The futures still appear to be laser-locked on 2921.75, a Hidden Pivot target that I've drum-rolled here recently. I am strongly discouraging shorting there unless you've made at least a thousand bucks on the way up, so please don't announce your intentions in the Trading Room. I doubt we'll be so fortunate as to see a pullback to p=2771.25, which would trigger an enticing mechanical buy, stop 2721.00. But there are bound to be other opportunities to get aboard, possibly with less risk. Those of you who remember how to do the old-style mechanical entries should look for an opportunity on a pullback to p2=2846.50. Recall that we need a few price bars above that level, with some white space beneath them, to set up the trade. Otherwise, any dip that exceeds a prior low on the lesser charts can be used to set up an rABC entry. _______ UPDATE (Apr 15, 9:33 p.m.) The thousand bucks (see above) was there for the taking for anyone who used the price trigger and stop-loss I posted in the Trading room about 45 minutes before the opening. This gambit went successfully against the day's weighty downtrend and could have produced an actual gain of about $2300 in under 20 minutes. As far as I could tell, only one subscriber, the intrepid MikeS, jumped on it, so I did not establish a tracking position. Looking just ahead, the drum-rolled 2921.75 rally target noted above remains viable, but tonight's weakness offers little encouragement for a bull trade. A dive to the green line (2696.00) would trip a 'mechanical' buy signal, but I'm much less enthused about using it than I was yesterday's signal at the red line. Check the room for guidance in real time, since prospects could brighten after the opening.
The stock market has been acting as though truckloads of oral vaccine will show up on supermarket shelves this weekend. Of course, we know better than to attribute the robust uptrend of the last two weeks to careful or even rational calculation. The market is not a thinking creature, after all, just a dumb beast that has been annoyed by a swarm of flies, or excited by pheromones washing over its olfactories. Far from thinking past the crisis, surging stocks are simply adjusting to the temporary exhaustion of sellers who bailed out when it seemed like the news couldn't get much worse. It didn't, but there is little to encourage at this point, since we all understand that social distancing, with its ruinous effect on the economy, could continue indefinitely. So, do Warren Buffett, BlackRock's Laurence Fink, Bezos and other whales dive for cover, dumping their shares in a panic? A better question to ask is: To whom would they sell? Since there are no buyers big enough or dumb enough to take these Leviathans out of their positions, they will simply continue to moderate their offers as short-covering bears drive stocks further into the insanity zone. Big sellers dare not pounce, at least not yet, since that might frighten the herd back to its senses. But they will quietly distribute as much stock as they can before pulling the plug. The buyers will be mostly 'don't-pass' bettors whose appetite for stocks has been stimulated by margin calls on bearish positions gone badly awry. DaBoyz will know when that appetite starts to wane, since they are literally making book on it. Their touch is so light that the suckers enticed to do the buying no more feel the weight of massive distribution than someone living in Billings feels the swelling
Buyers blew away a Hidden Pivot target at 1782.30 that we'd been using for a while and June Gold now looks bound for at least the 1832.20 target shown. The futures are all but guaranteed to get there if they can close above 1777.40 for two consecutive days or reach 1800.00 intraday. We can use the pattern shown to trade the rally confidently. Most immediately, that would mean placing a 'mechanical' bid at 1711.11, the green line, stop 1670.60. A somewhat riskier trigger could be fashioned using p=1751.50, stop 1724.60, but I'd suggest paper-trading this one if you are unfamiliar with 'mechanical' entries. Even if you know what you're doing it would be best to convert the mechanical signal into a less risky alternative. Tune to the chat room for further guidance if the opportunity gels. Let me also mention, just to be on the record with it, that there's another rally target at 1886.20 that comes from the continuous daily chart. The futures would need to push decisively above the 1777.40 'secondary' pivot referenced above to imply that the higher number is a done deal. Here's the chart. ______ UPDATE (Apr 15, 9:44 p.m.): A buy at the red line (see above) never got airborne, but a 'mechanical' bid at 1711.10 still looks promising -- the moreso if it occurs early in the session. ______ UPDATE (Apr 16, 8:30 p.m.): Here it comes! The best 'mechanical' trades will often test our nerves to the limit, since they trigger at the end points of brutal countertrend moves. This one would go 'live' at 1711.10, stop 1670.60, for a shot at 1751 or higher -- that's risking more than $4,000 per contract -- but I'd suggest watching from the sidelines if you are merely curious about how well they work. The
The June futures have topped so far this evening less than a point from the 1775.10 rally target I'd flagged Sunday night ("Gold is down an unpersuasive $24 at the moment..."). The target may have been especially useful to subscribers who felt discouraged by gold's $30 drop after Thursday's close. I'd suggested buying on weakness using a 'mechanical' bid at 1722.90. It failed by a hair to trigger, but the point of it was to avoid hoping for the gift of a pullback all the way to the green line, where we initiate most of our 'mechanical' trades. The chart raised the prospect of an rABC short, but it actually triggered at 1772.20 just after the chart was drawn and produced a $370/contract gain on paper. Here's the rABC pattern on the 30-minute chart: a=1772.80 (4/13 at 4:00 p.m.) Bulletin: Gold's pop just now above 1775.10 means the June contract is on its way to at least 1782.30, a bigger-picture target we've been using for quite a while that could prove challenging to beat.
Gold is down an unpersuasive $24 at the moment, perhaps resting for more-challenging adversity in the wee hours. We remain focused on two rally targets nonetheless: one at 1782.30 that is tied to a big pattern that's been in play for more than a week; and another, lesser Hidden Pivot at 1775.10 that is shown in the chart. Ordinarily we look to bid patterns like this one at the green line -- here 1696.80, and an implied stop-loss at 1670.60. That's risking $24,000 on a four-lot trade, so I am recommending it only to those with the Hidden Pivot chops to cut the risk by 80% or more. A buy at the green line would entail about the same dollar risk (using a 1696.80 bid, stop 1670.60), although it would be somewhat less hazardous, as well- developed green-line entries tend to be. By that point, depending on the time of day, it may be possible to substitute GLD, or options on it, for the futures contract. _______ UPDATE (Apr 13, 8:15 a.m. EDT): The trade recommended above missed triggering at 11:00 p.m. by a micron. Cancel the order, since I'm not keen on sloppy seconds in this instance. If anyone filled the order using an rABC (a=1731.80 at 7:00 p.m. on the hourly chart) or a camo set-up, please let me know so that I can establish a tracking position. It could have produced a profit so far of as much as $8,600 on four lots.
The 250.35 rally target we used last week is still in play, but I can offer no guidance in advance of Monday morning's opening that is guaranteed to survive further weakness overnight. I've proffered a 'mechanical' buy at the green line for the E-Mini S&Ps, but this vehicle would trigger a comparable signal at the red line, p=228.77, stop 221.57. Check in after the bell, since the opportunity may be developing in a way we can exploit using call options. ______ UPDATE (Apr 13, 10:12 p.m. EDT): Once again, DIA is poised to trigger a red-line buy at p=228.27, and once again I cannot recommend it until I've seen how stocks open Tuesday morning. _______ UPDATE (Apr 14, 6:40 p.m. EDT): DIA opened on a gap higher, negating the easy 'mechanical' entry we'd sought at the red line. This helium balloon is still going to 250.35, but any shot we have of climbing aboard before it gets there will have to come from an intraday set-up. Plan on shorting at 250.35 in any case, using puts priced under $1 that have a week or so left on them. The trade should not be initiated until such time as DIA trades within 0.07 points of the target. ______ UPDATE (Apr 23, 9:15 p.m.): This space for rent! _______ UPDATE (Apr 27, 9:05 p.m.): Using a 24-hour chart, I've changed the point 'B' high slightly to come up with a new target at 250.43. My trading strategy can stand as given above. _______ UPDATE (Apr 28, 9:22 p.m.): A plunge to 228.36 would trigger a 'mechanical' buy signal, stop 221.00. Please note that the 250.43 rally target is still viable.
The futures have opened weak Sunday night, but it feels like DaBoyz are maneuvering stocks lower in order to buy 'em. We should join them if the June contract falls to the green line (2696), since that would trigger an appealing 'mechanical' buy signal. The trade is recommended only to those who know how to reduce the theoretical entry risk, which amounts to about $3800 per contract on a 2620 stop-loss, to $400 or less. This can be done with a 'camouflage' set-up or an rABC pattern. If the opportunity gels during the regular session, tune to the Trading Room for potential real-time guidance. ______ UPDATE (Apr 13, 10:25 p.m. EDT): The futures dipped no lower than 2711.00, stranding our niggardly bid. The 2921.75 target shown in the chart remains viable as a minimum upside objective for the near term.
Investors who think the worst is over had better prepare for the other shoe to drop. Stocks rallied sharply last week, reflecting the egregious miscalculation not only of bulls who have yet to meet a dip they did not like, but also of bears who evidently fear that the crazed buying binge will continue for no good reason. They should relax, since there has never been an instance where an initial drop of 30% in the stock market did not take at least another six months to bottom. Another reason why bears shouldn't panic to get 'em back is that in bear markets, shares tend to fall by as much as earnings. Assuming that the bottom line is halved over the next six to nine months for S&P 500 companies -- a very conservative estimate, considering the number of businesses that are either headed into bankruptcy or shuttered indefinitely -- the S&P 500 should eventually fall to at least 1700. That is miles below the current 2789, and 22% lower than the March 23 crash-landing bottom. AAPL Is Key, as Always As always, we'll be keeping a close eye on AAPL, the most popular stock in the portfolio world and a reliable bellwether for the stock market in good times or bad. Short-covering nuttiness has pushed the stock as high as 271.70 so far, but you should expect the rally to hit a minimum 282.45, an important Hidden Pivot resistance, before it sputters out. A commensurate target for the E-Mini S&P lies at 2881, exactly 94 points above Friday's close. Enjoy the rally while it lasts, but don't get too caught up in the idea that we are seeing the V-shaped bottom that many financial advisers have told their clients they can count on. Although we often ascribe prescience to
Investors seem to imagine that slightly encouraging pandemic news will somehow beget improved economic news. Shares rallied for a third straight day, evidently because the deadly tide of contagion appeared to be receding somewhat in Italy and China. Even that story was a bit muddled, since there were reports that a second wave of Covid-19 was rolling through Wuhan. Regardless, the small businesses that are the backbone of the American economy face a long, difficult slog toward normalcy, assuming anything approaching it ever returns. The Fed has made a mighty effort to ameliorate the pain in the meantime, providing a credit lifeline to tens of thousands of businesses that are not generating any cash. Far more daunting than their cash-flow problems, however, are the challenges of staying solvent. My colleague James A. Kostohryz has some sobering thoughts on this subject in an article he posted at Seeking Alpha, How The Intrinsic Value Of Common Equity Shares Will Be Destroyed In This Crisis. The discussion that follows is worth a read as well, since it suggests there are still plenty of investors who expect a v-shaped bottom and who are ready to pounce on stocks at the first encouraging sign. This is in stark contrast to my prediction that the Dow Industrials will trade well below 10,000 before the bear market has run its course. You can read Kostohyrz's essay by clicking here.
One good rally and everyone's bullish! How else to explain yesterday's abortive attempt to do it again? Just as traders came to their desks Monday morning looking for stocks to plummet, on Tuesday they evidently thought the Dow was going to tack on another 1000 points. When it did so early in the session, it was easy to think this was the start of another monster move. To the contrary, stocks peaked on the opening bar and it was mostly downhill from there. Moreover, weakness in the final hour would have challenged the resolve of anyone bent on bottom-fishing. The fleeting, bull-trap opening was not quite strong enough to get AAPL or the E-Mini S&Ps to their respective targets. The shortfall in either case was not large, but the subsequent selloff had some subscribers wondering whether I was still confident the targets will be reached. The answer is yes, mainly because of the way AAPL impaled a Hidden Pivot midpoint resistance on the way up Monday. This sort of price action usually means the target associated with the midpoint resistance will be reached. In AAPL's case, it sits at 282.45, a little more than $10 above Tuesday's intraday high of 271.10. That high occurred almost precisely at a 'secondary pivot' shown in the chart that stood to be a potential stumbling block for bulls (as I'd noted in the Trading Room). The $12 decline that followed was brutal, but it did little technical damage to AAPL's intraday charts. Doomed Rally As for the E-Mini S&Ps, they peaked at 2750, somewhat shy of the 2783 target I'd proffered. A trend failure at or near the secondary pivot is concerning, since reversals from very close to this level often accelerate. For now, though, I'll stick with my forecast that the E-Minis and
