I have not updated my perennially bullish outlook for the dollar for a long time, and you can see why in the chart. DXY has come of March's 103 high with a so-far 6.3% sell-off that has done no technical damage to the long-term uptrend. Actually, a further selloff of 3.6% would come down to a trendline that is likely to evince good support. Pivoteers may also notice that a pullback to the green line would trip a strong 'mechanical' buy signal that is about as textbook as such trades get. 'Mechanical' trades work best when speculators get too far ahead of themselves in either direction. The pullback to the green line is Mr. Market's way of reminding them that overconfidence seldom pays off. The bullish outlook also implicitly raises a question that seems not to be troubling traders at the moment -- namely, what kind of moron would be buying the euro and other currencies in preference to dollars? Indeed, the rally in the euro is as stupid and groundless as the one in U.S. stocks at the moment. No currency will supersede the dollar, simply because it is the only currency big enough to facilitate the quadrillion dollar shell game that makes paper-shufflers rich. Also, the world will continue to prefer to pay for real things, most particularly crude oil, with a currency that is in practically infinite supply. If you read anything suggesting that the dollar has entered a bear market, save your time energy, since it was written by some bozo with poor comprehension of the currency market's underlying dynamics. _______ UPDATE (Jul 21, 7:18 p.m.): I road-mapped a potentially nasty correction months ago, and so it has been. But the dollar will generate a 'mechanical' buy at 94.48, stop 88.25 if it falls to the
The shockingly powerful rally from March's bombed-out low has stalled in a very unshocking place, three ticks beneath a secondary top recorded just before stocks really fell apart. So far, the pullback has been shallow, implying bulls are sizing up the challenge presented by all-time highs achieved in mid-February. Getting there would be quite a feat, considering the global economy is probably no better than a 50-50 shot to avoid a full-blown depression. We're more interested in the technical aspects of the rally, however, since an 'impulsive' thrust exceeding the peak by even a penny would refresh the bullish energy of the daily chart. How Not to Be Fooled If this happens it could always be a fake-out, not that that would necessarily fool us as long as we diligently monitor the strength of corrective abcd patterns on the intraday charts. My gut feeling is that the maniacs driving this epic short-covering rally have come too far to leave the offending secondary peak unbloodied, and that's why we ought not be too aggressive betting it will hold. Once the futures are decisively above it, however, a dose of skepticism will be warranted, given the obvious challenge of all-time highs that Wall Street's wack-jobs will see as a dare. Mr. Market will be watching, of course, presumably wanting the sunniest optimists to make his day.
The Nasdaq 100, bloated with helium-inflated FAANG stocks that portfolio managers never sell, appears all but certain to achieve new record highs, probably within the next 2-3 days. With the index trading 250 points lower a week ago, I'd said that a two-day close above 9585 would all but clinch a move to at least 10,575, a Hidden Pivot target derived from the E-Mini Nasdaq's weekly chart. That would be a little more than 8% above the old summit at 9780. The futures have in fact closed decisively above my benchmark as required, hinting of significant buying power percolating below the surface. We will soon be reading about how the relative handful of companies whose shares are responsible for this maniacal rally are going to single-handedly save the day for the global economy. If you are inclined to help make this fatuous prediction come true, I'd suggest using your $1200 check from Trump to buy an iPhone over the weekend.
With the nation in deep crisis, stocks continued on their heedless path higher. The seemingly demented rally is demonstrating yet again that bull markets at some point decouple so completely from reality as to mock those who thrive by promoting them. By now, the spun story that investors are looking past the pandemic and focusing on renewed growth is sounding increasingly farfetched. Some economists estimate that it could take more than a decade for economic activity to return to what it was before Covid-19. We don't need economists to prepare us for the worst, though, since we can see the truth of what they are saying all around us. Huge write-offs yet to come will dwarf the relatively paltry trillions pushed, in the name of stimulus, into economic dead zones. What the money has stimulated, mainly, is the markets, but with some big holes. For example, the collapse of just one category of financial derivatives -- ETNs, or exchange trade notes -- threatens investors with losses of as much as $7 trillion. It is never coming back. $$ Trillions Are Trapped But there will be vastly larger losses coming in real estate -- in New York City, among a dozen urban centers, where hundreds of thousands of workers will not be returning to their office-tower jobs. The ripple effect from this will devastate businesses on the surrounding streets, turning Gotham itself into a gangrenous appendage of workers who needn't ever leave their homes or travel to distant centers. Out-of-town business meetings will be moved online, causing huge swaths of the nation's transportation infrastructure to wither. Planes, trains, buses, subways, taxi fleets, cruise ships and Uber cars will trap tens of trillions of dollars' worth of investment capital as the cost of storing and maintaining idled resources continues to mount. Hotel
Just when toilet paper supplies were starting to loosen up, we learn there's a run on pepper spray. Do people who live in or near big cities dare leave home without it? You may be in greater danger than you think, what with Antifa threatening to fan out into the suburbs. More effective than pepper spray would be a lawn sign advertising your zealous support for the Second Amendment. Concerning the looting and riots, which seem to have quieted now that the weekend is past, seekers of 'social justice' missed a historical opportunity to make a magisterial impression with candlelight vigils across the land for the late George Floyd. The impact that peaceful marches might have had has gotten lost in a blaze of looting, mayhem and rage, much of it captured, with horrifying explicitness, in videos that ran 24/7 over the weekend on the major networks. The lingering images will pose a serious setback for the aspirations of black Americans while boosting the electability in November of candidates known for taking a strong stand on law and order.
Gold has come crawling out of the gate Monday morning, down as much as $13 just ahead of the NYSE opening. The bounce from 1738.40 is mildly encouraging, however, since this level corresponds almost to-the-tick with a midpoint Hidden Pivot support. In theory, for uptrends to remain dominant, corrective abc patterns must reverse at or near their respective midpoint pivots as may be happening here. When this has occurred, we also know that a relapse breaching the pivot would likely find its way down to D=1730.00, whence a presumably tradeable bounce precisely from that Hidden Pivot would become likely. In this case, the fledgling rally is approaching the point 'c' high of the pattern and would negate the pattern itself with a print at 1746.80. That would be reason for an added ounce of optimism, putting a 1754.40 target theoretically in play (15-min, A= 1728.60 on 5/29 at 4:00 a.m. EDT). ______ UPDATE (June 1, 7:05 p.m.): The 1754.40 target boldfaced above caught the intraday high within four ticks. I have slightly modified the pattern to show a 1770.00 'D' target that would become an odds-on bet to be reached if buyers can push the futures decisively past p=1753.80. Be on the alert for a 'mechanical' buying opportunity, since gratuitous swoons are always possible in this vehicle. _______ UPDATE (June 2, 5:15 p.m.): Gold's tortuous, mincing rallies, punctuated by gratuitously nasty plunges, have become too tiresome to be taken seriously. The futures are easily tradeable, however, using the Hidden Pivot tools at our disposal. Stay tuned to the Trading Room and post your technical observations if you care to interact with this vehicle.
Index futures have done a tentative alley-oop Sunday night, feinting lower before moving as though to challenge Friday's nutty highs. They occurred, apparently, because Trump was not as hard on China as he could have been when he addressed the nation ahead of the closing bell. Anyone mystified by the stock market's latest burst of exuberance hasn't been paying attention to the steep rally that has occurred since late March with a global depression looming. For a market that appears to be thriving on bad news, the headlines over the weekend could not have been more encouraging: looters running amok in America's largest cities; record unemployment; millions of rents and mortgages going unpaid; a menacing chill in U.S. relations with China; bankruptcies sweeping through nearly every sector; the devastation in particular of travel, dining and entertainment; the huge capital write-downs coming in the energy sector as subways, buses, trains and planes worth hundreds of trillions of dollars face obsolescence and enormously costly overcapacity. Under the circumstances, need we even ask why stocks are holding up so well? Investors, as we noted here earlier, are mentally ill. Kudlow and Mnuchin might dispute this, but the rest of us know better.
A deftly engineered swoon Sunday night has tripped a textbook 'mechanical' buy at 3017.00, the green line (see inset). You'd have needed guts to stand pat with a bid there, considering how difficult it was to discern what was moving index futures at the time. The slingshot bounce from the lows promises to reach the 3092.00 target, although we shouldn't expect it to happen as easily as Sunday's short-squeeze on almost no volume. We'll look at getting long via a 'mechanical' set-up if the futures rally and pull back to the red line in the way we prefer. _______ UPDATE (June 2, 5:25 p.m. EDT): The futures will hit 3092.00 as predicted and expected. Short there only if you've made at least $800 on the 50-point rally that has occurred to get them there. _______ UPDATE (June 3, 11:13 p.m.): No guesswork is needed. The futures are all but certain to connect with the 3177.50 target shown in this chart. It was first mentioned here several weeks ago, along with another that will show some stopping power at 3153.25.
Although GDX has not fallen to the green line to put the 30.97 target in play (see inset), I've drawn the pattern with a bearish bias just in case. I am not down on this vehicle at the moment, but a little bit of weakness could set up an attractive buying opportunity at 32.92, the pattern's midpoint Hidden Pivot. I will continue nevertheless to solicit crowdsourced ideas for getting long, and possibly even building a long-term position. But if we are going to attempt a buy-and-hold from the get-go, it will require an optimal entry point with clear opportunities to take partial profits along the way. _____ UPDATE (June 1, 7:13 p.m. EDT): A pullback to p at 2:00 p.m. generated an appealing 'mechanical' buy signal at 34.88. The subsequent rally appears bound for at least 35.54. No one has mentioned GDX in the Trading Room since Friday, implying there is very little interest in this vehicle at the moment. It is still a crowdsource project. ______ UPDATE (June 2, 5:35 p.m.): Two Hidden Pivot levels I mentioned in the Trading Room this morning look promising for bottom-fishing: 33.65 and, especially, 31.77 (corrected). Here's the chart. I've suggested using rABC or 'camouflage' to get aboard, but a limit bid and tight stop-loss will do if easy entries are your preference. ______ UPDATE (June 3, 8:45 p.m.): I'd suggest a light touch if you plan to bottom-fish this cinder block at 31.77 -- a 12-cent stop-loss at most. If it's hit, we can try again 'counterintuitively' beneath the 31.31 low recorded on May 1. Tune to the Trading Room for rABC guidance in real time. ______ UPDATE (June 8, 9:56 p.m.): GDX tripped a picture-perfect 'mechanical' buy at 32.39, but it went unnoticed in the Trading Room. I'll leave this vehicle
DIA's spirited leaps through two Hidden Pivot resistances since mid-May has made a run-up to the D target at 267.28 very likely. Although I restored this vehicle to the touts list in order to provide an equity-based trading alternative to futures contracts, the juicy 'mechanical' entry set-ups we look for have been relatively few and far between. That's because DIA is usually playing catch-up with index futures at the opening bell, creating bullish gaps that leave our fire-sale bids in the dust. Be that as it may, we'll continue to look for opportunities as they arise, probably going against the trend in places like the 'D' target here. We should be prepared nonetheless to jump on intraday swoons if they come our way.
