The pattern shown in today's chart (inset) may be helpful in determining whether June's steep rally will prove to be a bull trap. Strictly speaking, it shows an rABC (reverse-ABC) set-up of the kind that we typically use when stalking 'counterintuitive' entries that go against the trend. In this case such a signal would be bearish, with a tripwire at the green line to tell us when to get short. However, the point 'C' high is not quite high enough to qualify as ideal. Better suited to our purpose would be a 'C' occurring nearer late May's 2961 peak. A run-up to around 2954 would be ideal, and so that's what we'll look for. These patterns are experimental and I have only recently begun to use them, not only in my own trades, but in set-ups we look for during Wednesday tutorial sessions. Since most subscribers will be unfamiliar with this adaptation of the Hidden Pivot Method, I will provide more-specific guidance than usual in the Trading Room if the set-up looks like it will pan out. Notice as well that, taken as a whole, the chart shows an inverted, potentially very bullish inverted head-and-shoulders pattern. If you see it, you can also see that a plunge of 50-60 points from current levels would not diminish the bullish look of the chart. I don't put much store in H&S patterns, but neither do I ignore them when they are this compelling. ______ UPDATE (Jun 20, 11:13 p.m.): Although a drop to 2905.50 (basis the September contract) would trigger a theoretical 'counterintuitive' short, I'd ignore the signal because there is a more compelling bullish target at 3095 still outstanding in the S&P 500 cash index.
If things weren't slow enough already on Wall Street due to summer doldrums before summer has even begun, the announcement coming Wednesday from the Fed has made stocks go comatose ahead of the "news". Expect Monday's dirge to continue until the Big Event at 2:00 p.m. EDT. Powell & Co. has been in such a dither lately that anything he says will be greeted with surprise. We won't hazard a guess as to which direction stocks will move. [Late-breaking bulletin: Stocks are lunatick-ing vertically at the moment (9:51 a.m. Tuesday) caught in a violent short squeeze ahead of tomorrow's momentous news. Ironic that the rally should seriously undermine whatever flimsy rationale the Fed can concoct for easing.] Although everyone knows the central bank determines when to ease or tighten based on what the stock market is doing, the pretense of using sophisticated tools to shape monetary policy is a silly game with rules that investors dare not flout. The first is "Don't fight the Fed." It is at times like this, however, that monetary policy is so muddled and convoluted that it's difficult for investors to know whether or not they're in harmony with monetary policy. Sit back, enjoy the show, have few laughs as the alchemists do their stupid thing, and you won't be far out-of-sync.
I am resuming bitcoin coverage and will treat it as nothing special, since that's the best way to be objective when reading its charts. The one shown provided two good opportunities to get long 'mechanically' at 7481, so we'll assume that its target at 10,026 will prove just as useful as a minimum upside objective. We'll talk about buying a pullback to the red line (p=8330) if it should occur, but for now just keep in mind that 'mechanical' set-ups are well suited to trading vehicles that move as violently as this one. Not to get crypto fans too excited, but the weekly chart implies that 11492 will be reached and that 19850 would be in play if 11492 is exceeded decisively._______ UPDATE (Jun 24, 9:35 p.m. ET): The lunatics have taken charge, speeding this bottle rocket toward the 11492 target much more quickly than we might have expected. Let's see how easily they handle 'hidden resistance' at 11492. _______ UPDATE (Jun 25, 8:39 a.m.): A vertical rally pushed this wack-o speculative vehicle to 11467 before it topped out 0.2% (two-tenths of one percent) from my 11492 target. It's due for a breather now. Let's see how long it lasts. _______ UPDATE (Jun 25, 8:35 pm.): The Hidden Pivot resistance at 11,492 lasted for all of about ten hours. This comes as no surprise, since this speculative vehicle really IS in the hands of revelers who, to put it mildly, are not overly concerned about valuations. The 19,850 target is not yet a done deal, but at this point it is no worse than even odds to be hit.______ UPDATE (Jun 26, 9:34 a.m.): I am raising my minimum target to 21,032. Based on this chart, I would say the odds are remote that bitcoin won't get there.
The rally has reached the mezzanine level (p=193.18) after tripping a 'counterintuitive' buy signal at 181.72 on June 5. Progress above p has been weak so far, suggesting that a possible climb to the 216.08 target won't be easy. However, my gut feeling is that bulls will get there, even if most of the fuel for the climb will be provided as usual by short-covering bears. A pullback to the green line would offer us a belated opportunity to get long 'mechanically,' although the trade would look more enticing if the retracement comes from slightly nearer 200. _______ UPDATE (Jun 19, 10:16 p.m.): The stock hit 200.29 today, fulfilling the first of two conditions needed to set up a mechanical buy at 181.72. _____ UPDATE (Jun 20, 11:28 p.m.): Ignore the 'mechanical' trade outlined above, since it's just a distraction at this point. The stock is bound most immediately for 205.51, a Hidden Pivot rally target shown in this chart. _______ UPDATE (Jun 24, 9:42 p.m.): If 205.51 is easily exceeded, use 209.12; and thence, 216.08.
There was good news for gold bugs last week in The Wall Street Journal, even if it threatens a day of reckoning for everyone. Although Friday's front-page story had nothing to do with bullion, the headline tells us why sunnier days are likely for anyone invested in precious metals over the next few years: Washington Puts Aside Fears And Embraces Debt. It is the word 'embrace' that holds such promise -- and menace -- since it implicitly acknowledges that regardless of who wins in 2020, there will be no serious political opposition to the fiscal orgy brewing on Capitol Hill. The mountain of bogus money needed to stoke the revelry cannot but put upward pressure on inflation hedges, particularly gold and silver. That is why the rally in precious metals begun two weeks ago should be taken seriously. Mind you, this doesn't mean bullion quotes are destined to soar as they did during the 1970s heyday of inflation. There are factors at work that will keep inflation relatively subdued no matter how much ginned-up money the Guvmint pumps into guns, butter and free lunches. This time around, global competition will suppress price increases not only for goods and services, but for the labor required to produce them. Working stiffs have never benefited from inflation anyway, and there's no reason to think they will do so this time. The biggest beneficiaries will be investors in stocks and real estate, much as they have been over the course of the decade-long bull market. But also investors in gold, which appears bound most immediately for $1412 per ounce (click on chart inset). Only Deflation Is Possible Ordinarily we might expect interest rates to rise, choking off borrowing before it capsizes the economy and the banking system. This time, though, strong global demand for
The futures looked torqued at Thursday's close for a run-up to the 2932.50 target shown. This would become an odds-on bet if and when buyers exceed the midpoint resistance at 2900.00 decisively. The scenario seems so likely that it is tempting to place a contrarian bet against it, especially since no trader on earth could have gone home Thursday harboring thoughts of a downturn. For the record, I hold short positions in the E-Mini Dow and E-Micro Nasdaq with stops, respectively, at 26,290 and 7601.00.
Some of Wall Street's smelliest garbage got airborne Thursday, caught in a short squeeze that could finish out the week. The shares of Lyft and Uber in particular, two companies that are good bets to remain profitless indefinitely, wafted skyward as though launched from a trebuchet. The medieval weapon is capable of hurling an automobile the length of a football field, but the short-covering behind Thursday's rally packed even more power. That's because the day had begun with news that might ordinarily have been expected to scuttle stocks. Instead, the Dow gained a respectable, if not to say insane, 101 points. This extraordinary display of confidence, arguably misplaced, followed reports of an Iranian attack on two oil tankers in the Gulf of Oman. When word of the torpedoing of the ships hit the blogosphere around 9:45 p.m., crude prices instantly shot up around 4% as stock-index futures plunged commensurately. But by the time the NYSE's regular session opened, the Indoos had wafted back into positive territory and crude had recouped about half its losses. From that point forward bears were screwed, since there was nowhere for stocks to go but up. In Ordinary Times... It's not that investors were fearless, although that is probably the way they will be described by mainstream pundits. It's more a case of shares moving opposite expectations, energized in particular this time by short-covering bears who had every reason to think that a serious threat to the world's oil-supply would spook stocks. In ordinary times they would be right. However, there is nothing ordinary about these times, at least not on Wall Street, and especially with regard to how shares behave when credit money to buy them is cheap and in more or less unlimited supply. This condition can turn rationality itself on its head,
The futures were noodling aloft a short while ago, allowing DaBoyz to milk an after-hours, distributive rally for all it was worth. Lo, DaDirtballs have just pulled the plug, allowing the E-Minis to fall the equivalent of about 130 Dow points in mere minutes. What gives? There is nothing on Bloomberg.com to indicate financial or geopolitical mayhem, but something assuredly is going on. Unfortunately, the cause is known at this moment only to those who pay for their information rather than get it 'free' on the Internet. In any event, the Hidden Pivot target at 2863.00 shown in the chart can serve as a minimum downside objective for the time being. Its decisive breach would suggest more weakness to come.
Here is the best explanation I've seen to date of how the U.S. stock market works. It is from John Jay, who posts regularly in the Rick's Picks Forum: "The stock market is the primary bag-man the Federal Reserve uses to transfer the U.S. Dollars they create from thin air to the .01%." Just so. When you consider how many hundreds of billions of dollars find their way into the pockets of the very rich when just a half-dozen mega-cap stocks rally sharply, you begin to understand how the U.S. economy actually works. "Compare this to TARP," writes Jay. "It was a check written directly to the .01% without a money laundering intermediary like the stock market. You and I are like seagulls picking up the scraps after a killer whale pod consumes a school of herring. We can make a nice little living doing just that!" $50M for a Hotel on Baltic Ave? My colleague Alan Newman, editor of Crosscurrents, used to track the total dollar amount each day of all NYSE transactions. If memory serves, it once amounted to more than three times America's daily GDP. Newman's conclusion was that the main business of America was not making and selling actual things, but trading stocks. As much could be said of the global financial system, which has amassed a quadrillion dollars worth of derivatives for paper-pushing deal-makers to play with. Does a world economy that produces $100 trillion dollars worth of actual goods and services really need a financial edifice ten times that size to facilitate business? It's akin to provisioning a Monopoly game with a $100 billion bank, and making a hotel on Baltic Avenue "worth" $50 mil.
Although there are a dozen good reasons why the bull market should flame out, like, tomorrow, there's nothing in the long-term charts to suggest this is likely. A friend and fellow permabear sent me an Elliott Wave theorist's prediction that the sensational run-up begun more than ten years ago could continue for another three or four years. This is based on a five-wave Elliott pattern that is currently in its final phase, having corrected the spectacular excesses of Wave 3 via the Great Financial Crash of 2007-08. Much as I would love to see the market plunge into molten hell so that the global economy, born again, could cycle back to more-honest weights and measures, I am resigned to the likelihood that the bullish charts are simply correct. This is notwithstanding tariff wars, a global economic slowdown, falling commodity prices, falling bond yields and all the rest. Wall Street seems not to care about any of this, and so the buy-the-dips crowd reigns supreme. They will get their comeuppance someday, for sure. But as long as investable cash remains in more or less unlimited supply, stocks will continue to rise. Placid Stochastics The weekly S&P chart (click on inset) corroborates the bullish EWT perspective. Notice that a divergence between price tops and stochastic tops accurately foretold the devastating selloff that occurred in Q4 of 2018. Currently there are no such divergences on the weekly chart, and I take this as a sign that the long-term uptrend will continue. That could change if the current rally achieves new record highs without generating a higher stochastic peak. But until such time as this occurs, there are no worrisome signs that I can discern in the chart. For a more detailed explanation of stochastic divergences and their relevance to the current technical picture,
