Rick Ackerman

I've shown you today's chart before (see inset), and some of you may remember it because it is more than a little threatening. But with the Indoos just a hair from reaching the potentially very important rally target featured in the chart, a timely reminder seemed appropriate. The target is a clear and compelling Hidden pivot resistance at 27251 that lies exactly 299 points above the 26,952 record high achieved a week ago. The high missed our benchmark by just 1%, and while that may not sound like much, I would expect the Dow to get even closer to it before any serious downturn could begin. Not to psychoanalyze the chart too deeply, but the Dow appears to have blasted off recently without building a sufficient base for a push to 30,000 or higher. I'm not ruling out such a move eventually, but it would be more easily accomplished if a hellish dive were to occur first, scaring the bejeezus out of bulls. A head-fake to 27251 would set up this kill shot nicely, since the Dow would be high enough above the old peak to turn traders and investors even giddier than usual. It is of course possible that some are already giddy enough for DaBoyz to pull the plug, since the Dow technically broke out when it exceeded 26,952. Traders interested in leveraging a possible sharp reversal from 27,251 with entry risk tightly controlled should stay tuned, especially to the chat room, for guidance in real time.

Interest rates have risen to levels where they are finally getting noticed, even on giddy Wall Street and in the undiscerning precincts of television business news. In recent days, nasty selloffs in the stock market have been attributed to correspondingly large leaps in Treasury yields. The move since late August has been unusually steep. The Ten-Year Note hit 3.25% on Monday, up from  2.83% just five weeks earlier, while the 30-Year reached 3.42%, up from 2.98% during the same period. Rick's Picks was well ahead of this economically threatening development with a bearish call and a 3.11% target for the 10-Year that went out to subscribers in 2017 when rates were hovering around 2.54%. The 3.11% target was precisely achieved in mid-May, and at the time, we expected it to mark an important top. But the subsequent pullback was so obviously corrective that we raised our targets to levels that lie not far above today's peaks. With this edition of The Morning Line, however, we are raising the targets yet again to, respectively, 3.59% on the long bond and 3.47% on the T-Note. Why Yields Ar Rising The upward pressure on rates is being caused by several factors. For one, the Fed has reduced its borrowing and 'tapered' its balance sheet by selling Treasury debt on the open market.  In addition, the U.S. economy has been strong, CPI inflation, at 2.9%, has risen significantly since a year ago, commodity prices have recently firmed, and foreigners, most particularly China, have been dishoarding U.S. paper. We've long expected that the higher rates we were predicting would choke off the economic boom and cause stocks to fall. The latter effect has taken longer than we'd anticipated and required an in-Wall-Street's-face breakout in yields to get the message across to bubbleheaded portfolio managers. It

Friday's abortive rally died five points shy of the 2919.50 threshold where I'd said bears might have to dive for cover. The subsequent relapse to 2873.25 was partially recouped ahead of the closing bell, but the effort was unconvincing and has left a bearish cloud over the rally as the new week begins. Use the 2924.00 peak shown (see inset) to warn if the buying is turning serious, but otherwise look for more slippage to at least 2857.00 (60-min, a=2944.75 on 10/3).  Here's a longer-term chart that shows why we shouldn't be too surprised if the weakness we've seen over the last two weeks gets legs. ______UPDATE (Oct 9, 7:17 p.m.): Bears looked so feeble Tuesday trying to push this gas-bag down to the 2857.00 target flagged above that we can only infer they will be ready to capitulate when trading resumes on Wednesday.  Once above 2917.75, the rally would take flight. Regardless, you can bottom-fish with a 2857.25 bid and a stop-loss as tight as you can abide.______ UPDATE (Oct 10, 10:35 a.m.): Ray-rah, bears!! They are putting on a surprisingly good show this morning.  The futures have been down as much as 37 points and look like they are in for even worse.

Before Saturday's confirmation vote, I'd raised concerns here that a rejection of Kavanaugh might unsettle the nation politically and economically, ultimately reversing Trump's undeniably positive effect on the economy and the stock market. With Kavanaugh confirmed, perhaps it's time to flip the argument around with the observation that things looks just a little too rosy to last. Unemployment is at its lowest levels since the 1960s, wages are finally starting to rise, and the new Nafta agreement could help ease global trade tensions while jump-starting tired appendages of the U.S. economy. It's even possible that the Democrats' embarrassing failure to stop Kavanaugh will result in significant Republican gains in November, helping to solidify Trump's aggressively pro-business agenda. What Could Possibly Go Wrong? What could possibly go wrong? Pundits could be pardoned for seeming not to care. It is in their nature to validate the popular wisdom and to tell us what they think we want to hear. This implies not only that they will always be wrong at important turning points, but that the sunnier their disposition, and therefore the more optimistic their predictions, the closer we are to the bear market that will end these good times practically overnight. For what it's worth, when I tuned briefly to some TV business shows Sunday morning, one commentator wondered aloud "How high can this economy go"? The response from a co-panelist was predictable, but also unsettling to those of us who have been students of bull and bear cycles for decades: "It's not going to be over any time soon." We can only hope that this will prove to be the case. Regardless, it behooves us to take with a grain of salt the giddy pronouncements we are certain to hear from economic pundits as long as stocks continue to rise.

With the Dow down 357 points late in the session, bears couldn't finish the job.  Unwilling to trust their good fortune, they scrambled to cover short positions in the final two hours, helping DaBoyz recoup more than 40% of the ground they'd lost earlier in the day. This was the second straight day of weakness, which is about as bad as it gets for the aging bull market.  Even so, because the major indices exceeded some key Hidden Pivot supports intraday, there is hope that the week could end with always-cocksure buyers getting their comeuppance. An important vote is scheduled on Kavanaugh's confirmation, but it has become clear that Wall Street doesn't care what direction the country is headed politically.

S&P volatility exploded Thursday, causing call options we'd recommended less than a week ago to nearly triple in price. The trade was detailed on Facebook under the headline Leveraging an October Disaster with Cheap Calls.  You can tune in on my forecasts and recommendations every Friday for free by clicking here. Thursday's exhilarating plunge was not quite the disaster we'd had in mind, but it'll do, at least for the moment. The trade entailed buying October 30-35 call spreads for 0.50 or less. The spread dipped to as low as 0.21 on Tuesday and was an easy buy in any case for under 0.25. Yesterday it shot up as high as 0.81 as stocks fell, allowing subscribers to easily 'double out' or even triple their initial stake. Although the selloff may have disappointed permabears because of the upturn late in the session, there were indications it has further to go. That is something best judged, however, by watching how AMZN trades on Friday. See my AMZN tout on the Rick's Picks home page for details. _______ UPDATE (Oct 7, 5:08 p.m. EDT): The spread, which will expire on Friday, traded as high as 1.00, so anyone who took a position based on my guidance should be out of at least half and holding what remains for free. You're on your own now, but I'd suggest holding at least a small portion of what's left for a swing at the fences, including one or two contracts until Friday. Here's a chart that shows VXX's move off the launching pad.

Sellers pushed the futures well below a clear Hidden Pivot support in the heat of yesterday's steep selloff, implying that another leg down is likely.  However, the short squeeze that ensued was quite nasty and threatened to cause bears even more pain as the night wore on. The pattern shown is the only one available at the moment for gauging the rally's strength, so I'll suggest paying close attention to the way buyers interact with the midpoint resistance at 2919.50. An easy move past it, especially one surpassing the 2924.00 'external' peak would, be warning bears to seek cover.

Yields on Treasury debt took a big leap on Wednesday toward some longstanding targets (see TYX and TNX touts below), adding yet another dark cloud to the Fed's preternaturally sunny picture. The central bank's narrative is that the economy is strong enough to weather more rate hikes, but the banksters seem not to realize that the housing and auto sectors are ready to tank with just one more turn of the screw. A chat-room denizen who builds homes noted today that the 150-basis-point rise in 30-year mortgage rates off their lows amounts to about $75 per month for each $100,000 of debt. This has had a significant impact on the housing market, he said, starting with a collapse of canary-in-the-mine homebuilder stocks that began six months ago. Higher rates are also starting to take a toll on auto sales and leases -- especially the latter, since they were explicitly designed to allow Americans to drive more car than they can afford. Toss in a sharp rise in car sticker-prices over the last two years, and it's not hard to see why the used-car market is so strong.  Something's got to give, since prices for stocks and bonds cannot continue to move in opposite directions, as they have been doing, indefinitely.

AAPL shredded a 231.13 Hidden Pivot rally target with such ease on Wednesday that the stock is all but guaranteed to reach 240.45 (see inset) over the near term.  It gained $2.35 on the day, generating enough additional paper wealth to buy eleven million pairs of Gucci loafers. If you stacked them fifteen-high, they would cover Alaska and Texas to a depth of 18 inches. If you instead bought Evian water, it would fill 3,240 Olympic-size swimming pools. A thousand video-gamers couldn't spend it all in an arcade if they played Mortal Kombat round-the-clock for 22 months.  As we know, however, most of the wealth will go not into Gucci shoes, but into the pockets of institutional investors who are paid princely sums to throw OPM at a relative handful of stocks. Nice work if you can get it. AAPL is the most valuable publicly traded company in the world, implying that it takes increasingly vast sums of OPM to levitate the stock. This has posed no problem, at least not so far. The Cupertino purveyor of overpriced smartphones has been buying back tens of billions of dollars worth of its own shares. In addition fresh quantities of OPM appear to be flowing into AAPL at a torrential pace, so eager are investors to get a piece of the surest of sure things. We'll go with the flow ourselves -- to 240.45, anyway  -- but it will be tempting to short this out-of-control gas-bag with some tightly stopped put options when it gets there._______ UPDATE (Oct 7, 4:37 p.m.):  The stock plummeted to the green line Friday, generating a moderately appealing 'mechanical' buy signal. I say 'moderately' because the correction, assuming that's what it is, has come from a higher starting point than we should prefer. Let's see how it