Rick Ackerman

Leave it to the pundits to tell us what the hell the stock market was celebrating on Friday. The FAANG stocks inspired an inexplicable rampage, just like in the good-old days, and everything seemed right with the world. In the view of those anointed by television producers to make sense of Wall Street's non-stop nuttiness, it is always the central bank's seeming intentions that have caused shares to move, whatever the direction. This is occasionally true, but the tortured reasoning it requires to flesh out the point hardly satisfies skeptics who see a world in meltdown. Shouldn't shares be falling steeply in order to discount the growing unlikelihood, if not to say impossibility, that the U.S. economy will ever return to normalcy, whatever that might be, let alone to good health? There are so many gangrenous appendages in the all-important consumer sector, for one, that it is reasonable to speculate that Amazon will be the only retailer left after this so-far wishy-washy recession turns lethal. The Simple Explanation For the record, there is a simple explanation for the sharp rally that ended the week, and it is this: Every trader on the planet came to his desk Friday morning eager to short every uptick. And so they did, creating perfect conditions for a short-squeeze that put stocks relentlessly on the rise until 15 minutes before the final bell. What happened then underscored the quasi-criminal nature of the game: stocks dove, but only far enough to sodomize holders of call options who were doubtless counting their chickens. Some would have been holding Chipotle 1725 calls that had fluctuated intraday from $5 to $15 and were worth $8 at 3:46 p.m.. Sitting pretty, right? In fact, the calls went to zero in the final 14 minutes when CMG mysteriously plunged to 1723.

I've arbitrarily selected the bullish 'reverse' pattern shown because today's rally triggered a buy signal that allows a projection of p=110.94 as minimun upside for the bounce. Other such signals have failed, but this happened when TLT was not looking quite so dismal. The ETF proxy for the long bond has been looking so bad, actually, that giving it the benefit of the doubt for once in a rare change seemed like the decent thing to do. Don't pass up an opportunity to get long 'mechanically' if TLT pulls pack to the green line after hitting our sweet spot between p and p2. _______ UPDATE (Sep 8, 9:55 p.m.): Wow. The imminent failure of the buy trigger noted above is impressive, even if we already knew that every conceivable factor acting on the long bond is bearish right now. No question, investors take the fraudsters at the central bank more seriously than your editor. Wll TLT ever rally? Stay tuned. 

After stalling briefly at p=18.27, the December contract is trying to turn it into support. By merely closing above the midpoint pivot, however, the futures have made p2=18.53 no worse than an even-odds bet to  be achieved. A pullback in the meantime to the green line (x=18.00)  would trigger an attractive 'mechanical' buy; stop 17.73.  The implied $5400 entry risk on four contracts warrants a 'camouflage' set-up on the 15-minute chart or less to reduce the theoretical risk by at least 80%.

The impulse leg shown is such a killer, having exceeded two major 'externals', that two outcomes seem quite likely: 1) the rally will reach p=4090.63 at least, and probably p2=4194.19 or even D=4297.75 eventually; and, 2) any 'mechanical' buy that triggers on the way up is a good bet to produce a profit. The Catch-22 is that the steepness of the ascent won't likely allow the one- or two-level pullbacks needed to trigger 'mechanical' entries. That doesn't mean we can't play, only that we'll need to improvise to get aboard more or less risklessly in unconventional ways. _______ UPDATE (Sep 8, 10:20): Today's headless-chicken price action created this conventional sub-pattern, which remains usable. Notice the $10,000 'mechanical' winner (on four contracts) triggered around mid-session by the gratuitous swoon to the green line. Now, a decisive thrust through D=4042.50 would reaffirm the ease with which this rally will reach p=4090.63. 

The 3862.25 downside target flagged here last week is still my minimum objective for the near term. It can be bottom-fished, although I expect the futures to continue lower once they're done toying with this 'hidden' support. The 'mechanical' short recommended last week failed and should never have been attempted. I seldom recommend 'mechanical' entries at the red line to begin with, and this one went against a short squeeze Thursday afternoon that all but guaranteed a vicious pop on Friday morning. As it happened, a standard-issue 'mechanical' short from the green line would have worked beautifully, producing a profit by day's end of as much as $22,000 on four contracts. Pivoteers will recognize this particular set-up as the most reliable in our playbook: a precipitous countertrend move to the green line following a reversal from between p2 and D.  The good news is that those who reported doing the trade in the chat room seem to have used this tactic rather than the red-line short I'd suggested.

Although I am on a busman's holiday and will not resume publishing The Morning Line until Sep 17, here's a timely note concerning AAPL. We've been using a 151.38 downside target that remains viable, but I expect the stock to go much lower in the months and years ahead -- well beneath $100, that is. When the company announced a week ago that iPhone sales were holding up pretty well, it was a clarion call to short the bejeezus out of the stock. Apple was alway going to be more vulnerable than most retailers to an economic downturn, and that downturn has finally arrived. A key market for the company's pricey, over-camera'd cell phones is Europe, which is headed into deep recession. The one-decision chimps of the portfolio world who have ensured AAPL's steady rise over the years are not going to go quietly into the night, however. They'll have their hands full distributing the biggest-cap stock ever to the rubes in a process that will take years. AAPL remains the key bellwether for the stock market as a whole, and it is the only stock one need get right to get the market right. The bear market will still be tricky to play, though, since everyone knows by now that we are in one. Wall Street's shameless shills, particularly the clueless, lazy hacks in the news media, will be talking up the resumption of the bull market each and every day until the Dow falls below 10,000. But if you can contrive to tune out their blather, you'll have a better chance of getting through the nation's slide into darkness without losing eveything,  Here's a link to my interview on Friday with Jim Goddard of Howe Street. (Also interviewed  for This Week in Money were Doug Casey and Ross

The futures were freefalling to the 4032.50 target shown when the closing bell left them a split-hair shy of it.  Look for a tradeable turn from the pivot, although not necessarily an enduring one. Sliding point 'A' a step higher yields a slightly lower target at 4022.75 that might also work for bottom-fishing. As always, a decisive move through either of these 'hidden' supports on first contact would suggest the trend is likely to persist, even if there's an intervening bounce. The selloff damaged the intraday charts, but because it was tied ostensibly to news, there is no reason to think it will continue for much longer. ________ UPDATE (Aug 30, 4:45 p.m.): Sellers spent the entire day frolicking at p=3967.50 of this pattern, with a 3862.25 downside target. They'll need to crack p to drive this brick lower, but the pattern should continue to work unless stopped out above C. _______ UPDATE (Sep 1, 11:15 p.m. ET): One subscriber reported shorting this brick at 3967.50, per my 10:34 chat room instruction. The 4001.75 stop-loss advised implies entry risk of $6800 on four contracts, but you'll be on your own in any event. ________ UPDATE (Sep 2, 9:04 a.m.):  The trade was stopped out by a lunatic leap ahead of the bell to 4002.00. Cool trick, wasn't it?

AAPL was overdue for a drubbing, especially since the stock could not have continued to hover in outer space when the broad averages finally got hit.  Nor is there any compelling reason for the portfolio chimps who live off AAPL to put much effort into holding it aloft while other stocks continue to correct. You can see that a seemingly nasty fall to $150 would not change the menancingly bullish look of the chart or the likelihood of new record highs.  Most immediately, there's a 162.40 downside target we can use as a minimum projection over the near term (30-min, A=174.90 on 8/18). ________ UPDATE (Aug 30, 5:06 p.m.): The bearish pattern shown in this chart, with a 151,15 downside target, is all we've got to work with at the moment, The impulse leg is not legitimate and the C-D leg has yet to touch p, but we'll give the pattern the benefit of the doubt as AAPL continues to make its way lower. Apple says iPhone sales are holding up fairly well, but with Europe headed into a possible economic depression, the market for overpriced/over-featured cell phones is about to crash along with consumer spending. ________ UPDATE (Aug 31, 11:40 p.m.): This chart revises the quite bearish target slightly upward to 151.38. Today's low just pennies from p=157.00 says the pattern is working and will yield good odds for trading its levels 'mechanically'. ________ UPDATE (Sep 3, 10:32 a.m.): 'Good odds', indeed! A straight-up  'mechanical' short at the green line would have produced an intraday profit of as much as $486 per round lot. The 151.38 target remains viable as a minimum downside objective for the near term. ______ UPDATE (Sep 7, 9:30 p.m.): My  newly bullish outlook for the E-Mini S&Ps contrasts sharply with a still-bearish forecast for AAPL. I'll be

The futures did nothing last week to earn the somewhat ambitious bullish pattern shown. The 1985.40 target is theoretically viable because the green line was tagged, but the follow-through failed to reach p=1840.80, which is what we should expect at a minimum if this brick is going to have a shot at 1985.40. The selloffs have lacked vigor as well, so don't be surprised if the Decembe contract spends the next 2-3 weeks screwing the pooch. My moderate bias calls for a marginal breakdown below C=1696.1. _______ UPDATE (Sep 3, 10:38 a.m.): The 'C' low at 1696.10 held, albeit barely, but I do not trust a bounce coming from such an obvious place. Brace for a relapse, and don't get your hopes too high unless this dog vaults p=1840.80 (see inset). _______ UPDATE (Sep 7, 9:35 pm.): I'll lower the bar for this dog, stipulating that it must leap to 1758.00 to turn the hourly chart unambiguously bullish. That would exceded a key 'external' peak recorded on August 29. _______ UPDATE (Sep 8, 10:36 p.m.): The lowered bar (see previous update) was too high, since today's mere head-fake created a bullish impulse leg that cannot be ignored. Depending on how buyers handle p=1729.60, we'll be able to judge the odds of further upside to D=1745.50 or higher.