Rick Ackerman

Last week's commentary asked how high the dollar can climb before it snuffs inflation and the increasingly shrill hysteria that has accompanied it. Inflation is supposed to cheapen the dollar, but that is not what has been happening. Instead, it has been climbing steeply relative to all other currencies. The experts have not been able to explain this, nor why the rally began well before the Fed was even thinking about tightening. It is simple, though, if you understand deflation and its chief symptom, a rise in the real burden of debt. The dollar has been climbing because it "knows" there are more debts than can ever be repaid. This can only result in massive waves of bankruptcies that are going to make us nostalgic for the consumer inflation that is today's headline news. Sure, the Fed could print enough money to pay off everyone's debts, including its own: student loans, our collective liabilities for Social Security, Medicare and private pensions, etcetera - but also car loans, mortgages and credit card balances that have ballooned. The resulting hyperinflation would solve nothing, however, even as it destroyed lenders as a class and all institutional conduits of borrowing. The megabanks would be ruined, leaving no one to lend to you, me or anyone else. It could take a generation or longer for credit to sprout roots again. Do we really want to go down that path? More Tightening Unneeded This week's question is related to the one about the dollar: How high can interest rates climb before they snuff inflation and the increasingly shrill hysteria that has accompanied it? Economists and pundits seem to think the Fed has only begun to tighten. More likely is that interest rates are already high enough to have tripped the U.S. and global economies into deep

Although charts with shorter time frames would appear to suggest that crude is in a bullish consolidation, the continuous weekly chart displayed (see inset) provides a speculative basis for inferring that the bull market peaked with March's surge to 130.26.  I say this is speculative because there is nothing in this picture arguing against another bull leg once the spectacular Covid rally begun in 2020 has had time to regain strength. There are reasons to doubt this scenario, however, particularly the significant weakening of China's economy. Energy demand from China sets the global price of oil at the margin, and when the nation's manufacturing sector in particular is imploding, as it is now, no amount of cartel price-rigging or ginned-up constraints on supply can surmount the deflationary effect of falling demand. An even bigger picture suggests the global economy has begun to shrink, with a report on Friday that U.S. GDP fell 1.4% in Q1. (Leave it to the WSJ to publish an op-ed by that useful idiot Alan Blinder saying IF a recession comes, it will be mild.)  If a U.S. recession has indeed begun, as I asserted in my commentary last week, then the March high in crude is certain to stand for a very long time.  ______ UPDATE (May 3, 10:28 p.m.): Check out the Trading Room thread starting with my 12:50 post, which produced an easy winner bottom-fishing June Crude futures. The 99.02 downside target in the pattern linked in my post will remain my price objective unless the 'C' igh gets stopped out. _______ UPDATE (May 4, 11:)3 a.m.): Since the minor bearish pattern we used yesterday to make money (from the long side!) has gotten stopped out, and because the upturn has come from the midpoint pivot of a corrective pattern, we will gaze upward

The pattern in the chart replicates the one displayed here last week, but with an additional, plunging bar that shows why the once-outrageous target at 3994.75 remains a lock-up. We confidently assumed it would be reached when sellers obliterated the pattern's 4312 midpoint support a little more than a week ago. On Friday, they wrecked another Hidden Pivot, the 4146 'D' target of a lesser pattern, all but clinching more downside to D=3994.75. The pattern is too obvious to suggest that bottom-fishing with the usual nickel-and-dime stop-loss will be easy, but even so, there is no way in hell the futures will not rebound tradeably from somewhere very close to the target. Shorting corrective peaks will be yet more difficult, although nothing we can't handle with some diligent crowdsourcing in the Trading Room. _____ UPDATE (May 3, 10:35 p.m.): The pattern shown is a fine specimen of  my favorite kind of gnarliness, which explains why it produced several 'mechanical' winners during today's session. If you made money on the long side, use some of it to cushion a stop-loss shorting at D=4210.25. You'll be on your on if the order fills. _______ UPDATE (May 4, 10:36 p.m.): If you're eager to get short -- as who on Earth is not? - fixate on the dotted red line I've drawn at 4401.75 as a place to set it up. This is the sweet spot of the 'discomfort zone' we love to use, and although it lies an impressive leap above current levels, it shouldn't prove too difficult for DaScumballs to achieve. They drilled shorts a new orifice today, then strung them up with piano wire and left them hanging a millimeter from last week's peak. This is how powerful rallies happen with zero bullish buying, and we should always be careful about

The week ended with a feebly impulsive rally, so we shouldn't get our hopes too high that the June contract will somehow avoid a predicted fall to at least the 1825.80 target of the pattern shown. It ha s been working fairly well for trading purposes although, strictly speaking, the rally to the red line on Friday did not trigger a valid 'mechanical' short because it came from a low that missed touching p2 by a hair's breadth. ______ UPDATE (May 2, 6:47 p.m.): Mechanical trades rated higher the '7' are rare, but here's one that triggered today -- on the monthly chart, no less! With more than $60,000 of initial risk on four contracts, however, this is one you should either paper trade or execute using 'camouflage' in the full-size  contract or the mini.  My target for the corrective move, basis the June contract, suggests the futures will go lower, to at least 1825.80, before they can turn around.  The 2329.10 rally target is hardly a done deal, but it is not looking too shabby for the long term, given the way buyers impaled p=2011 in March. _______ UPDATE (May 4, 10:45 p.m.): So far, so good!  The corrective rally implied in my last update has traveled $50 since bottoming. This occurred a millimeter from an 1852.30 low I'd rated 8.1 for 'mechanical' longs. Anyone aboard?  _______ UPDATE (May 5, 9:31 p.m.): Yet another promising rally turned to dross when the futures reversed near the opening and gave up nearly all of the previous day's gains. I'll have little more to say ahead of the weekend.

The sketchy impulse leg shown in the chart yields a picture whose discouragements are congruent with June Gold's.  It is bullish overall, but the slight failure of the follow-through leg to reach the p midpoint resistance at 27.61 is telling. Strictly speaking, the futures did not trigger a 'mechanical' buy when they fell thereafter to the green line (x=24.58); nor did I suggest buying there. The question now is whether sellers will stop out the pattern's 'C' low at 21.56, gratuitously or otherwise. My hunch is they won't, but neither do I expect a robust recovery to p, let alone a move through it. We should keep an open mind nonetheless, since bullion has a nasty habit of looking like hell...until it doesn't.

As pleasant as it may have been to see AAPL get its ass kicked last week, this didn't make the chart any more bearish. For the time being, that's why we will continue to use the nastier but more predictable chart of the E-Mini S&Ps to tell us exactly what's going on. I don't want to count on the rightmost 7 or 8 bars of the chart to give us a pattern and a downside target, since the would-be A-B leg did not exceed any prior lows. However, it is good enough for government work, and that's why I expect D=150.06 to synch up with the 3994 target we are using in the E-Mini S&Ps. Moreover, it can be bottom-fished, and the ersatz pattern used to get short 'mechanically', since this particular entry tactic has so much forgiveness built into it. ______ UPDATE (May 4, 11:08 p.m.): We shouldn't expect the thieves, pederasts and carnival geeks who have worked this stock since 2009 to go quietly into the night.  The current, rip-your-face-off short squeeze has been impressive over the last three days, but it would still need to take out the 171.53 peak shown in this chart before it becomes a serious menace to bears' well-being. _______ UPDATE (May 5, 9:37 p.m.): Today's relapse took the menace out of AAPL's ferocious short-squeeze earlier in the week. Now, look for a test of the 150.10 low recorded on March 14.  

The Dollar Index last week popped through peaks going back as far as five years, flouting the Fed's doomed efforts to 'manage our expectations'. This is deflation knocking loudly on the door, and as the dollar continues higher it will put increasing pressure on all who owe. (See my commentary above, and click here for a lively, expansive interview at Howe Street.)  In the headline essay, I've used a minor, look-to-the-left peak near 109 to project minimum upside for the next few weeks. However, here's a bigger picture that yields a higher target at 112.14. I expect the dollar eventually to challenge highs near 120 recorded twenty years ago. _______ UPDATE (May 13, 9:57 p.m.): To gauge the strength of the uptrend, here's a lesser chart that shows DXY in an apparent bullish consolidation after hitting a relatively minor rally target. The 112.14 target given above remains viable and is still likely to be reached. _______ UPDATE (May 19, 6:13 p.m.): What a difference a day makes. The sharp dive has transformed a promising technical picture into a question mark. Some will see a head-and-shoulders in the making, but we should give it another day or two before be infer that DXY is about to fall back to 100 in search of support.

A lone deflationist on the lunatic fringe of economics 30 years ago, I wrote in Barron's and the San Francisco Sunday Examiner that an out-of-control dollar eventually would do us in. Specifically, I asserted that a short squeeze on dollars would send their value soaring, making it difficult or impossible for anyone who owed dollars to repay them. I'd already run this idea past a few Ivy finance professors, who all had the same reaction: "What have you been smoking??"  Not Professors Ivor Pearce and W.P. Hogan, however. It was their 1984 book, The Incredible Eurodollar, that had awakened me to the potential disaster brewing in a dollar market vastly larger than all of the others put together, including stocks and Treasury paper. Could a tradeable asset available in theoretically unlimited quantities from the central bank ever be in dangerously short supply? "An interesting question," Prof. Pearce allowed in a phone conversation we had at that time. The possibility had fascinated me since my days as a floor trader on the Pacific Stock Exchange. It was not uncommon to see a stock soar simply because too many traders had bet against it. These panic-driven melt-ups blithely ignored poor 'fundamentals' to generate rallies that tended to enrich the reckless and stupid at the expense of the well-informed. The latter invariably suffered pain an even financial ruin, although many of them were very smart guys who could do the math. In one particularly memorable instance, they calculated that a certain airline stock trading for around $80 was not worth half that. After the stock ultimately climbed above $200, standing quants on their heads and wrecking some financially promising young lives, the quaintly stupid notion of 'valuations' would never be the same for them. Or for me. Short Up the Old Wazoo This

That whooshing sound on Friday was the stock market getting flushed for a rare change. Permabears shouldn't get their hopes too high, however, since DaBoyz will have an opportunity to turn things around at the 4146.75 'D' target shown in the chart. This Hidden Pivot support can be used as a minimum downside objective for the near term -- and also as a place to attempt bottom-fishing with as tight a stop-loss as you can abide. Since you will be catching the proverbial falling piano, be prepared for more slippage to 3994.75 if the support doesn't hold. There, too, I would encourage you to bottom-fish using a bullish pattern on the very lesser charts (aka 'camouflage'). _______ UPDATE (Apr 26, 11:22 p.m.): At today's close, I provided detailed guidance for a countertrend trade that went on to produce a profit of as much as $2000 per contract. Two subscribers reported doing the trade successfully, each in a different way. The 4194.75 'D' target of the pattern  is just an inch away at this hour, so you should be out of 3/4 of the position. Here's a chart that shows how the trade set up. _______ UPDATE (Apr 27, 10:57 p.m.): When the futures finish their distributive dance at p2=4153.81, expect them continue falling to at least D=3994.75 of this pattern. This is the same target as the one given above, but with additional, falling price bars. _______ UPDATE (Apr 26, 10:06 p.m.): No telling how high this detour will go, but AAPL's very strong performance today is warning bears not to get too aggressively in the way.