Gold's $30 run-up over the last two sessions is the sharpest we've seen in a while. Was it just a knee-jerk reaction to continuing weakness in U.S. stocks? Probably. But we'll keep a close eye on it nevertheless, since gold sentiment is so negative, sometimes verging on despair. Many investors who have followed bullion's bear market closely since prices peaked eight years ago just above $1900 seem to get their hopes up every time gold rallies moderately. Disappointment has invariably followed, and then something worse as prices receded back into a rut. And yet, quotes have been too stubbornly buoyant for bears to triumph. Gold has been in a holding pattern for six years, defying predictions of a plunge below $1000 to shake out weak hands once and for all. It is a consolidation to be endured -- but also closely watched, so that we do not mistake the start of a bull market for yet another tiresome and vexatious head fake. In practice, for now, that will mean focusing on the three 'external' peaks shown in the chart (inset). If this move exceeds all of them without much of a pullback on the intraday charts, that could be a sign that we are witnessing something more than just a tease. ______ UPDATE (Jun 3, 6:42 p.m.): This is the steepest three-day rally we've seen in a long while. It would exceed 1335.70, the last of the three peaks mentioned above with just one more modest push. If it can get past a fourth 'external' peal at 1347.90 recorded in February that isn't labeled in the chart, that would raise the odds that this rally is about to get legs. Specifically, it would put into play the 1412.20 target shown in this chart. Note that our minimum target at present
Thursday's price action was as slow as we've seen in a while. This is curious, since there was news out intraday that the Fed "might" "consider" easing if economic conditions deteriorate. My hunch is that we'll see a delayed-reaction rally on Friday, DaBoyz evidently having been unwilling to waste the news on a day when stocks seemed too lethargic to respond to stimulus. It came from a panel discussion involving a Fed official rather than from an actual Fed news release. That's what it will take to put the central bank's imprimatur on a policy change. Expect this within the next couple of weeks, if not sooner.
Here we go again. The Fed evidently has begun "conditioning" our "expectations" for a new season of quantitative easing. Fed Would Consider Interest-Rate Cuts if Growth Outlook Darkens is the headline atop a news story concerning a NYC panel discussion moderated by the central bank's vice-chairman. This is just what Wall Street and other promiscuous abusers of credit have been praying for lately, along with the Trumpster. We've come a long way policy-wise, baby! How many months ago was it that some Fed party pooper was dropping hints about another round or two of tightening in 2019? The stock market's reaction was feeble, but only because DaBoyz are already pacing themselves to milk every inch of upside they can from the central bank's new spin. Perhaps this is what will push the S&P 500 index to 3095, a Hidden Pivot target of mine that has seemed a little farfetched. I still have my doubts it will be reached, but I'll stick with it unless my technical runes take a turn for the worse. In the weeks ahead, we'll surely be hearing plenty about how easing will re-invigorate the housing market. I am predicting otherwise, since this particular gas bag has already begun to deflate. But who knows? Perhaps Southern Californians who live in dumpy little, million-dollar Eichlers will trade up? My forecast calls for 10-Year rates to decline to at least 2.11% from a current 2.22%. That may not be enough to launch stocks into the sort of parabola they achieved in Q1, but it'll probably hold them buoyant for a while. _______ UPDATE (May 31, 8:34 a.m. ET): So much for buoyancy. Trump has taken the tariff war to Mexico with a tweeted threat, and stocks are getting pasted as a result. My forecast for lower rates can stand,
Although I usually let charts tell me where stocks are headed next, the current technical runes are a tad sunnier than I am at the moment. This is notwithstanding recent weakness that has caused new record highs that were within spitting distance just a few weeks ago to recede. A 3095 target that lay just 4.5% from early May's peak now sits 10.5% away. It's certainly do-able, but I doubt buyers have the moxie to turn things around as sharply as they did in December. The failure of much-ballyhooed IPOs in Uber and Lyft to get Wall Street's speculative juices going is a wet blanket shrouding the Street right now, the wetter because the bloated airbag called WeWork seems likely to lay an egg when it goes public. If it bombs, that would complete a bearish hat-trick of IPOs. The office-rental firm sported a $47 billion valuation in January, and although that is now looking like pie-in-the-sky, there's no telling how severely the stock will be marked down when it starts to trade. Shady Numbers However, because WeWork's nifty accounting tricks are even shadier than Lyft's or Uber's, and because investors have been in such a surly mode lately, we should look for WeWork shares to get savaged in the early going. With such a drubbing in prospect, it's hard to imagine investors summoning the bravado to push the shares of Apple, Facebook, Boeing et al. into the ether, especially since all of those companies have serious problems of their own that have been widely reported.
The head-and-shoulders pattern shown implies the futures could fall at least a further 50 points in search of traction. It is a flimsy support, to be sure, created by an important low at 2726 recorded in early March. The suspicion grows that the ten-year-old bull market is over, but we've been there before and stocks have recovered every time. If a bear market has in fact begun, we should see it first in uptrending ABCD patterns that fail to reach their ' D' targets and downtrending (i.e., corrective) abcd patterns that overshoot 'd'. The first instance of the latter lies at 2744.25, a Hidden Pivot support that must evince a strong bounce if bulls are not about to get trounced. Concerning the rally target, I've proffered one at 3095 for the S&P cash index that has grown more distant and which now lies about 11% above current levels. This no longer looks like an odd-on bet, at least for the near term._______ UPDATE (May 31, 8:23 a.m. ET): An ESU19 target at 2747.00 is equivalent to the June target we've been using at 2744.25. Any lower would activate 2734.25.
With government bond yields around the world near multi-year lows, U.S. stocks are in a dither. Should they take a bold leap to new all-time highs, defying mounting expectations of a global economic slowdown? Or should they instead fall to a more sustainable, cruising altitude? My own technical outlooks suggests they could do both: first with a rally of about 9% that fulfills a 3095 target in the S&P 500; then, with a dramatic fall of 20% or more into bear market territory. The Masters of the Universe Universe who manipulate and control the markets will be hard-pressed to decide in the weeks ahead. But it seems increasingly unlikely that they will be able to hold shares aloft for much longer as economic conditions continue to deteriorate. There is no denying this is happening. Last week brought more troubling developments on several fronts. Orders for durable goods plunged 2.1% in April, weighed down by the Boeing's deepening scandal. In Japan, investment in machinery was weakening amid concerns over growing trade tensions between the U.S. and China. Modi was reelected as India's prime minister, portending tighter constraints on U.S. tech companies and on retail giants Amazon and Walmart. And copper, a reliable leading indicator of global growth, was trading 9% below its April peak. China, the biggest player in this market, accounts for fully half of world demand. Low Unemployment Overrated Against all of these negatives, economists and the news media would have us believe that America's low unemployment rate is a major, offsetting positive. I have argued here before that this statistic is vastly overrated and of little value, other than as fodder in presidential election campaigns. The fact remains that 3.6% unemployment will have almost no impact on the mountain of debt that eventually will pull America into a
A 175.48 Hidden Pivot support that we've used as a minimum downside objective has kept us comfortably on the right side of a lengthening bearish trend. However, the hourly chart (inset) suggests that the damage could grow as sellers do the bidding of a succession of higher points 'A' that project to as low as 162.06. An upthrust exceeding 192.47, the point 'C' high of the pattern, would invalidate the series of descending targets, but we'll retain our bearish bias until such time as that occurs.________ UPDATE (May 31, 8:43 a.m.): The stock has fallen overnight to within 33 cents of the 175.48 target. Please refer to the chart accompanying the tout for the sequence of lower targets yet to come. ________ UPDATE (May 31, 5:28 p.m.): Next stop on the way down: 171.82 (see inset). _______ UPDATE (Jun 3, 7:09 p.m.): Target achieved. The next lies at 168.32. _______ UPDATE (June 4, 5:44 p.m.): The short squeeze projects to 182.06, or 186.20 if any higher (60-min, a= 171.47 on 6/3); however, it would take a print at 192.47 to invalidate the series of bearish targets shown in the original chart.
DaBoyz showed a deft touch as the week drew to a close, guiding the broad averages to a respectable close even though there were no buyers around. Stocks often soar ahead of summer holidays, but this Memorial Day weekend they seemed challenged merely to stay in positive territory. Although there were no aggressive bids in evidence, especially for tech stocks, neither were there any urgent sellers. The result was a moderate rally that saw the Dow Industrials rise 108 points and the S&Ps tack on a negligible 6 points. Seasonality clearly failed the bulls, and that could have bearish consequences when stocks begin to trade again Monday evening. Of course, traders could always develop amnesia over the three-day holiday, forgetting about the things that have been weighing on stocks these past few weeks. Tariff-war headlines in particular have been unsettling, although Trump's spin control has helped somewhat to calm the herd. He keeps hinting that a deal is coming, even if it appears that not much of one is possible. Some high-minded banter in the Rick's Picks chat room illuminated the spectrum of possibilities. "There is a lot to like about the Chinese," noted one subscriber. "They have a really diverse culture, they are hard working and smart. The problem I would agree is their form of government as it grows increasingly oppressive and dictatorial. They are extremely threatened by the tough talk out of Washington and have responded by inciting nationalistic feelings on a billion and a half obedient citizens who never felt threatened by America before. If they would react this strongly to the mere demand to trade fairly can you imagine what they will do if push comes to shove over Taiwan? Risks to the West "If past behavior is the best predictor of future actions we
AMZN remains on track to fall to at least 1774.26, a Hidden Pivot support given here earlier. The stock just missed rallying last week to 1881.70, where it would have signaled an enticing 'mechanical' short. A somewhat riskier short would be triggered by a rally touching 1845.89, the red line. This trade would require a stop-loss at 1869.76. The cheapest leveraged bet here would entail buying expiring at-the-money calls with AMZN trading within 25 cents or so of the target._______ UPDATE (May 31, 10:)2 a.m. ET): The stock's plunge today has fulfilled the target with a low just beneath at 1770.90. A $20 bounce ensued but is fading. ______ UPDATE (Jun 4, 5:54 p.m.): As impressive as today's short-squeeze rally may have seemed, it was not as impressive as this bearish pattern, which implies minimum downside remains to p=1599.
The futures have tripped a 'counterintuitive' buy signal at 2830.75, implying that a rally of about 70 points is developing. However, these signals work best when the rally pops quickly to midpoint pivot -- in this case 2854.00. Instead, the futures fell slightly on Friday after hitting the trigger point. If they don't get a new burst of energy on Tuesday with leap above p=2854.00, odds of a major breakdown beneath the trendline (see inset) will increase. Bottom line: It'll be fly or die in the week ahead. ______ UPDATE (May 28, 4:30 p.m. ET): The futures broke down late in the session, but not before providing bulls long from 2830.75 with an opportunity to exit for a quick profit of more than $500 per contract. Now they are destined to fall to at least 2783.25, a Hidden Pivot support that must hold if bulls are to escape a sixth straight week of declines. Here's the chart.
