Skepticism toward the rally begun in November blurred my vision for a while, but last week's sunburst turned the intermediate-term picture too bright to ignore. It tripped a conventional buy signal at the green line with sufficient brio to suggest a further run-up to at least p=107.38, or even D=115.33. It is the interaction between buyers and those Hidden Pivot resistances that can tell us whether the rally is just getting warmed up -- i.e., whether the brutal bear market begun in March 2020 is finally over. Stay tuned, because I will be tracking this chart more diligently in the weeks ahead. ______ UPDATE (Jan 12, 6:45 p.m.): A strong, three-day rally has stalled almost precisely at the crucial, 107.38 midpoint Hidden Pivot resistance flagged above. As always, a decisive move past it would portend more upside to the (slightly adjusted) D target at 115.36.
The futures spent Friday in a vicious short squeeze that itself would become short-able if it touches the green line (x=4014.00). I have my doubts the rally will get that far, but we need to take it slightly seriously anyway, since it generated an impulse leg of daily chart degree. The trade carries about $13,000 of theoretical entry risk, assuming a stop-loss at 4180.25 on four contracts. That means it should only be attempted with a 'camouflage' trigger. Prompt me in the chat room if ES gets there, and perhaps we will be able to improvise in real time. ______ UPDATE (Jan 12. 9:54 p.m. EST): The futures spent the entire session in full-nitwit mode, with wild swings greeting news of moderating inflation. Since no one on Earth has the foggiest idea what this means or how it might affect Fed policy, I'll avoid wasting energy pondering such questions and simply track the short trade as having filled at 4014, stop 4180.25. This will be a good test of a 'mechanical' entries that came from an explicitly detailed recommendation. Since the trade caught a 66-point downdraft to 3954 after the futures topped at 4020, I'll treat the short as having been half-covered at a middling 3974. That leaves us with two contracts and a 4054 basis. Let me know in the chat room how you handled the trade, since that might allow me to tighten my guidance. For now, bid 3950 to cover a third contract, o-c-o with a stop-loss on both of the remaining contracts at 4022.
The bearish pattern shown is one we haven't looked at before, but it might provide a better frame of reference for trading this contract than the bullish rABC we've been using. It shows an unfulfilled D target at 67.88 in a conventional ABCD pattern that has produced no fewer than three 'mechanical' shorts, all profitable. It would create yet another with a powerful rally to the green line (x=86.79). However, my gut feeling is that the better opportunity will lie in bottom-fishing if and when CLG hits the target. Some subscribers may hold a bullish call spread in USO that expires Friday. It is based on a recommendation I made in the chat room, but I am not tracking it because only one subscriber mentioned doing the trade. Check the 12:20 post for further details. _______ UPDATE (Jan 12, 11:27 p.m.): The call spread traded as high as 1.45 today, but it could max out at 2.50, five to eight times the price paid, if USO ends the week with a further rally of 1.37 or more.
The chart uses a conventional pattern yielding a downside target at 120.82 that nearly matches an important one we derived earlier from a trendline. It will allow us to trade precise levels if the opportunity should arise. So far, though, even after Friday's sharp, go-along rally, AAPL still failed to generate an impulse leg on the daily chart. That would occur if buyers push this hoax above last Tuesday's 130.90 peak, but even then I wouldn't get too excited. A counterintuitive feature of this chart is that if the rally were to go ballistic, hitting x= 148.33, that would trigger a compelling 'mechanical' short. With close observation, though, we may be able to get short well beneath that level, presumably in a boring 'discomfort zone' where the rally seems fated to die.
[The following went out in mid-December to clients of Doug Behnfield, a Boulder-based wealth manager and senior vice president at Morgan Stanley. The letter provides an insightful view of the economic landscape as we enter the new year. Doug foresees falling stocks, falling inflation (or possibly modest deflation) and a continuing rally in long-term Treasurys. He is one of the most successful investors I know, and also one of the wisest. I have featured his work here many times in the past and am grateful for the opportunity to share his timely thoughts with Rick's Picks readers. I've substituted my own charts from Tradestation for the ones in the original report because they reproduce with greater clarity. Also, the irreverent picture above was my choice, not Doug's. He was assisted in preparing the report by his son Max Behnfield, a financial advisor at Morgan Stanley; and by Amelia Guidi, vice president and financial advisor in Morgan Stanley's Boulder office. RA ] As we wind down a challenging year in the financial markets, there are many events that have occurred that shaped the outcomes that are much easier to see in retrospect. At this time last year, the stock market was making its last glorious run to all-time highsjust as Jerome Powell, the chairman of the Federal Reserve, was being handed the Keys to the City in terms of controlling inflation by President Biden. Powell immediately set out to alter the course of monetary policy that had been Fed Doctrine since 1987, when Alan Greenspan took over as Fed Chairman from Paul Volcker. What has happened since has been quite dramatic. Considering the very recent, downward reversal in long-term interest rates and the accompanying rally in the bond market, now seems like an appropriate time to chronicle what has transpired over the
A fall to at least 121.60 early in the new year still looks inevitable. That's not a Hidden Pivot target, but rather a closely measured approximation of where the trendline will be at the end of this week. We'll look to bottom-fish using a small-degree reverse pattern (rABC) when the stock gets there. However, given the compelling clarity of the channel lines, if the bounce were to peter out quickly, that would be ominous. Although my long-term forecast sees AAPL eventually falling to $50 or lower, I don't see this happening any time soon.
Stocks are even weaker than they appear. Notice how the E-Mini S&Ps failed to penetrate a sitting-duck trendline on their final, desperate short-squeeze lunge of the year. The broad averages are obviously marking time until DaBoyz have distributed as much stock as possible. With the U.S. recession continuing to deepen, however, they are going to have their greedy hands full trying to corral a new bunch of pigeons when trading begins in 2023. For now, we'll stick with the 3682.00 'secondary' Hidden Pivot shown in this chart as our minimum downside objective. It's tied to a 'D' target at 3516.00 that is well in play but not a worst-case number for the early new year. Lower projections at 3460.00 and 3349.25 are possible using successively higher point 'A' peaks at, respectively, 4250.00 (8/26) and 4361.00 (8/16).
The chart shows what can happen when the so-called smart money gets trapped. Given the unnaturally tight trading range that bitcoin's deft conspirators have maintained for nearly two months, one might believe they are capable of holding the cryptocurrency above $15,000 indefinitely. Unfortunately for them, the chart is telegraphing a fall to at least 11,484. Bitcoin's deep-pocketed sponsors undoubtedly have been hoping to be rescued by a powerful short-squeeze, but this is looking increasingly unlikely to materialize from these levels. As 'Trader Mike' Schurr likes to remind us in the chat room, hope is not a strategy. The smart guys will have a better chance of propagating a short-covering panic if they allow more slippage, however painful, to the 11,484 Hidden Pivot. Even then, the reaction move would be limited by mountainous supply above $25,000 from players whose cost basis is at least twice that. More likely, in the context of an intensifying bear market in stocks that could run for years, is a washout that threatens to take bitcoin down to $5000 or lower. ______ UPDATE (Jan 9, 5:43 p.m.): Today's volumeless waft just missed touching an important midpoint Hidden Pivot at 17,456. Buyers will need to pulverize it, however, to demonstrate their seriousness and ability to reach D=18,634. _______ UPDATE (Jan 12, 11:39 p.m.): Bertie's doomed rally topped in an obvious spot, at the 19157 D target of this pattern, It is into serious supply now, so we shouldn't expect today's Whoopee Cushion squeeze to continue much higher.
March Gold's tortuous climb to a 1907.10 Hidden Pivot target continued last week in the accustomed way: an impressive leap followed by exhaustive backing and filling, The futures have signaled only one 'mechanical' buy at the green line, and it went on to produce a theoretical profit of about $2,200 per contract. A second such signal if gold relapses would be worth bottom-fishing, although my gut feeling is that the implied trek to D would be a messy, tedious slog, assuming the target is achieved, Although that still seems likely, it is not a given because of the difficulty the March contract has had surmounting midpoint resistance. ______ UPDATE (Jan 6, 11:24 p.m.): No change. Feb Gold remains on track for a run-up to at least 1907.10, a Hidden Pivot target that has kept us confidently on the right side of the trend for more than a month. Let's keep our fingers crossed and hope that bulls blow the 'D' target to smithereens when they first connect with it. _______ UPDATE (Jan 12, 11:47 p.m.): This morning's lunatic leap came within a split hair (i.e., 0.50) of fulfilling the longstanding target at 1907.10. Anyone who shorted there should have taken a partial profit on the subsequent $19 dive. The shallow pullback so far suggests bulls are not finished,
March Silver's rally to D=24.95 was signaled a month ago and lies but one good thrust above. That will be scant consolation to bulls who just slogged through yet another week with no reward. Silver futures have outperformed gold, however, having consolidated at p2 while the latter was stuck a level lower at p. A swift pullback to the line (p=22.86) should be used as an opportunity to get long with a 22.16 stop-loss. The risk is substantial, so the trade is recommended only if you know how to cut it by around 90% with a 'camouflage' trigger. _______ UPDATE (Jan 4, 7:10 p.m.): The recent high at 24.78 fulfilled the target for trading purposes, although it remains theoretically viable. A 'dynamic' stop-loss would have taken you out of the trade at around 24.77. ________ UPDATE (Jan 6): March Silver is not likely to make a marginal new high that touches our longstanding target at 24.95 only to die there. Assuming buyers pop through it, we should expect Feb Gold to do the same when it reaches a corresponding target at 1907. The C-D leg has provided only one opportunity so far to get long 'mechanically', adding to the evidence that there is still considerable buying power percolating beneath the surface. Here's the big picture.
