Rick Ackerman

My colleague David Isham may have raised your bullish hopes in my absence, but I'm going to get back on my own skeptical, pessimistic track with tonight's edition. There are numerous good reasons for this. For one, the chart reproduced with the latest E-Mini S&P update shows the failure of the futures, after three weeks of trying, to get past a key peak at 2744.00 recorded three weeks ago on the way down. For two, even allowing for Mr. Market's unflagging determination to stand logic on its head whenever this suits him, I cannot buy into the idea that stocks are about to move significantly higher when: 1) they have failed to do so with earnings at a years-long crest; 2) crude oil prices are about to rise into the $80s; 3) a strong dollar is about to eat into the earnings of America's largest multinational companies; 4) housing has peaked; 5) U.S. Ten-Year rates have hit the 3.11% target I projected here six months ago and could go even higher, putting a choke-hold on the U.S. economy.  There are a dozen other factors I haven't mentioned, but you get the idea. We'll be in recession before the year is over, and although such a trivial event is not likely to disturb the simple-minded plans of the buy-the-FAANGs chimpanzees who manage Americans' Fed-induced 'wealth', neither is it likely to produce a dramatic resuscitation of the nine-year-old bull market.

The futures have opened Sunday night with a subdued lurch higher. They're up eight points at the moment, trading near their highs, but that's enough to leave the 2721.50 target we'd used to stay on the right side of the trend in the dust.  The next significant Hidden Pivot resistance lies at 2750.25 (see inset), and it can serve as a minimum upside projection for the near term. However, it would take only 2744.25 to put the bearish case in serious jeopardy.  A print there would exceed a key external peak from March 21, generating a powerful new impulse leg on the daily chart.  The bull-market target thereupon would be 2826.25 (A=2533.00 on 2/9) -- a seven-iron shot from the record-high 2883.25 achieved in January. Anything above the old high is a potential spot for Mr Market to spring a trap on bulls and short-covering bears. If so, we'll have a fighting chance to be ready for it.

Stocks ratcheted higher Thursday, taunting bears to short each new peak as the day wore on. We tried once ourselves, using a 2721.50 target in the E-Mini S&Ps that in retrospect was probably a little too obvious. The eventual top occurred at 2725.00, but the shallow pullback that followed would make any bear nervous about trying again. Still, with $70 a barrel starting to look like support rather than resistance in the oil patch, bears shouldn't give up hope that the global economy is headed for a smackdown. Here's an astute observer who agrees:  "Seneca," who posts regularly at Rick's Picks. "There are several triggers in place," he wrote, "but mid-May we are going to see a larger shift that will combine all of them for lower equity pricing. This will confirm that the long bull market has been killed." Nor will the bull's death be subtle, he says. More like a "lighthouse beam" from afar. "America has had a great shift, and it [will be announced] very soon." For starters, notes Seneca, we're about to experience a 15% fall in the Dow Industrials that will bring the blue chip index close to a "cave-in" number. This is a good time, he says, to sit back and observe. And so we shall -- with as much objectivity as we can bring to a waiting game that has grown more than a little tiresome.

Wednesday's rally pushed past the three peaks shown, all of them 'external', generating a deceptively powerful impulse leg with relatively ease.  Accordingly, pullbacks should be treated as buying opportunities, particularly by night owls able to exploit a relatively shallow B-C correction from within a tick or two of the so-far high at 2700.00 (i.e., a 'camouflage' set-up.)  The 2721.50 rally target given here earlier still obtains and can be used not only as a minimum objective, but as a place to reverse a long position with a very tight stop-loss if you've profited on the way up._______ UPDATE (May10, 7:59 p.m.): The rally topped at 2725.00, just above our target. Usually I would say this is somewhat bullish, since the target was so precisely clear. In this case, though, I'll reserve my enthusiasm, since the breach of the pivot was likely caused by too man traders seeing, and using, the same pattern we saw. And the lesson? Subtlety and gnarliness are our best friends when we look for patterns to trade this vehicle.

Here's a headline that cries out to be rebuked: Oil Traders Have Already Priced in the Effects of Sanctions. I'm not so sure myself -- am on record, actually, with a prediction that prices will top $80 a barrel before this run-up ends. I should mention that the headline was not in some rinky-dink newspaper that gets all of its non-local stories from the  Associated Press, but in the Houston Chronicle, which covers the energy sector insightfully and with great diligence. A companion story on the front page notes that Texas shale drillers could benefit from market disruptions caused by Trump's planned sanctions against Iran, which is a major energy producer. The Chronicle story does make clear, albeit unintentionally, that if crude oil prices should continue to rise, it would have to be for some reason other than the sanctions. What the markets have not fully considered, as I wrote here earlier, is the possibility of war between Iran/Hezbollah and Israel. If it's coming, energy markets are going to react in a way that will make the recent run-up in prices seem relatively mild.

Is gold headed below $1000?  I doubt it. Like every other bullion investor who has tired of watching gold's price meander sideways for nearly six years, I've grown increasingly disappointed and frustrated. But also concerned, as many apparently are, that one last, hellish plunge may be necessary to shake out the weak hands. However, looking at the long-term chart, I'm persuaded that bulls still have the edge, if not a big one. That's because the 'impulsive' leap gold took between October 2008 and August 2011 was so powerful, pushing the price of an ounce from $680 to $1912. Although the subsequent retracement took 70% of it back with the $1046 low that occurred in December 2015, bears have been challenged ever since to win the skirmishes that prefigure changes in the long-term trend. By my analysis, gold 'should have' fallen to $821 at its correction low.  It could still get there, and that target will remain valid in any event until such time as 1432.50 is exceeded to the upside. But there is nothing in the chart that implies bulls are going to give up that much ground. To the contrary, they took a shot across bears' bow with a $328 thrust in 2016 that tripped a theoretical long-term 'buy' signal at the green line (see inset).  The move exceeded no fewer than four 'external' peaks on the daily chart, and that's why the bad guys have struggled so hard to push gold back down. They may be able to crush the spirit of bulls, and to do so repeatedly. But this is not the same as crushing prior lows that continue to provide 'structural' and psychological support on the long-term charts. Set an Alert at 1208 If you want a warning signal that the tide could be turning in bears'

Give DaBoyz credit for levitating the Dow by 2.89 points on Tuesday. That may seem like a pittance, but it was actually quite a feat for them to eke out a small gain with the price of crude head-butting the psychologically crucial $70 level. Although there is room to disagree about how much higher oil prices might go this time around, no one doubts that anything above $70 is going to put a serious drag on the U.S. economy.  Trump's decision to jettison the nuclear deal with Iran could add 15 to 25 cents a gallon at the pump, the news media are telling us. Don't these guys ever learn?  Merely talking about a 25-cent increase 'over time' all but guarantees it will happen more or less overnight. A 75-cent spike by mid-June sounds more likely.  If so, don't be surprised if the Dow is trading 2000 points lower than the current 24,360.

The 2724.50 rally target we've been using seems within easy reach, but the futures have looked so tired lately that you should consider getting short off a 'counterintuitive' pattern like the one shown.  Night owls in particular should pay close heed, since, if the trade triggers, it has a good chance of happening overnight. There are many ways this could happen, but instead of my trying to guess which, I'll mark this one 'for experts only'. _______ UPDATE (May 9, 10:03 a.m.): The futures are too sloppy to trade this morning, at least for me.  Although I cannot come up with a Hidden Pivot rationale, even in retrospect, for getting short at this morning's top, the fact that the futures rolled over from a high 2.50 points shy of the target is likely telegraphing more bearish action ahead. ________ UPDATE (12:04 p.m.):  ...or not.  The futures now appear bound for the 2721.50 target shown in the link above. What threw me off was the 2.50-point miss mentioned in that last update.  Given the sinuous, delicate perfection of the pattern, I am quite surprised that the stall did not occur within no more than a tick or two of the 2686.88 midpoint resistance.

With surgery and an indeterminate recovery period just ahead, I've given my colleague David Isham (EYE-sham) free rein to speak his mind here in my absence (which I hope will be brief). I was somewhat startled to see that, in his first Morning Line at-bat here yesterday, he boldly predicted that the Dow Industrials would hit 40,000 before the bull market ends. Considering how skeptical I am toward a stock market that has been pumped full of steroids by the Fed, readers might ask whether Rick's Picks is sending out mixed messages. My suggestion is to keep an open mind toward any and all possibilities.  Although I could (and often do) give you a dozen good reasons why the Dow should be trading at half its current price, I cannot offer any guarantees that it won't hit 40,000 first.  As unlikely as this seems to me, it's a scenario that neither I nor any of my fellow permabears can afford to ignore. David will also be putting out some actionable trading touts in the week ahead. He has been a Rick's Picks subscriber since the beginning -- which is to say, for long enough to develop a distinctive style of his own. I hope you enjoy his work as much as I do. He brings a level of sophistication and imagination to chart-reading that could change the way you play the game.