Friday's wildly gratuitous swings were prompted by a Powell speech that added almost nothing to what investors already knew about the Fed's intentions. The session ended with an impulsive leap of faith that surpassed an important 'external' peak made a day earlier on the way down. Despite this show of bravado, the suspicion of a bear rally will remain until such time as the major indices surpass the record highs of mid-February. The futures cannot but telegraph the outcome if and when they encounter the 3872.50 midpoint resistance, but they will need to smash through it on the first try to become an odds-on bet to reach the 'D' target at 4023.75. That would be yet another record high, even if no guarantee of a new bull market cycle. Come what may, we can use the HP levels shown in the chart to buy the futures 'mechanically' as opportunities arise. _______ UPDATE (Mar 8, 6:53 p.m. ET): Buyers diddled the 3872 pivot, exceeding it slightly before retreating sharply. I hesitate to ascribe any meaning to it, but it did not make me more bearish. ______ UPDATE (Mar 9, 4:22 p.m.): After three tries the futures have finally speared p=3872.50 and even closed above it, albeit slightly. Bulls look enervated and unimpressive, but the 4023.75 target still gets the benefit of the doubt because bears look even more drained.
We've been using a 323.59 target on the monthly chart as a precise place to look for a potentially important top. However, the thumbnail chart in the inset shows another not far from it at 327.27 that also looks very promising for getting short with risk tightly controlled. On balance, I'll suggest staking out a small short position at the lower target, but adding to it aggressively if the rally should continue to the higher Hidden Pivot. Positioning can be accomplished using out-of-the-money put options that expire in perhaps three weeks, although you should allow an extra week for puts bought with DIA at 323.59. I will provide timely guidance when appropriate, but you should review the free instructional material concerning butterfly spreads on your Account page beforehand, since that is how we may proceed. _______ UPDATE (Mar 8, 6:56 p.m. ET): If you're keen to short this barf-bag with a very tight stop-loss in an opportune place, targets corresponding to 323.59 lie at 32,692 for the DJIA and at 32,745 for the E-Mini-Dow. _______ UPDATE (Mar 10, 12:16 p.m.): We looked at DIA during this morning's tutorial session, and found the 323.59 target too juicy NOT to short. We considered legging into some Mar 26 300/29? put spreads for cheap -- 0.30 or less -- buying four 300 puts first. Here's the DIA chart again with the ridiculously juicy target at 323.59. _______ UPDATE (Mar 10, 3:46 p.m.): With DIA peaking at 324.31, the March 36 300 puts traded down to 0.83, but I'll track them officially for 0.86. You should be risking as much as you could afford to lose on a 30-to-1 horse that had a good morning workout, and your expectations should be low, since this bet is being made just as the bull market is
DaBoyz have beaten down the lunatic sector pretty hard simply because they had to. With bubble chatter at 100 decibels, it became necessary to rotate Other People's Money into quieter places. The mere process suggests that 'they' have control and plan to take stocks higher. This will occur just as soon as investors return to their wonted state of obliviousness toward insane stock valuations and rampant speculation in every investable save bullion. To help distract us from the recurring idea that the Mother of All Tops is in, I will maintain my focus on the ambitious 377.14 target in this vehicle. Traders will also want to notice that if a selloff hits p=271.04 it would trigger an attractive 'mechanical' buy, stop 235.67. There are no guarantees 'D' will be reached, however, given the lengthy basing period at p. ______ UPDATE (Mar 10, 4:04 p.m.): DaBoyz gapped QQQ higher on the opening, but the relatively weak selloff suggests the uptrend is likely to continue. The thrust exceeded three minor 'external' peaks, adding to the hidden power of the move. Here's a chart that shows it.
Bulls struggled last week to hold above a key Hidden Pivot support at 1702, but their failure to endure portends more downside over the near term to 1630.50. That's my worst case target for now, and although the chart pattern that produced it is highly unconventional, using a visually obvious 'marquee' high and a point 'B' low that failed to exceed any significant prior lows, it's all we've got. The pattern is certainly good enough for government work, meaning a tradeable reversal at or near D is highly likely. We will remain open-minded nonetheless toward the unthinkable -- i.e., a decisive breach of the 1630.50 pivot that would imply an eventual test of the 1467 watershed low recorded exactly a year ago. A relatively minor 'hidden support' at 1660.40 mentioned here earlier also remains viable and can be used to bottom-fish with a very tight stop-loss. Gold clearly does not like anything Powell has to say, even when his obfuscations suggest the Fed will continue to pursue inflationary policies with reckless abandon. So why doesn't bullion rally on that prospect? Perhaps it understands that the inflate-or-die effort is ultimately doomed. Even so, that is hardly a reason for bullion prices to have fallen relentlessly since last August's $2100 high. _______ UPDATE (Mar 8, 7:05 p.m. ET): A downside target at 1667.20 that I flagged in the chat room has surfaced as a possible "best case" for a turn. If you use a 'reverse ABC' pattern to set up a trade, the A-B segment can be as tight as 10 points, provided you plant the point 'C' low within 1.00 point of the target. Here's the chart. ______ UPDATE (Mar 9, 4:29 p.m.): The futures have levitated themselves off a 1673 low that stranded our niggardly bid, but I have little
Silver's chart is bullishly out-of-whack with gold's at the moment, having tripped a very promising mechanical buy signal last week with a sharp drop to x=25.12. Gold looks like it has farther to fall, but I doubt it will proceed far enough to cause May Silver to stop out this trade with a dip below 21.99. Even so, I am not recommending a conventional limit bid at x, since the implied entry risk would be more than $15,000 per contract. We'll paper-trade until the discrepancy between the two metals is resolved, presumably in a way that is bullish for both. ______ UPDATE (Mar 9, 4:36 p.m. EST): The paper trade is off and running. I'll be interested to see whether it gets to p=28.27, where we would ordinarily exit half of the position. Maximum upside for this ancient pattern is 34.55, a target that has been in play theoretically since December 16.
No one said it would be easy to get short at the top. This bull market is proving especially challenging to fade because the herd knows how grotesquely overvalued stocks are. With so many traders eager to bet the 'don't' line, the broad averages have started to behave like El Diablo (see photo above). The Dow has staged three 600-point-plus rallies-to-nowhere since peaking two weeks ago, but none lasted for more than a day. Although bull riders must hang on for eight seconds to claim a prize, traders could conceivably have to endure weeks or even months of loco price action to hit it big. Many will get busted up badly trying. The 'everything bubble', as it is called, is wherever one looks: stocks, bonds, real estate, art...African American Barbie dolls. There are more homes listed for $5 million and up than there are Smiths in the Manhattan phone directory. Ironically, gold and silver are among the few investable assets that are not in a bubble. That tells you how badly the players have misjudged the risks of a financial cataclysm. They've gone all-in on bitcoin instead, as though scarcity alone could make cryptocurrency money, a store of value or a hedge against the crash that is coming. Fed Quackery Fed Chairman Powell's every utterance has been the obsessive focus of economists and pundits who make their living taking the central bank's monetary quackery seriously. Does anyone actually believe that credit stimulus will produce an economy healthy enough to service the trillions of dollars in debt we've accumulated desperately trying to keep an asset bubble from deflating? The effort is not only doomed, it is likely to to produce a deflationary collapse featuring a strong dollar and crushing real rates of interest. Sound impossible? Not with everyone on the 'inflation'
Lest we get so wrapped up in the imminent prospect of a major top, here's a long-term chart of the Cubes to keep the bullish imagination supple. It projects a 20% rally to a 377.14 target that might have seemed absurd a year ago. At the moment, however, it looks like an odd-on bet to be achieved, notwithstanding the toppy look of the Dow Industrials and the S&P 500. Price action at the 271.04 midpoint pivot was choppy, but most of it occurred above the pivot, and that's why the D target itself should be regarded as a good bet to be reached. If it were to occur by way of a spiky rally, I'd eagerly back up the truck to get short there. More likely in my estimation is that it will be a bumpy ride to the target if it is in fact achieved. A pullback first to p=271.04 would be widely heralded as the start of a bear market, but in the context of this chart, it would actually present an excellent 'mechanical' buying opportunity (with a stop-loss placed at 235.67).
The futures have dropped 174 points, or 4%, since briefly poking slightly above a compelling Hidden Pivot target at 3938 two weeks ago. I'd expected last week to bring greater clarity to the question of whether a major top is in, but it must remain a 'suspected top' for the time being. That implies short-squeeze feints will continue to plague bears who have many good reasons to think they may have finally gotten it right. I smell a top myself, but even my near-certitude doesn't make holding a short position at these levels any easier. It will have been worth the wait only if and when the stock market plunges for three consecutive days with unexpected ferocity. Until then, however, nervous jitters will persist. You can use a modest, 3767.75 downside target for now. It is remarkable that this Hidden Pivot support was not hit on Friday, presumably because nervous short-covering was more powerful than fearful selling. The balance could shift this week, but I'm not going out on a limb with a bold prediction. ______ UPDATE (Mar 1, 6:43 p.m. EST): Permabear that I am, I love to sneer at rallies that only seem powerful. This one at its apex failed to get past even a single 'external' peak on the hourly chart, so it was not impulsive, merely corrective. A print at 3935.00 would be more impressive, but until such time as that occurs, consider this effusion just a garden-variety bear rally. Be sure to check the chat-room discussion from today, since I connect the dots as they pertain to various rally targets for, respectively, QQQ, the E-Mini S&Ps and DIA. Keep in mind that if stocks are topping, they will do so in a way that will make it almost impossible to get short without weathering enormous
Elsewhere on the home page, I've presented a chart that allows for a further rally of 20% in QQQ. The Diamonds, however, could hit granite just 4% above, at 323.59. Since the temptation to nail the top of a bull market and to profit handsomely from it will always be irresistible, I am going to suggest staking out a small put position if and when DIA gets within a point or so of the target. You know the drill by now, and I should not have to mention that you should regard this bet as money flushed down the toilet. It will be a do-it-yourself project, so you're on your own: no chat room reports, and no questions or comments on the trade until such time as you've doubled out on half of any put positions initiated at the top.
Updates for this week have stepped back from the intraday charts, which encouraged one to imagine that every feint was significant in our quest to exploit The Mother of All Tops. While each whoop, dive and thrust may be contributing to this end, we needn't punish ourselves by obsessing over price action on the hourly charts. But as I've noted in DIA, there is nothing reprehensible about betting on a major top, provided it is aligned with our technical runes. In this case, I'll suggest buying puts if IWM pushes above 234. This ritual has been fruitless in recent months, and that's why you shouldn't go overboard taking odds on the 234.82 target. If your bet is small, plan on letting it expire worthless. But if you risk more, be aware that a two-day close above 236, or an intraday spike exceeding 239, would be sufficient reason to close out the position. And please, no questions or comments about this trade until such time as you've doubled out on half of your position. _____ UPDATE (Mar 8, 7:15 p.m. ET): As much as I've been itching to short this hoax at exactly 234.82, I am increasingly doubting that it has the moxie for the implied push to slightly above the old high at 230.32. This is a subjective feeling that comes from the weekly chart and the way the trampoline bounce from last week's low has so far failed to continue into this week's price bar. A fierce rally starting Tuesday or Wednesday could change this impression, but until such time as it happen, I'll remain skeptical. Here's the chart. ______ UPDATE (Mar 9, 4:46 p.m.): The trendline shown in this chart is guaranteed to display stopping power and should therefore take precedence over any Hidden Pivot resistances we might
