[I wrote the following for the Sunday San Francisco Examiner two decades ago. I offer it as lighter fare in lieu of the usual rant about how the stock market is mentally ill, investors are besotted with greed, and the global financial system galloping toward ruinous deflation. RA] Talk about a sure thing! Here was the kind of inside information that one imagined tumbled from heaven into the ears of the anointed. It concerned not the stock market - we'll get to that part soon - but a pacer named Happy Yankee A that was running in the seventh race at Roosevelt Raceway outside of Philadelphia one evening nearly four decades ago. According to my source, this horse was not merely a strong bet to win, he was an absolute lock, lead-pipe cinch. This horse absolutely could not lose. What's more, the Yankster had looked so tired the last few times out that he would probably go off at fat odds. My tipster was Willie D, a storied acquaintance and unusually gifted confidence man who could loosen a mark's checkbook the way a starfish pries open a clam. Here he was on the phone one Saturday morning - probably to everyone he owed - trying to burnish his karma with an offer of timely investment advice. One seldom saw or heard from Willie D around breakfast time, since that was when he usually went to bed. But that day he had stayed awake, he said, to get the word out. He wanted to give his pals enough time to borrow, beg or steal as much cash as they could by post time, the better to wager on the seventh race. A Jones for Pacers If word of Happy Yankee A's expected trip to the winner's circle had come from anyone
The pattern shown is gnarly perfection, and it could spell easy opportunity on Friday. Everything about it is textbook, and although the external low surpassed by the point 'B' low is well to the left and not shown, it is most definitely there and distinctively so. The key here is that virtually no one but us sees this pattern. This implies that 'mechanical' longs or shorts will work from x, p or p2, and that D= 3242.50 can be bottom-fished with a very tight stop-loss (or an rABC set-up). Stay tuned to the Trading Room for details, since anyone who posts with a blue 'handle' should be able to navigate the set-up mechanics. Lately, I've remained inured to the noise of strong rallies and nasty sell-offs, since they are setting up a bigger deception. I detailed one such scenario here the other day, illustrated with a chart of IBM's crash in 2007-08. The takeaway is that if this selloff continues, we should be prepared for a wicked turnaround that will send the broad averages to new record highs. Things might not play out exactly that way, but however they develop, the effect will be for the bear market to take as many investors down with it as possible. Right now, there is a mix of bulls and bears; however, for a proper top, EVERYONE -- including short-covering bears -- will need to be crazy-bullish.
It's obvious that the U.S. dollar is the only thing occupying investors' symian brains at the moment, since stocks are moving in lock-step against it. Even gold and silver have been kow-towing, reacting to every dollar zig with a precisely measured zag. That's why I recently shifted my technical focus from AAPL to the Dollar Index (DXY), starting with a September 1 low in the latter that missed a longstanding Rick's Picks correction target by just six cents. If the dollar continues to rise, virtually every trend in effect since the March 23 low is due to reverse. Debtors around the world will not be able to survive a strengthening dollar, nor will the charlatans at the Fed be able to do much about it. Their 2% inflation target is such a lame bluff that Powell, if he were honest, would admit the banksters are praying for it, not managing it. A rising dollar is about to unmask all of them as fakes. It may also prompt pundits, eggheads and the news media to acknowledge that Fed 'policy' since the S&L debacle 30 years ago has been just hocus-pocus the banksters have made up as they've gone along. The very idea that America can return to prosperity by having the Fed 'buy' trillions of dollar worth of government debt is patently absurd. It is a free-lunch scheme hatched by crackpots that is believed only by economic imbeciles.
Short-covering provided a strong finish to what might otherwise have been a dispiriting Friday. However, when the rally touched the green line (3442.81), it triggered a moderately appealing 'mechanical' short. I did not recommend the trade, however, because the implied stop-loss at 3483.00 would have risked $2000 per contract, and because taking a position over the three-day holiday weekend would have been unnecessarily stressful. We'll watch from the sidelines when index futures resume trading, but please note that, like AAPL, the E-Mini S&Ps would need to rally only moderately to surpass two external peaks, creating a strong impulse leg. The higher of them lies at 3493.00, and if it were to be surpassed in the first 90 or so minutes, the breach would be warning bears to dive for cover. _______ UPDATE (Sep 8, 8:39 p.m. ET): Far from rallying past prior 'external' peaks, the futures look leaden. The easy breach of this 'D' downside target at 3323.00 today is bearish and telling us that the next strong rally is likely to be a trap. _______ UPDATE (Sep 9, 10:44 p.m.): Now let's see if Wednesday's strong rally was a fake. If it was the real deal, buyers should be able to pop the futures above 3452.25 by week's end. That's an 'external' peak recorded September 4 on the way down.
Although the stock rebounded sharply from the low of Friday's selloff, the rally was technically unpersuasive. The implication is that any base-building for a leg to new record highs will likely occur at lower levels. Two problems related to pre-holiday price action stand out on the intraday charts: 1) the low exceeded a 'D' Hidden Pivot target; and 2) the rebound failed to surpass any 'external' peaks. Together, these factors suggest buyers are more timid than we have seen them in a long while. Despite their lack of gusto, a rally that at least seemed impressive was all but ordained, since there has been no instance in years when AAPL sold off hard for three consecutive days. Bulls will have a chance to turn the tide with a vengeance on Monday, however, since there are two external peaks not far above to taunt them. The higher lies at 125.17, and if AAPL were to pop above it in the early going, it would make a further move to new all-time highs within 4-6 days no worse than an even-odds bet. I said here earlier the stock would need at least a month to shake off the recent damage, but if it shrugs it off in less than a week, that would be clear evidence that DaBoyz feel no need to even pretend that a little moderation might be a good thing. They are hell-bent on unloading as much stock as they can onto the robinhood crowd and other greater fools, and time could be running out. Better to bamboozle them with an extraordinary display of strength than to allow doubts and rational thinking to creep in. _______ UPDATE (Sep 8, 8:50 p.m. ET): Sellers have breached p=111.65 in after-hours trading, implying AAPL is imminently bound for D=100.79. The stock will
A 2142.40 rally target we've been using for nearly a month remains valid, although the wait is becoming an ordeal. Bulls seem in no hurry to get there and are probably even less enthused about trying when they're vulnerable to a smack-down. They usually come on days when Wall Street's energy is focused on pumping stocks full of hot hubris, or when Powell says something that is easily construed as bullish for America. Whatever exuberance spills thereupon into stocks is lost on gold, which gets kicked, like some nerd in the playground, just for the sin of looking weak. Even so, it cannot be lost on gold bulls that these take-downs do not last for long, and that they almost invariably fall short of 'D' correction targets. I can only counsel patience for now, but if one of those silly smack-downs hits 1855.00, be ready to jump on the futures aggressively. Here's a chart with the relevant pattern. _______ UPDATE (Sep 9, 10:58 p.m. ET): This chart corrects the earlier one, which had an erroneous 'B' low. The new price where you could try bottom-fishing aggressively is p2=1884.70. Alternatively, a pop exceeding 2004.10 would put bulls solidly back in charge.
Like AAPL and the Dow Industrials, the Cubes could generate a powerfully bullish impulse leg with a relatively modest rally past the three small 'external' peaks shown in the chart (inset). The highest lies at 291.38, and it is equivalent to a peak at 11,944, basis the September E-Mini Nasdaq contract. On Friday, following two-and-a-half days of hard selling, QQQ rebounded sharply but without exceeding any external peaks. That may or may not happen when post-holiday trading resumes, but we should be ready for it nonetheless and open minded about the very bullish implications it would have for tech stocks, particularly the FAANGs. Alternatively, if QQQ opens lower, it could still be bought with a very tight stop-loss at p=278.10 of this pattern on the five-minute chart; a=288.93 at 9:40 a.m. on 8/4; b=271.80 at 10:45 a.m.; and c= 286.66. _______ UPDATE (Sep 8, 8:59 p.m. ET): The Cubes opened on a gap BELOW p=278.10, telegraphing the weakness that followed. The bottomed occurred exactly at the pattern's D target, but I doubt the selloff is over. Raising the point 'A' to 303.50 yields minimum downside to p2=262.89, or D=254.96 if any lower. _______ UPDATE (Sep 9, 11:30 p.m.): Use the 281.36 'D' pivot shown in this chart as a minimum upside target for the near term. Bulls should have been able to do better, given the shock-and-awe, short-squeeze opening. Is the rally a fake? We should know by day's end. _______ UPDATE (Sep 10, 10:11 p.m.): The double fist-pump to just above the 281.36 rally target in the first hour was sufficient to scare off even the most determined bears before the Cubes tanked. They looked bound for at least D=265.20 (5-min, a= 286.66 on 9/4) at the close.
Sellers were subtly unimpressive last week, implying bears could find themselves running for cover when the new week begins. Notice in the chart how three successive down-legs on Thursday and Friday failed to exceed 'external' lows to the left of them. The shortfall in each case was only a tick or two, but that was enough to categorize the legs as corrective rather than impulsive. This suggests that bears were lacking in confidence, even though tech stocks were getting hammered brutally at the time. If index futures open higher Monday evening, we should focus on the 268.40 'external' peak shown in the chart, since an easy move past it, especially early in the session, would suggest buyers mean business. However, even if the Mini-Dow were to open lower, a midpoint Hidden Pivot support at 27,889 would be an opportune place to try bottom-fishing with a tight stop-loss. Here's the chart. _______ UPDATE (Sep 9, 9:10 p.m.): DIA not only gapped through the green line on the opening, it also crushed a midpoint Hidden Pivot support at 276.21. This implies more downside over the near term to at least p2=272.37, or to =268.53 if any lower. Here's the chart. _______ UPDATE (Sep 9, 11:33 p.m.): This morning's gap-up short squeeze began with promising viciousness but ultimately died well shy of the imposing 'external' peak recorded last Friday at 283.88 on the way down. The burden of proof will be on bulls when the day begins. _______ UPDATE (Sep 10, 10:18 p.m.): Look for DIA to continue down to at least 271.71 as the week ends. An overshoot of more than 0.50 points would give bears a head start next week. Here's the chart.
December Silver appears bound for the 31.285 target shown, a 15% rally from here. The target has been in play since August 12, when a strong upthrust first touched the green line. But it has been a trying slog for bulls ever since, even if the gratuitous ups and downs have provided ample sustenance for traders. Last week's ratcheting downtrend tripped a weak mechanical 'buy' at the red line, stop 26.30, but I didn't trade it 'mechanically' myself because Silver's rebounds from Hidden Pivot levels have lost much of their vigor. Under the circumstances, the futures could easily drift down to the stop and regain their lazy energy for another rally. The workaround is to bottom-fish with rABC patterns, and so I did: with small -a-b segments fashioned from the 15-minute bar chart. The small rallies were profitable in a small way, but they went nowhere. Now, if the futures were to fall to x=25.671 (the green line), they would signal a 'mechanical' buy somewhat more appealing than the one last week at the red line. The stop-loss would be at 23.795, implying a theoretical entry risk of about $9400 per contract. Although I would rate the odds of this trade working as excellent, the dollar risk is obviously much too high to employ a straight 'mechanical' entry. Again, the workaround would be to fashion small-pattern rABCs if and when the December contract falls to 25.670. I would encourage most of you to simply paper-trade this one, since it's a good way to increase your confidence in 'mechanical' set-ups. These trades provide the easiest way I know for relative beginners to make money consistently. I haven't kept close track of our winning streak with posted 'mechanical' set-ups, but anyone who has could attest that the streak has been formidable and
AAPL topped last week within a hair of an important rally target at 135.98, prompting this headline atop last Thursday's commentary: "Is This the Start of the Big One?" If so, it is long overdue. Valuations are worse, even, than at the height of dot-com mania, led by vertical spikes not only in AAPL, but in the shares of Tesla, Amazon, Chipotle, Google, Facebook and a few other world-beaters. Portfolio managers have thrown a mountain of Other People's Money at a relative handful of stocks that are deemed likely to flourish in these economically challenging times. The geniuses keep dumping more and more money into the same few stocks because they evidently are clueless about what to do next. This has caused the value of some big companies still doing brisk business during the pandemic to soar into the hundreds of billions of dollars, or even into the trillions. Crazy. Throughout the mania, we've focused more on AAPL than on any other stock simply because it is the one stock that no portfolio manager can be without. Under the circumstances, if a forecaster gets AAPL right, he invariably gets the stock market right. Rick's Picks has succeeded well at this, remaining foolishly bullish against all common sense and wisdom. But last week's sharp selloff, coming at a time when most investors were already getting antsy about valuations, has many wondering whether it will mark the end of the party or just a healthy correction. Labor Day Expectations Our take is that the weakness occurred because too many investors had expected stocks to drift higher as they often do ahead of Labor Day weekend. However, there are a couple of reasons why we should assume higher prices will soon return. For one, the selloff generated too much bear-market buzz, especially among
