Rick Ackerman

IWM did what I asked of it, generating an impulse leg with a pop above a prior peak at 225.93. However, I'm going to treat this feeble display of bravado as a mere annoyance for now, since it occurred in the context of a chart that has been boring us to death for nearly four months. Granted, this could be the breakout that the portfolio chimps have been holding in reserve until no one cares. But if that's the case, let them push IWM above the 230.95 peak recorded on April 29 to command our attention. My inclination in any event is to trade it solvely with 'rabc' patterns, implying we will buy only on weakness.

‘Reverse abc’ trades continue to function as our workhorse now that every Tom, Dick and Harry has begun to exploit conventional ABC patterns all the time. They are seeing the same things we have seen for years; and, having belatedly discovered how to use them, rendered them nearly useless. Fortunately, our instinctual feel for the markets has allowed us to avoid this trap by using entry strategies that continue to evolve. Herewith, another lesson to further that goal.

Investors who feared muni-bond defaults when the pandemic first hit created unusual opportunity for those willing to buck the tide. One of the winners was Doug Behnfield, a Boulder-based financial adviser at Morgan Stanley whose ideas have been featured here many times over the years. Doug is not only one of the savviest investors I know, he is one of the savviest guys. Now, he is quite bullish on municipal bonds for reasons spelled out in a report that went out to clients in April.  He also thinks Fed Chairman Jerome Powell's confidence that the inflationary effects of stimulus and fiscal spending will be "transitory" is well founded and that this has already been discounted by stocks and bonds. Doug and his clients enjoyed an exceptional year in munis because he started buying them when others were dumping them. Prices subsequently recovered and then some, yielding excellent gains for anyone who'd faded the panic.  Doug is a canny contrarian who shares your editor's view that deflation poses a greater threat to the U.S. economy than inflation. More immediately, he expects pent-up demand to produce a subdued recovery rather than boom times. It will take years for growth to recover, he says, in part because consumers have learned beneficial lessons of frugality. A Limited Supply There are additional factors that have made Doug especially bullish on municipal bonds. For one, they are exempt from federal income tax. Substantial tax hikes planned by the Democrats will therefore make municipal bonds even more attractive.  Munis also are exempt from a tax that affects mainly the wealthy: the 3.8% levy on investment income under the Affordable Care Act.  Limited supply is another reason munis stand to do well over the next couple of years or longer, he says. Cities will not have to raise

June Gold has consistently been exceeding minor targets while showing increasing resistance to the $50 takedowns that have plagued bullion since last summer. This gives me increasing confidence that the 2083.90 target shown will be achieved. It was first broached here six weeks ago, a feature of a bullish 'reverse ABC' pattern that looks unlikely to fail us. That means not only that the levels can be used for 'mechanical' entries, but also that last week's penetration of p=1880.10 was undeniably bullish. Notice that the thrust also took out two 'external' peaks from January, adding further evidence that the bozos who have impeded gold in its role as an inflation hedge are finally starting to smarten up. This is good news for gold bugs, though not so much for lovers of bitcoin. ______ UPDATE (May 25, 10:51 p.m. ET): June Gold was wafting effortlessly higher late Tuesday, having pushed through round-number resistance at 1900 with little hesitation. The futures looked bound most immediately for the 1918.60 target shown in this chart, but an easy move past it would telegraph still more upside over the near term. _______ UPDATE (May 27, 5:58 p.m.):  We'll use the pattern shown, with a 1944.90 target,  for the time being.  The futures would trip a 'mechanical' buy signal on a pullback to x=1882.70, but because initial risk would be more than $2000 with the required stop-loss at 1861.90, I'll recommend the trade only to those who are able to cut it down to size with a 'camouflage' set-up.  _______ UPDATE (May 28, 11:06 p.m.):  The trade worked perfectly off a textbook-perfect pattern that has produced a so-far gain of around $1700 per contract. The trampoline bounce followed an 1880.90 low just 80 cents beneath the suggested bid.  In practice, the trade would have produced a quick and

Although the bullish pattern shown is very different from gold's, it has the same encouraging energy and vitality. Its 31.51 target looks very do-able, and although we have a higher one at 35.02, this lesser pattern should suit us better for the near term. That means a pullback to x=25.718, however unlikely, would offer an excellent opportunity to get long in order to augment a bullish position or perhaps initiate a new one.  More immediately, the robustly impulsive ABC pattern begun from 26.78 on 5/13 could prove useful for setting up an entry trigger on charts of lesser degree. Stay tuned to the chat room, and don't hesitate to make your interest known, even if you are new to Rick's Picks. Crowdsourcing is encouraged as always.

The 4324.50 rally target shown, a 4% climb from here, has two things to recommend it: 1) the ABCD pattern is too gnarly to get noticed by anyone but us; and 2) it assumes yet another boring leg up in a 12-year-plus bull market whose last gasp has become difficult to imagine let alone predict. Rather than try, we'll simply accept the all-but-inevitable for now and go with the flow.  There is just one small caveat: Friday's high stopped out shorts whose hopes had accumulated over a two-day period before getting bayonetted. That implies that if the so-far pullback does not intensify Sunday night/Monday, shorts are setting themselves up to get murdered again.  Juicy as it is, do not plan on shorting the 4324.50 target unless you have made some bucks on the way up. Alternatively, in the unlikely event the futures fall hard when the week begins, use p=4084.50 as a minimum -- and precise -- downside target (A=4230.25 on the hourly chart, 5/10/21). The short would trigger at x=4134.75. _______ UPDATE (May 25, 5:16 p.m. ET): Weakness tripped a 'reverse abc' sell signal at 4181.75 about an hour before the close. Immediate potential is to p=4150.75, with a 4213.00 stop-loss that implies initial theoretical risk of around $1500 per contract. I'd recommend paring that down to $200-$300 or so by executing the trade camouflage-style on the five-minute chart. You can also paper-trade this one if you are new to 'rabc' entries and camouflage.  _______ UPDATE (May 26, 5:25 p.m.): The short is still live and looks pretty good, actually. This is notwithstanding the fact that the position remains in the red and that bulls have been extremely reluctant to let this brick fall. _______ UPDATE (May 27, 6:10 p.m.): Oh, well. The position is a micron from being stopped

Bitcoin's swings have been so violent lately that you could almost forget that it's just another trading vehicle, the unwitting slave of Hidden Pivots.  For all of last week's whoops, swoons and histrionics, it looks bound for p=31,800 of the pattern shown. That would leave open the possibility, per 'Matt's Curse,' of a rally exceeding C=42,557 to negate the bearish pattern.  For trading purposes, I'll recommend using a 'reverse abc' pattern where a=38,226 ( 5/20 at 2:00 p.m. ET).  Initial theoretical risk would be $1007 per unit. Plant your point 'c' low only if and when this vehicle has come down to at least 31,820. Alternatively, and only if you understand the risks of trading this rabid badger, you could buy 31,820 with a stop-loss as tight as 31,300 (that's 1.5%). ______ UPDATE (9:43 p.m.): The 'reverse abc' trade suggested above would have produced a gain of at least $1o11 in under 20 minutes if you bought one lot at x and cashed it out at the red line. Here's a chart that shows it.  Alternatively, notice that BRTI subsequently tripped a textbook-perfect 'mechanical' entry at x when it pulled back to the green line around 2 p.m.  That trade could have been worth as much as $12,000 if you had bought a typical, four-lot position and held it to D=35,185. Our usual practice is to exit half at p, another 25% at p2 and the rest at D. That would have netted you a little more than $7,000. If you did either of these trades please let me know in the chat room what vehicle you used, since I am still trying to determine which bitcoin proxy to use for trade recommendations. _______ UPDATE (May 25, 11:05 p.m.): An uncorrected pop through both peaks, the higher of which lies at

The short I'd recommended from 341.09 (see inset) ended the week underwater, but that hasn't diminished the textbook appeal of the pattern itself. Traders seemed as eager as we were to profit from the short side, but they seem to have spent half of Wednesday and all of Thursday and Friday trying to gnaw their feet free from a tightening trap.  Anyone who stuck with the short position will have the possible opportunity on Sunday night to experience that rare feeling of exhilaration bears get when the markets are clobbered by a weekend surprise.  For now, however, the original downside target at 329.55 remains theoretically viable. Be sure to cover half at p=337.24 if possible. _______ UPDATE (May 25, 12:22 a.m. ET): The short missed getting stopped out by a hair. Assuming it happens today, beware of a high marginally above C=344.93 that gives way to renewed weakness. _______ UPDATE (May 25, 11::10 p.m.): The head-fake happened as predicted, but the feeble decline that has followed so far suggests bulls will soon be bounding higher. ______ UPDATE (May 26, 5:29 p.m.): Or perhaps not. DIA appears to be rolling over.  In any event, bears will soon have holiday seasonality to contend with.  _______ UPDATE (May 27, 6:15 p.m.): As expected, it's a-wafting we will go, with bears in hibernation ahead of the holiday weekend.

With home prices pumped to record levels, we are hearing more and more about Uncle Sam's plan to avoid sticking it to taxpayers when the next crash hits. Although it's always wise to have a plan to deal with catastrophe, especially one that is inevitable, there are reasons to doubt that a mortgage market valued at $12 trillion could unravel without taking the economy and much else -- including, conceivably, our system of governance -- down with it. Consider that Fannie and Freddie, ground zero in the 2008 crash, still own roughly half of all U.S. mortgages -- as much as the three largest banks -- but lack reserves sufficient to cover more than a small fraction of bondholders' losses if it happens again. Of course, the next crash could conceivably be worse, since the financial system is much more leveraged than then. That's a concern the Feds may not have fully considered when they created "living wills" for financial institutions under the 2010 Dodd-Frank bill.  The law requires large banks to file workout plans that would seek to mitigate the risk of upending the financial system and the economy while accountants deal with the quagmire. Extending this rule to the GSEs reportedly is the last piece of legislation needed to complete the Dodd-Frank reforms. 'Affordable Homes' a Gimmick We should all be grateful that someone in Washington has thought this through. But how deeply? As former heavyweight champ Mike Tyson famously said, everybody has a plan until they get punched in the mouth. And what a devastating punch this one would be. My own forecast, which predates the 2007-08 real estate collapse by more than a decade, calls for a 70% plunge in home prices, with losses on vacation homes reaching as high as 90%. This may sound overly