A shelf of resistance created back in June looks primed for a challenge. Short-covering bears have been the sole driver of this presumably doomed rally, now entering its ninth week. Much of it has occurred into airless gaps, with economic 'news' as the catalyst, and thin, off-hours markets offering almost no resistance. A push past early June's thicket of supply looks all but certain, since the approach path has been a methodical, ratcheting process of stair-building that has consumed nearly two weeks. Once above the resistance, it's anyone guess how far DaBoyz will be able to take this hoax. I'm going to drop a 'c' anchor for a reverse-pattern short near 4256, not because it's a Hidden Pivot, but because it is in the middle of the ocean, so to speak, where bulls, bears and even chartists will be at their queasiest. ______ UPDATE (Aug 8, 11:21 p.m. ET): Dave Isham posted this pattern in the chat room today, with a bear-rally target that pessimists should keep well in mind. The D target at 4418.00 is 26.25 points higher than his, since I used a slightly different point 'A' low. In either case. the midpoint resistance got shredded so badly that 'D' should be regarded as an odds-on bet if the futures get past the middle-of-the-ocean number at 4256 noted above. _______ UPDATE (Aug 10, 7:54 p.m.): To get short, use this rABC pattern, anchoring the 'C' high in the range 4254.90 - 4257.70, with an implied trigger 15.73 points off a high falling within those numbers. If you get a chance to cover half 15.73 points below the price where the trade was initiated, you'll be on your own. Please note that theoretical entry risk is about $800 per contract and that it is sufficiently cutting-edge to be labeled experimental.
It was odd to see this vehicle gratuitously stop out deflationist bets on Friday, trading as though it were a malign, nutty natural gas contract. Such nasty price action in this interest-rate proxy can only be ascribed to the shaky inventiveness of the fraudsters who run the central bank. The old adage 'Fake it till you make it' doesn't apply in their situation, since it is more a case of 'Fake it till you trigger a global depression'. In the meantime, the idiotic will-they-or-won't they game that has been driving the markets for more than a decade may have run its course with the recent 75-basis-point rate hike. With the country officially in recession and a third consecutive quarter of GDP shrinkage likely to settle the political argument over semantics, more tightening seems almost as unlikely as easing. Does that mean market forces will come to bear more forcefully on rates? That sounds pretty scary, but even scarier is the possibility rates will continue to fall, as they've been doing since mid-June, because the economy is imploding.
After a scorching rally that lasted 14 months, the dollar needed a rest. It could pull back to 97.63, and that would be a mere ten percenter and presumably healthy, as I mentioned here earlier. But the long-term chart (see inset) suggests that even if the selloff were much worse -- say, to below 95 -- that would generate an appealing 'mechanical' buy at the green line. No doubt the talking heads would be proclaiming the greenback's demise. But in purely technical terms it would provide a Hidden Pivot springboard for a shot at the 113.16 target. I doubt we'll see a correction that nasty, and we'll be looking in any case for a 'mechanical' buying opportunity if and when the red line (p=100.71) is hit. In the meantime, let's focus on the lesser charts for signs of an upturn well shy of the worst-case levels identified above. That would imply minor abcd downtrends that do not reach their targets but instead reverse from p.
At the current pace, this anemic uptrend will reach the D target at 1985.40 by next June. Something's got to give, obviously, since no bull market can survive such torpor. We may be spared waiting, however, if the futures pop to p=1840.80 sooner rather than later. A decisive move past that Hidden Pivot would imply the December contract is no worse than an even-odds bet to continue to at least p2=1913.10, if not necessarily to D. In the meantime, Friday's downdraft tripped a so-so 'mechanical' buy at x- 1789.50, stop 1769.90 (daily, A= 1727.00 on 7/27). I didn't recommend the trade because getting long ahead of a weekend is almost always unappealing.
Silver has performed somewhat better than gold recently, but that's not saying much. Since the September contract didn't quite reach the red line last week, I cannot recommend a 'mechanical' buy if it touches the green line on Monday. My gut feeling is that the trade would make money, but there's no compelling reason to cast discipline aside. There's a potential gain of around $6400 per contract on a one-level move to p=20.60. however, so don't feel constrained from trying if you know how to keep theoretical risk down to $400 or less by applying 'camouflage' on the five-minute chart. ______ UPDATE (Aug 8, 11:35 p.m.) With an easy pop through p=20.54 today, and then a relaxed consolidation above it, September Silver looked terrific. If it closes higher on Tuesday, that would strongly imply the rally is destined for a minimum 21.62, the D target shown here.
GDXJ has traversed the 'reverse' pattern shown with such caution that many bulls must be wondering when the obligatory air-pocket-from-hell is coming. It's been a while since a rally in any gold vehicle achieved a 'D' target, even a relatively modest one like the 35.99 Hidden Pivot resistance shown in the chart (inset). Rest assured, the target will be achieved, even if Mr. Market seems to delight in busting the chops of gold bulls whenever they wax -- here's that fatal word again -- hopeful. In this case, although the pop through 'p' took two tries, the latter was sufficiently decisive to imply that bulls were in charge, even if a little shaky. Our concern in any event is not whether D will be reached, but whether this proxy for exploration companies can fist-pump its way past it, especially on the first attempt.
The rally from mid-June's 108 low would appear to have sputtered out in a bad place, just shy of the 121.68 'D' target shown in the chart. The target remains viable nonetheless, and there are reasons why we should give it the benefit of the doubt. The most important is that the last portion of the upthrust exceeded an 'external' peak at 119.74 recorded in May, generating a robust impulse leg of daily-chart degree. Also, when TLT popped through the midpoint support at 116.87 after a week of trying, it built a base for a presumptive thrust to D. Last week's close beneath the 'launching pad' was not exactly a sign of robust health, but I see it as exhaustion selling related to the way in which the charlatans who run the central bank mismanaged our expectations' last week. The official story that the economy is doing okay and reality have moved widely apart, but the recession is real and will continue to exert downward pressure on yields. They are already high enough to snuff the economy worse than in 1973-74. Falling energy prices will help to somewhat mitigate the effect, but they will not reverse it. TLT in any event would trigger a 'mechanical' buy if the pullback hits x=114.46.
It's been a particularly tough slog for Bertie these last couple of months. Those who have been praying for a big short squeeze to lighten their losses are many. Quite a few were trapped at much higher prices, including some of the biggest crypto bettors in the world. Prayerful losers constitute heavy layers of supply that didn't exist in bitcoin's early days. Supply is particularly daunting along the final few, crushing bars of bitcoin's collapse last spring. Two months of heavy lifting since then have succeeded in hoisting this vehicle only to the midpoint of the last bar (see inset), which saw BRTI free-fall from $32k to below $19k. If and when it rises to the 25,634 low from the swift and devastating down-leg ended in mid-May, buyers may begin to feel like Sisyphus as they shoulder into it for an indefinite period. Why bitcoin should have any value at all was always a fair question. But $69,000 per copy? I asked this question of many experts, some who'd made fortunes on the way up, but I never got a good answer. It came out of nowhere and is not money by any stretch of the imagination, just a secure means of recording transactions.
[The following went out last month to clients of my friend Doug Behnfield, a wealth management advisor and senior vice president at Morgan Stanley in Boulder CO. Like your editor, he is skeptical that consumer inflation can persist for long with the U.S. economy in recession and a bear market in progress. Deflation is coming, he says, along with a further decline in stocks of at least 20% from early July's lows. Doug has been recommending long-dated Treasurys both as a defensive investment and for potential long-term capital gains from falling interest rates. RA] On January 11, 1987, the Denver Broncos played their last playoff game of the season at the Cleveland Browns. It was rainy and muddy. With 5 minutes left to play, the Broncos had the ball on the two-yard line after a muffed kickoff return and the score was 13-20, Cleveland. Legend has it that as the huddle was called on the two, ProBowler and offensive lineman Keith Bishop said to the team; “We got ‘em right where we want ‘em!” Through a series of runs and passes, sacks and scrambles, John Elway led his team 98 yards to score a touch-down to tie the game. The Denver Broncos won in overtime and went on to the championship game. The first half of 2022 is characterized by a bear market in stocks with the S&P 500 down 20.58% and the NASDAQ down 29.51%. While shorter maturity bonds were down much less, the longest duration Treasury and municipal bonds were just as bad as stocks. The Index of long Treasury Strips was down 27.90%1 and the CEF Connect Index of National Leveraged closed-end Municipal Bond Funds was down 20.1%2 . Here, at the end of the first half of 2022, we are staring at the worst start to
The picture shown makes much better visual sense than the tortuous, gutless pattern I posted here earlier. (It had an erroneous target to begin with.) The new graph will enable us to use p=1840.80 as a minimum upside projection, and D=1985.40 as a best-case objective for the next 6-8 weeks. Depending on how the uptrend interacts with p=1840.80, I may move 'A' down to the marquee low at 1793.50 to produce a slightly higher target. There are no guarantees that the rally will achieve 1840.8, since the chart lacks sufficient information as yet to determine this. At a gut level, though, it looks safe to use 1840.8 as a minimum upside projection.