Last week's elongated bars imply bulls and bears were more or less evenly divided as they fought for their respective lives near the bottom of January's plunge. You can use the 4500.75 'D' target of the reverse pattern shown as an upside target as the week begins, but I am not recommending shorting there unless with 'camouflage' cover limiting your risk to no more than relative pocket change. The pattern worked well for 'mechanical' bids at the green line, but using it again will likely be pushing your luck. ______ UPDATE (Jan 31, 7:43 p.m.): ES poked its snout above the 4500 target for a few minutes, then pulled back to cruising altitude so that DaBoyz can await further instruction. It will come via the desertion of sellers, short-covering bears uncomfortable with the recalcitrance of the pullback or, most likely, a combination of both. ______ UPDATE (Feb 1, 5:40 p.m.): The way bears have obligingly placed their testicles in Mr. Market's vise could make one wonder how on earth the bull market will ever end. DaBoyz twiddled their thumbs for most of the session, effortlessly holding stocks aloft until shorts capitulated in the final hour. The latter now look like dead ducks -- worse than dead ducks, actually, since they are probably hoping tomorrow will somehow be different. _______ UPDATE (Feb 2, 8:56 p.m.): Use this sumptuously gnarly pattern for all purposes -- and yes, it does imply a 'mechanical' bid at x=4503.25 is warranted if you know how to 'camo' your way aboard for no more than $800 of theoretical entry risk (on four contracts). ______ UPDATE (Feb 3, 9:35 p.m.): The futures are in a steep short-squeeze following after-hours news that business is just hunky-dory at Amazon. Wall Street is crazy for companies that show sufficient pricing power to sodomize their
Bertie's constipated price action does not warrant any changes in the chart previously shown here. We see a large, potentially gorgeous head-and-shoulders top forming that could continue to evolve until April or May. It's hard to believe the bull market will last that long, but we'll give this scenario the benefit of the doubt, since what else do we have to sustain our interest in bitcoin when it is in a cooling-off period that is about to enter its second year? I will supply trading guidance in the chat room if the interest is there. For now, use the neckline just below 30,000 as a minimum downside objective for the bear cycle begun from 69,000 in November. _______ UPDATE (Feb 1, 5:55 p.m.): Bertie has become gutless -- a go-along trading vehicle that at the moment is docilely trailing the short squeeze in the broad averages. ______ UPDATE (Feb 2, 9:03 p.m.): ...and now it is following index futures lower, in high-beta fashion. ______ UPDATE (Feb 3, 10:05 a.m.): Bertie has triggered a 'conventional' short down to 28,742, but bears shouldn't look for a quick payoff. There are no sellers, only a relative dearth of buyers, so any bleed-out will necessarily come from an accretion of paper cuts.
I've substituted TLT for T-Bond futures to give equity traders a chance to get involved. If a trade is signaled, it should be executed using TLT itself rather than puts and calls (unless they look particularly timely and opportune). There is nothing of the sort in this picture at the moment, although it may hold some small appeal for straddle sellers. A bullish resolution to this tenesmus picture is possible if TLT can rally above the pattern's 144.42 point 'C' high. That would exceed two peaks, creating an impulse leg more powerful than would be apparent at a glance.
Last week's pointless gyrations did little to dispel the notion that the bull market is over. The vicious short-squeeze in the final minutes of Friday's session only added to the impression that rallies are being stage-managed to suck in rubes. The hallmark of a bear market is un-shortable upthrusts, usually occurring at times of the day or week that make them too menacing to intercept. In this instance, even the most aggressive traders would have moved to the sidelines as index futures turned on the afterburners just ahead of the weekend. Guessing whether the buying will spill over into Sunday evening's opening would seem to be a coin-toss bet, but for the fact that few traders, including experts, can guess correctly even 50% of the time. We typically ascribe the stock market's diabolical evasions and cunning to a mythical 'They' who are all-seeing, all-knowing and able to cause stocks to move in ways that make it nearly impossible for anyone but 'They' to profit effortlessly. In fact, there is no 'They', only a mirror that reflects every oily pore, mole and sweaty follicle of fear and greed that animate the markets. 'Supply' Story Stinks Apple, a $3 trillion King Kong in a roomful of puny 800-pound gorillas, was the ostensible cause of Friday's brash juicing of the indexes. The company reported that material shortages were not impacting the bottom line as much as investors evidently had feared. This story stinks to high heaven, but the odor was barely noticeable after the Wall Street Journal certified and ballyhooed the report by leading with it in Friday's editions. It would not be an exaggeration to say that the economic world has grown critically dependent on short-squeeze rallies in a single stock, AAPL, like the one that goosed it on Friday. Let it
Bears were probably more frightened than bulls when Monday's carnage ended. The final half-hour of the session featured an 80-point rally so steep that it would have left shorts too dazed to stand their ground. However, the bigger picture suggests cyclical forces may finally be on their side. It features an 11% drop in the S&Ps over the last eight days that exceeded no fewer than five prior lows. This is a quite powerful impulse leg, and it is how we might expect a bear market to begin. For now, though, it seems highly unlikely to be quickly undone by short covering, let alone by bulls eager to buy the dip. This time, many of them will doubtless be praying for an opportunity to exit at at least somewhat higher prices rather than salivating over the prospect of going all-in on further weakness. This doesn't mean things will get any easier for bears, who may be sensing a chance, finally, to make some real money. Regardless, whatever opportunities arise will be reducible to the common denominator of the Hidden Pivot Method: impulse legs. Stay tuned if you want to see how we make sense of them and trade them, no matter how nutty stocks get. _______ UPDATE (Jan 25, 10:23 p.m.): 'Mechanical' trades work best in violent markets, especially when the entry looks scary. Check out this evening's chat room gambit involving a bet against a nasty after-hours sell-off. It produced a quick winner worth at least $1,700 per contract. _______ UPDATE (Jan 26, 9:10 p.m.): The night shift dirtballs can't always steal with impunity. Tonight, for instance, although they have pulled their bids in order to see where sellers exhaust themselves, they must still be on their guard for an onslaught of market orders at the opening. Use p2=4240.50 in
The rally has been unimpressive, but it is inarguably getting the job done. We've been using the pattern shown, with an 1873.90 target, to stay on the right side of a challenging trend. It has helped us to avoid disappointment whenever gold dives from somewhere shy of a minor target, but also to spot money-making opportunities on the way up, including a recent $8000 winner that had been explicitly detailed here. A similar opportunity would be signaled via a 'mechanical' buy if the futures were to fall to p=1813.50 (the red line in the chart). The appropriate stop-loss would be at 1793.30, implying $8,000 of entry risk on four contracts, but we'll find a less stressful way to get aboard if and when the opportunity comes. ______ UPDATE (Jan 26, 9:16 p.m.): If today's gratuitous, stage-managed plunge continues, it will trip a 'mechanical' buy at x=1783.20, stop 1752.00. Don't bother with this one unless you are proficient enough with rABC 'camo' setups to cut the implied $12,000 entry risk on four contracts to no more than a tenth of that.
Whatever is pushing up quotes for crude, it's scary to imagine. Stocks have been acting as if they understand that the party is over. But energy prices? You'd think the global economy was about to embark on a boom so robust that it will somehow overcome the world's hopelessly knotted supply chain. In actuality, the economy of the most important buyer of oil at the margin, China, is close to imploding, starting with a real estate bubble that could be the biggest ever. Is crude perhaps discounting a collapse in supply when Putin attacks Ukraine? Whatever the answer, and even if a bear market in stocks has begun, the March oil's monthly chart implies that prices are on their way up to at least 105.08 this winter. Gas by then will be $6 a gallon, which, far from exacerbating inflation, is more likely to knock the economy on its ass. ______ UPDATE (Feb 2, 9:24 p.m.): This chart shows why it is impossible to be long in crude while keeping risk:reward in propitious balance. Notice how each new marginal high is followed by a swooning dive that is about three times what you would have made holding the position from one peak to the next.
Buyers caved after failing to get much boost from a rigged opening. Sellers were played to exhaustion an hour into the session, but when the obligatory short squeeze sputtered out before lunch, the game was over for bulls. The surprise was that the downtrend in the final hour failed to hold a promising Hidden Pivot support. This put the futures on track to hit the 4372.50 target shown in the chart. This would ordinarily be a can't-lose place to try bottom-fishing intraday, but not on a Sunday evening if the futures open weak. That would waste an especially opportune 'gnarly' pattern, but as we know, there will always be another. Following a decisive breach of 'D', the next logical stop on the southbound express would be 4305.25, derived from converting point 'C' on the chart into 'A' of the new pattern.
The head-and-shoulders pattern that AAPL has traced out since Thanksgiving is so commanding at this point that there's no point in using Hidden Pivot patterns to try to improve the forecast. The selloff will need to hit 158 or so to round out the pattern visually, with additional room all the way down to around 147 if bears mean business. We shouldn't rule out the distant-longshot bet entirely, however. That would call for a sharp reversal from 160 or above that just keeps going. A rally with sticking power would be telegraphed by minor rallies that shred their d targets. Whatever happens, AAPL continues to be the perfect proxy for institutional mindset, ambition, folly and greed. _______ UPDATE (Jan 24, 8:23 p.m.): Today's exhilarating plunge to 154.70 made the head-and-shoulders pattern look even more compelling. It amounts to mountainous supply, so we'll focus on ways to get short, or perhaps long in order to make a few bucks ahead of the next downturn. Stay tuned to the chat room for a timelier perspective.
The so-far nascent rebound blew out a cautious attempt to get short last week with such ease that we should think expansively about how far it could go. The pattern shown allows for a run-up to 160^07, and my gut feeling is that the futures will need all of that room over the next 7-10 days. That implies 'mechanical' bids will enjoy favorable odds all the way up. There's about $1750 of implied entry risk per contract, however, but w can cut that down to size with 'camouflage' set-ups that reduce our theoretical exposure by perhaps 90%. Pay close attention to price action at 156^14, since that is the 'D' Hidden Pivot resistance of a lesser pattern. If it's easily surpassed, that would be warning bears to step out of the way. _______ UPDATE (Jan 24, 8:31 p.m.): The futures reversed sharply after topping four ticks above the 156^14 resistance billboarded above. No one mentioned wanting to trade this vehicle, so I provided no further guidance.
