, the appearance of sustainability and moderation would fool bulls and bears alike into expecting Monday to bring more of the same.

Admittedly, this scenario will require a very specific sequence of events to set up a nasty surprise next week. It is just one permabear’s ruminations. But if things should play out more or less as envisioned, it will surely merit your caution.

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$AMZN – Amazon (Last:1674.80)

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HGH19 – March Copper (Last:2.66)

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$HUI – Gold Bugs Index (Last:153.71)

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$JYH19 – March Yen (Last:0.92615)

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The yen, whose behavior corresponds closely to gold’s, began 2019 with a giant leap that slightly pierced the 0.94148 midpoint resistance of the pattern shown (click on inset). This is bullish but would become still moreso if the futures can close for two consecutive weeks above it. The 1.03755 target is already in play, but it would become a lead-pipe cinch to be achieved once the March contract is trading decisively above the red line. Pivoteers may have noticed that the pullback to the green line activated a ‘mechanical’ buying set-up. It took five months for the currency to get airborne after this happened, but the lengthy consolidation will likely contribute to the rally’s power.

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$AAPL – Apple Computer (Last:155.86)

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$GCG19 – Feb Gold (Last:1294.20)

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$GDXJ – Junior Gold Miner ETF (Last:30.19)

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$DXY – NYBOT Dollar Index (Last:96.58)

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The Dollar Index has been in a bullish holding pattern for two months. As tedious as this has seemed, it has not diminished the likelihood that the next big move will be up. My immediate target would be 98.20, and we could infer the rally had begun in earnest once DXY has closed for two consecutive days above the 97.10 midpoint resistance shown here.  Alternatively, the first hint of trouble — unlikely in my estimation — would come on a print beneath the 95.68 ‘external’ low shown in the inset.

A further, significant strengthening in the dollar will tell us when the deflationary endgame for the global economy is gathering force. It will crush debtors, bankrupt creditors and lop at least four or five zeroes worth of funny money from the banking system’s quadrillion-dollar shell-game. I have written extensively on why hyperinflation is extremely unlikely to settle debts that have become vastly too large to repay. If you cannot understand why, let me pose this question: Do you actually believe the banksters will let you pay off your mortgage with a few hundred-thousand-dollar bills that you’ve peeled from your wallet? If you answered in the negative, you are implicitly a deflationist. Regarding hyperinflation, if you think the ruinous Weimar episode of 1921-23 shows that it could happen in the U.S., the opposite is true.  Read Adam Fergusson’s When Money Dies for pellucid insights as to why. It is $8 on Amazon.

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$TNX.X – Ten-Year Note Rate (Last:2.606%)

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Odds that long-term rates have made an important top increased with the recent plunge in yields beneath the trendline shown in today’s chart (see inset). The U.S. Ten-Year Note fell to 2.826% last week, down from a high a month ago near 3.25%. The decline narrowly missed exceeding a key low at 2.808% (#1) recorded in August, but if and when that happens it would generate an impulse leg of weekly-chart degree that could weigh on rates in 2019. And if the downtrend were to exceed two prior ‘external’ lows shown in the chart at, respectively,  2.759% (#2) and 2.717% (#3) without an upward correction, that would shorten the odds even further that long-term rates have topped. _____ UPDATE (Jan 2, 6:03 p.m.): Some of you  may have wondered why I reactivated a tout originally published on Dec 10. I had intended this update, with an immediate downside target of 2.633%. Let’s see what kind of bounce we get._______ UPDATE (Jan 3, 10:24 a.m.): Plunging yields didn’t even pause at 2.633%, so look for more slippage to at least 2.505%. Here’s the chart.

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Tuesday, March 5, 2019

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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