We'll keep the 1832.20 target broached here earlier firmly in mind, but the pattern shown is likely to be more useful for trading this vehicle over the next week or two. Today's push past the green line tripped a theoretical buy signal and implies the June contract will reach p=1772.60 at a minimum. If you trade gold actively, that midpoint Hidden Pivot can be used to set up a short sale, albeit one that could prove fleeting. A decisive push past the pivot would make further upside to the 1879.00 target an odds-on bet. In the chart, I have referred to the pattern as 'good enough for government work' because the impulse leg is technically illegitimate, with an extension above April 7's 1742.60 peak that did not exceeded any 'external' peaks as required.
In the Trading Room this morning, a subscriber recalled my certitude recently that AAPL's bear rally would reach a minimum 313.58 before sputtering out. As it happened, the stock swan-dived 8% after going no higher than 288.25. Should I double down on my target? As far as the subscriber was concerned, Goldman Sachs already won the bet: "Rick," he texted, "I'm going to give the point to Goldman." True, the renowned investment firm had presciently waved the yellow flag just ahead of AAPL's fall. Some would say it was Goldman's warning itself that caused the stock to plunge, and they would be right. That doesn't necessarily mean it won't keep falling. For all we know, Goldman's vaunted analysts have nailed a very important top. But I doubt it, given the fact that the 288.25 high slightly exceeded an 'external' peak at 286.44 recorded a month earlier (see inset). The seemingly failed rally generated a powerful, albeit well camouflaged, impulse leg on the daily chart, implying that the selloff begun Friday is corrective and will eventually give way to a new rally leg. Anyone care to lay me some odds? Incidentally, my long term forecast for AAPL calls for an eventual drop below $100 -- an outlook far less sanguine than you will find among self-aggrandizing dartboard prognosticators like Goldman who retail stocks to the public, and whose front-run advisories notoriously lag big moves in either direction. ______ UPDATE (Apr 27, 8:59 p.m. EDT): No, you're not imagining it, Apple really does face some big problems, including: 1) shifting assembly out of China; 2) maintaining sales of a high-margin product during a global recession/depression, and 3) competing in a streaming market glutted with competitors. Even so, I'll stick to the bullish targets flagged above. Buyers are struggling with the 285.26 midpoint
With the whole world rubbernecking at the scene of crude oil's crackup, you could lose sight of why it matters. Listening to Trump fret about it tells us nothing. He has endorsed collusion by energy suppliers, the better to push prices back up to...whatever. But he hasn't said why this would be a good thing. It's not as though we're all feeling sorry for the likes of Exxon and BP just because the value of their inventory has imploded. Unfortunately, the benighted hacks who invent the news are too lazy to give us the real story. They've never been able to explain, even, why the price of gasoline sometimes fluctuates violently over a range of $1.00 or more, or why natural gas prices can crash without reducing our heating bills by a dime. Paper Shufflers Rule! Anyway, in case you missed an earlier commentary published here, crude-oil assets are the very real collateral for much of the aggressively leveraged borrowing that has taken place in global financial markets. The $1.5 quadrillion dollar derivatives market, for example. Just what percentage of this excrescence was seeded by oil in the ground is open to speculation. Suffice it to say, its dollar value would likely dwarf the approximately $100 trillion value of goods and services produced on this planet. So why do we need a financial edifice that is more than ten times the transaction value of actual things? The simple answer is that the main business of these times is not making things or performing tasks for a fee, but shuffling paper. Mostly, this shell game comprises hyperleveraged financial instruments whose relationship to the collateral from which they've sprung is as inscrutable as string theory. So there you have it: The collapse of oil prices matters because, along with real estate, energy
I searched my archive for any mention of the neon target at 1788.7 shown in the chart but found nothing. This is embarrassing, like a scavenger failing to spot a Harley 'Knucklehead" rusting under a pile of hay in a New Hampshire barn. If I'd noticed this pattern, I would have been less enthused about touting the mechanical buy at 1711 a week ago. (I am relieved, however, that no one has mentioned it since, even some subscribers who said they'd done the trade.) Be that as it may, the position went in-the-black for long enough to allow partial-profit-taking, and it could still come home. The hourly chart is still bullish as well, even if disappointing at the moment, and an ambitious target at 1832.20 broached here earlier remains theoretically viable. I would hazard a safe way to get aboard, but the pattern that has traced out over the last couple of weeks is distributive and about as appealing as off-brand ketchup. _______ UPDATE (Apr 28, 9:16 p.m. EDT): A three-day dirge has taken a toll on buyers without doing much technical damage, even on the lesser charts. We'll keep an eye on the so-far ratcheting downtrend nevertheless, since it began from a high that failed to reach the 1779.10 midpoint Hidden Pivot of a clear bullish pattern. This is slightly bearish but would not become concerning unless the downtrend breaches 1666.20, the point 'C' low of the bullish pattern.
Crude oil prices are collapsing, but not quite as shockingly as commentators with little understanding of commodity markets would have us believe. Expiring May Crude futures ended the day at minus $37.63, meaning anyone stuck with a contract when the music stopped either had to pay someone that much per gallon to take that contract off his hands, or take delivery. A single contract covers 1,000 barrels of oil, or 42,000 gallons -- enough to fill quite a few swimming pools in Scottsdale if you were an at-home trader unfortunate enough to have to held a few contracts when Monday's extraordinary long squeeze climaxed. Assuming your Arizona neighbors would not have been keen to help out, there is just no good place to put all that oil. Storage facilities, including tankers at sea, are filled to the brim even as demand is still falling because of the pandemic. Delivery problems are a common cause of breathtaking price anomalies in markets where forward contracts are traded. This one will probably go down in history as the granddaddy of all contangos, a millennial event that sent spot quotes nearly $60 lower than forward prices. Just so you are aware, similarly crazy things can happen even with garden-variety puts and calls. In 1981, for instance, PSE traders who shorted October $30 calls in Santa Fe International, a contact driller, for small change got a rude surprise when it was announced that the Kuwaiti government had tendered a $51 offer for the company. The call options in theory were worth only 'teenies', or $6 apiece, just before the announcement, but their price soared to $1425 before regulators halted trading in the stock. Market makers initially lost millions of dollars after selling thousands of call options to brokers working large orders from -- surprise! --
The news media and the pundits flailed around over the weekend trying to come up with reasons why the broad averages have rallied to within 10%-20% of record highs even though the global economy could be headed into a depression. ZeroHedge is usually able to provide plausible answers to such questions, but here's an attempt that fell short. It places commodity trading advisors at the center of the action: "CTAs, which are computer-driven models, do not care about such trivial facts as mass layoffs, millions of people infected with a deadly virus, and instead they only care if others are buying at which point they too join the buying frenzy." I agree that CTAs don't care about facts, even world-changing ones. I also agree with the author's prediction that stocks eventually will fall much, much lower. But who are the "others" he says are attracting momentum players? And how could they rally stocks with sufficient vigor to not only overcome intense hedge-fund selling, but to build velocity against it? Surely they are not simply bullish buyers, as a Nomura quant quoted in the article seemed to imply. It taxes the imagination to think anyone could be bullish these days, with fallout from the pandemic threatening to inundate the economic world. Even financial advisors who have been telling clients to sit tight could not be so foolish as to think stocks are actually a buy at these levels, could they? Tesla a Quick Doubler So who's doing the buying, and why? There is just one, simple answer: short-covering bears, many of whom have been getting crushed by margin calls. I've always insisted that merely bullish buying is never sufficient to drive stocks through prior peaks and supply zones, even during bull markets. But short-covering can, and does, with power that correlates
The Trumpster sounded so hopeful at Thursday night's briefing that one could almost think we're headed into a summer of baseball, barbecues, fireworks, lawn concerts and kids' birthdays with piñatas. If only. Still, traders are at least pretending that all of these staples of American life will be returned to us in the foreseeable future. They've pushed index futures into a steep after-hours rally, every tick of it supported by short-covering from bears who evidently believe economic reality should count for something. The rest of us should enjoy this simulated state of exuberance while it lasts, since bear rallies are notorious for flaming out just when they start attracting true believers. For you chart-watchers, I've adjusted my rally target for uber-bellwether AAPL to 313.58, at which level new record highs of up to 347.27 would not be unthinkable.
The hopeful, decisive pose struck by the President during tonight's briefing has touched off a spirited short-covering rally, powering this dervish past a major Hidden Pivot resistance at 291.45 that I hadn't expected to give way so easily. Actually, I'd planned to get short there, but fortunately the gap-up move in after-hours trading rendered my bold dream impossible. The move has opened a path to p2=313.58, a well-wrought secondary pivot shown in the chart. It will likely be a better place to try shorting than tonight's erstwhile Maginot Line; however, when we are doing so, it would be careless to ignore the magnetic allure of D=347.24. At that price AAPL would be in record territory, as blithely oblivious to the realities of pandemic economics as a tin of sardines. ______ UPDATE (Apr 20, 12:20 .m.): Goldman's spinmeisters unloaded on AAPL Friday, driving the stock sharply lower. Although the selloff generated a bearish impulse leg on the hourly chart that merits our attention, I still expect a rally to at least 313.58 before a top is in. ______ UPDATE (Apr 21, 12:08): If bulls are about to regain command, we should see AAPL turn from either 275.20 or 272.61. Both of these Hidden Pivot supports are shown in this chart. ______ UPDATE (Apr 21, 9:22 a.m.): Sellers breached 272.61 shortly after dawn and now AAPL will fall to at least 268.38, a target calculated using night bars. For the moment, however, Buffett and DaBoyz are using bears like a speed bag, sending the stock into a short-covering rally before they let the stock grope its way down to a 'natural' low. Here's the chart, with a 268.82 target that is derived from overnight bars.
DaBoyz have obligingly stepped out of the way Thursday night, allowing a short-squeeze panic to do what mere bullish buying never could. The June contract now looks like an almost certain bet to reach a 2921.75 target we've been using for the last week that seemed a little farfetched when I first posted it. Since these targets sometimes behave in Heisenberg-like ways, we should assume that my having aired the target on the home page will make it a less than stellar spot to stake out a big short position. We can try it just the same, but with entry risk very tightly controlled. My hunch is that the trade will produce at least a small profit but that buyers will retake the offensive quickly and drive the June contract to the marquee-suitable 3000 before remorse starts killing off the rally's most intrepid spear-carriers. ______ UPDATE (Apr 21, 12:25 a.m.): ES has tripped a weak 'mechanical' buy signal at p=2771.25, but we are already a step behind it, and I would only have recommended it in the first place to Pivoteers who can cut the implied entry risk of $2500 per contract down to a fifth of that or less. Why a 'weak' signal? Because the tortuous C-D leg has given initially-too-eager bulls a chance to jump ship after booking a profit. Here's the chart. ______ UPDATE (Apr 21, 10:12 p.m.): Just a tad lower and the futures will trigger a mechanical buy at 2696.00 (the green line), stop 2620.50. This trade is even riskier than the one at p=2771.25 (see above), and I am therefore recommending it only to Pivoteers who are comfortable on double-diamond slopes. If it gets stopped out, that would suggest distribution has been at Category 5 strength, since the April 5/7 A-B impulse leg was
Before the opening, I posted explicit instructions in the Trading Room for an E-Mini S&P ‘buy’ that produced a relatively quick gain of about $2400. The trade went against the trend, as our trades so often do, following an instruction sent out the night before. Imbibe the details to sharpen your understanding of rABC set-ups and how we can use them not only to trade comfortably against the herd, but with risk under tight control.
