December Gold ended the week breaching, then closing beneath, a 1660.90 midpoint support associated with a 'D' target at 1497.20. Before we sink into despair, let's use the lesser pattern shown in the inset to leverage a less severe outcome. The chart shows immediate downside potential to 1641.00, or to 1620.00 if any lower. Both are worth bottom-fishing provided you can set up the trade with initial risk of less than $150 or so per contract. There is also a possibility that Friday's 1646.60 low will prove to be an important bottom, although I doubt it. A 1685.10 print by mid-week would change my mind, but let's not hold our breath. _______ UPDATE (Sep 28, 8:17 a.m.): The gold trade I posted in the chat room last night canceled itself when the prospective 'c' anchor dropped more than a desirable few ticks beneath D=1628.70. The eventual low at 1622.20 was easily tradeable and came at 3:30 a.m. from this pattern, one that I should not have missed. I do not think sellers are done. Here is a quite bearish pattern with a 1597.50 target and a midpoint support that was breached last night. The pattern is gnarly enough that it should work well for any purpose, whether bottom-fishing or getting short 'mechanically'.
I've adjusted the downside target to 16.39 in the pattern shown. It has triggered two profitable 'mechanical' shorts at the green line, and although that's no guarantee D will be reached, it does shorten the odds, especially for a test of the p2 low at 17.55 recorded on 9/1. I wouldn't suggest attempting a third 'mechanical' short if the futures return yet again to the green line, since that would put them within the scent of C=21.02 and an opportunity to stop out bears who have been racking up fat gains since last March. One last note: A plunge could find tradeable 'hidden' support at 16.96, a lesser 'D' target calculated by sliding 'A' down to the 22.23 high recorded on June 16.
November Crude breached p2=81.67 with such force on Friday that we should assume it's headed down to at least D=73.70. We'll toss out this assumption for trading purposes, however, since crude is too devious to reward betting on a pattern this obvious. More likely, based on long observation, is that the turn will come from around midway between p2 and D, or 75.69. First, though, let's see whether the futures can get a tradeable bounce from p2=77.68. If you're familiar with reverse-pattern set-ups, I'd suggest anchoring a 'c' low there with an a-b 'trigger' of 1.00 point or less. That implies initial risk of no more than $250 per contract._______ UPDATE (Sep 28, 10:35 p.m.): A rally to the green line (x=86.65) would trigger a not unappealing 'mechanical' short, but I'll suggest paper-trading this one unless your 'camo' chops are well honed.
Yields on 10-Year Treasury Notes, currently at 3.70%, are likely to hit 4.90% before they level off. It is hard to imagine an increase of such magnitude not disrupting the U.S. and global economies severely. America is already in a recession that looks all but certain to deepen before we hit bottom in a year or two. And yet the Fed keeps tightening, leaving little doubt with last week's 75-basis-point rate hike, the third in four months, that Powell & Co. are hell-bent on crushing consumer inflation that has been rampaging for two years. The Open Market Committee must have known that our teetering economy, a super-heated real estate sector and a vaporous stock market would implode if they merely talked about raising rates. However, for the first time since Volcker's 1980s heyday, the central bank has actually walked the walk, surprising everyone by pushing up administered rates a total of 275 basis points since last May. This has sent borrowing costs soaring, including mortgage rates that have more than doubled from the sub-3% levels that obtained toward the end of 2021. Under the circumstances, it is surreal for politicians to be splitting hairs over whether the U.S. is in a recession. Only in comparison to the disaster that is coming could the current economy be described, as Biden is wont to do, as holding its own. The stock market has come down hard, so far without the kind of climactic selling we might expect at a bottom. This has taken a little of the steam out of inflation, albeit mainly via falling gasoline prices that reflect a global economy in a state of imminent collapse. But the broadly falling asset prices that lie just ahead eventually will trigger waves of bankruptcies so destructive and relentless that we'll wish we
I've been reluctant to give permabears the all-clear because, being one myself, I've seen the bull market roar back from death a dozen times since 2009, turning my smug eulogies into embarrassments. The most punitive and outrageous of the rallies was the monster that emerged in March 2020, when investors cast off pandemic fears just as global business went into lockdown. What a fooler that was! Who could have guessed that prices for nearly everything were about to soar? A friend who lives in a South Jersey resort sold his home for $1.8 million, thinking he'd be able to buy it back for half that in a year or two. Instead, six months into the Covid lockdown, the house was worth $2.4 million and beyond his reach for a buyback. He's living in an apartment now, but he may ultimately get his wish if real estate prices collapse in the current, deepening recession. Another friend bought his dream vacation home in Naples FL for $4 million, but readily parted with it when a giddy fool came along just 13 months later and offered him $7 million for it. It's not as though the economy has been booming. In fact the opposite is true, notwithstanding Wall Street's idiotic focus on employment numbers that tell us nothing. Who could possibly care about this statistical poppycock when stores, restaurants, movie theaters and countless thousands of other retail businesses have been calling it quits or are within weeks or months of failing on their own? Did Biden's statisticians and pundits even notice last week when the most successful category-killer of them all, Amazon, said it was scaling back growth plans significantly? When mighty Amazon starts tightening its belt, you had better believe that, after two dispiriting quarters, this recession is just getting rolling. Levitation
Last week's violent histrionics left an engulfing bar on the weekly chart that holds bearish implications for the near term, at least. Expect the futures to fall to the 3792.50 'D' target of the 'rABC' pattern shown. Bottom-fishing there with a 'camouflage' set-up looks promising, and that's what I am suggesting. Of course, any rally in the interim would be short-able, albeit with a pattern derived from the lesser intraday charts. Be advised that shorting this sonofabitch with risk nearly eliminated will require very close attention to fifteen-minute bars or less. _____ UPDATE (Sep 19, 8:18 p.m .): I'm planting a tightly staged 'reverse' c at 3933.50 to get short with less than two points of risk, but my hunch is that the short squeeze driving ES on the close will either negate the trade or stop it out. If the rally exceeds the 3963. 50 'external' peak from last Thursday, we'll need to feign a little more respect for the trend, which is being driven 100% by bears. _______ UPDATE (Sep 21, 7:24 p.m.): This afternoon's Fed-induced psychosis culminated with a steep plunge to within two ticks (i.e., 0.50 points) of the 3792.00 target billboarded above. The Hidden Pivot support held for two hours and fifteen minutes, but its failure a short while ago is yet one more sign that there is something far more seriously wrong with the stock market than has been reflected by the hard selling since early April. Most immediately, I see more downside to at least 3699.25, a voodoo number where I intend to anchor the 'c' low of a tight 'rABC' pattern to do some risk-obsessed bottom-fishing. Isn't it remarkable how we can watch the S&Ps shed hundreds upon hundreds of points without offering any decent opportunities to get short? Only a trader with
Wall Street's best and brightest are as clever and scurrilous as any broad-tosser who ever plied the Piccadilly Circus or Times Square, but they will have their dexterous hands full as they continue to distribute AAPL shares ahead of the crash below $100 that is coming. For the moment, the stock looks bound for the middling downside 'D' target at 145.89 shown in the inset. The pattern is choppy enough to qualify as gnarly, so bottom-fishing there will have a good chance of producing a profit. We might look to exit such a position by reversing it. The mild caveat is that the A-B leg here is 'sausage', which argues against the target working as precisely as we are used to. I haven't seen any evidence that subscribers are trading this stock, but please make your interest known if I am wrong. When AAPL hits 145.89, that will represent a 17% fall from mid-August's peak, which, amazingly, came within less than 4% of achieving new record highs (!) My hunch is that the stock's institutional sponsors want the stock to fall by at least 20%-30% before they start accumulating seriously again. Realize that their goal is no longer to push AAPL to new all-time highs, since that is probably impossible, but rather to buy it cheaply enough, and with sellers sufficiently depleted, to guarantee a profit on whatever short-squeeze rallies they can trigger off. Count on them to do this repeatedly as the Mother of All Bear Markets works its way to the bottom of the Marianas Trench over the next 2-3 years. ______ UPDATE (Sep 19, 8:10 p.m.): Today's short-squeeze was rigged in the usual way: Pull all bids ahead of the opening bell, exhausting sellers. This ploy almost never fails, and today it produced a bullish impulse leg
Pardon me for not getting excited about Friday's impulsive thrust, but scores of failed rallies have taken the thrill out of gold's occasional, meaningless flights of fancy. We should make the futures earn our trust every step of the way, meaning in this case we shouldn't even assume D=1704.10 will be reached via this presumptive bear rally. Let buyers push this sack of cement decisively past our minimum upside objective first, p=1692.00, and then we can raise our expectations just a little. This pattern should work well for 'mechanical' buying, but don't pass up an opportunity to take a partial profit on a modest, one-level move. Incidentally, gold ended the week at the scariest precipice on this chart -- i.e., the 1660.90 midpoint Hidden Pivot of a pattern projecting to as low as 1497.20. If the support doesn't hold, the futures should be presumed bound for at least 1619.90, a secondary D target derived from A2 on the chart.
Silver triggered a 'mechanical' short on Friday, although I'd advised paper-trading this one. I had to redraw the chart to discover that the short was more promising than it initially appeared. I hadn't realized that the 'B' low exceeded the external low from June 2020, making the downtrend more powerful than I'd originally inferred from a cursory glance. In fact, the A-B leg was quite powerful, implying that December Silver will not be able to push above C=20.98 of the downtrending pattern and eventually will fall to D=16.355. Nudge me in the chat room on Monday if shorting silver appeals to you, since we may be able to 'camo' ourselves aboard belatedly with risk very tightly controlled as always. (I would not have recommended using a conventional stop above C in any case, since that would have implied more than $23,000 of entry risk on four contracts.)
The Dollar Index is headed toward an interim top at 113.16, a Hidden Pivot resistance that would culminate a bull trend begun from around 79 in 2014. However, there is an even longer-term target at 119.37 that is shown in the inset. Both uptrends could experience significant corrections along the way, but the retracement that has played out over the last week or so from a peak at 110.79 would generate a 'mechanical' buy signal at 106.64 (stop 104.64: weekly chart, A=101.30 on 6/3). I've provided a big-picture perspective this week to explain why any weakness in the dollar, even if severe, would not jeopardize the very bullish projections possible using charts that go back as far as 20 years. This would be true even if the dollar were to fall to the green line (96.03) shown in the chart. Presumably, this would require an unprecedented money-printing spree, or a geopolitical shock severe enough to knock the dollar off its pins.
