A moment of truth, if not THE moment, likely impends as AAPL rises toward the green line. Assuming it gets there this week or perhaps early next, the stock would become as juicy a 'mechanical' short as we could hope for. If, instead, it gores bears with a move above the pattern's 'c' high at 199.62, that would surely be bullish, notwithstanding the head-fake possibility I've warned about in the ES tout (see above). A third possibility is that AAPL will fall to d=175.31 of the reverse pattern. That would create a bottom-fishing opportunity that we should not pass up, even if the expected bounce proves to be a short-lived last gasp for this aging bull.
Feb Gold's bounce from the green line took time to develop and is still not airborne. But the uptrend should at least reach the red line, validating the strong 'mechanical' buy signal that triggered on the pullback. We are used to disappointment in this vehicle, and impatient about when the long-term bull market will once again shift into high gear. When it does, the next target of consequences above the one at 2184.80 show in the chart lies at 2273.60, a Hidden Pivot resistance derived from a continuous monthly chart where A=681 in 2008.
Silver took a dump after triggering what had looked like a promising 'mechanical' buy at 23.80, the green line. Its February Gold counterpart has held up better and appears primed for a rally to a profit-taking level at 2086, about 35 dollars above Friday's close. Is Silver's recalcitrance a bearish divergence? I doubt it. It is probably just a variation on an all-too- familiar theme of jerking everyone's chain whenever possible. Let's cross our fingers and hope silver plays catch-up with gold in the week ahead.
T-Bonds have fallen moderately so far following a 100.57 top in this ETF vehicle that we'd anticipated precisely with the purchase of put options. The new pattern shown can be used to set up more trades now that TLT has tripped a reverse-pattern sell signal at the green line. There are two possible opportunities in prospect: 1) shorting near x=96.91 with a 'camouflage' trigger to reduce risk; and, 2) playing for a bounce from p=93.26. If you are interested in the more immediate opportunity, please let me know so that I can provide timely guidance in the chat room.
After triggering a conventional 'buy' signal at the end of 2022, this vehicle has gone nowhere as it continues to toy with the green line. If this were a Warner Brothers cartoon, Daffy Duck would stick a bottle rocket up GDXJ's posterior to get things going. Perhaps if we visualize this, something will happen. In the meantime, we'll have to accept the fact that GDXJ is bound to move less energetically than gold futures because, no matter how high bullion contracts go, someone will still have to labor mightily to dig gold out of the ground.
February Crude has been on a 'mechanical' buy signal since early December, when a pullback first touched the green line. The futures have since gone flat, dancing a jig a 'x' that suggests DaBoyz are in no hurry to let it loose. Geopolitical mayhem, including the targeting of tankers in the Suez, has had surprisingly little effect, and we hesitate to ascribe this to ordinary forces of supply and demand. But with China's economy weakening and the U.S. headed as always into recession, perhaps that is the explanation. Crazy world! In any event, the futures have pussyfooted at the green line for long enough that the buy signal, even if still theoretically valid, is no longer enticing. Look for quotes to fall below C=64.21 over the next eight to ten weeks, pulling gas prices down below $3 in most states.
Reader Scott Baker took issue last week with my unsettling prediction of a deflationary bust. The mountain of debts that I believe will cause this is really no big deal, says Baker. He quotes economist Michael Hudson to back him up: "Debts that can't be repaid, won't be." That certainly doesn't sound very menacing. So who will lose if a global banking system holding $2 quadrillion in hyper-leveraged securities implodes? According to Baker, the pain will fall mainly on supposedly sophisticated investors who failed to perform due diligence. And fortunately for them, the damage won't be nearly as bad as I've calculated, he says, since the value of all derivatives is probably less than half of the $2 quadrillion figure that is accepted widely, if not universally. Well, okay, I'll give him a little slack on that. But even if one allows that the size of the market is 'merely' $1 quadrillion, that's still nearly ten times as much as the world produces in goods and services. That can only mean that the collateral backing the market is dangerously thin. Baker believes the economy could survive the hit anyway, but for a reason that sounds like something Yogi Berra might say: 'Because derivatives are on all kinds of things...they literally cannot fail all at once.' A Debt Bomb The clock is ticking on this debt bomb, and optimism is not going to prevent it from triggering. Nor will any of us escape the effects. The late C.V. Myers, whom I've quoted here before many times, has provided the simplest explanation of why deflation is so likely: Ultimately every penny of debt must be paid -- if not by the borrower then by the lender. To understand why, you need only consider that if, say, students skip out on $1.8 trillion
The futures are bound for an all but certain test of the 4688.75 midpoint support, which I expect to fail. We'll wait for a verdict in real time, but p can be bottom-fished nonetheless with an rABC trigger interval of 24.50 points (a= 4743.25 on 12/20). The $5,000 entry risk demands a 'camouflage' set-up on the 15-minute chart or less, so the trade is advised for skilled Pivoteers only. The pattern looks reliable for trading purposes and targeting even though its A-B segment is unusually steep and elongated. That implies it would trigger a 'mechanical' short with a rally back to x from p or lower. _______ UPDATE (Jan 12, 9:03 a.m.): Surprising strength has trashed my bearish outlook, sending me back to the chart for a second look. It turns out the 'mechanical'-short set-up I'd found so striking never occurred. That would have required the decline from late December's highs to have touched the red line. It missed by 11 points, actually, implying that any rally back up to the green line would signal strength capable of achieving new highs. So far, the effort has fallen shy by four points. The rally may yet fail, possibly after a breakout to a marginal new peak. We'll keep close track in any event, and act accordingly, as the futures continue to frolic menacingly in the 'discomfort zone'.
Sellers obliterated the 187.47 'midpoint support' of the pattern shown last week, clearing a path for more downside to at least D=175.31. Any one- or two-level rally in the meantime would set up an attractive 'mechanical' short. Bottom-fishing at D will be a high-odds play as well, although the pattern, even though an rABC, may be too obvious for a penny-ante stop-loss. In such situations, shorting puts is likely to be a better tactic than buying calls.
I've included MSFT on the list this week because the bearish pattern shown offers as much certitude as AAPL's. The initial plunge through the red line on December 4 not only 'guaranteed' a further fall to at least D=352.89, it also made the 'mechanical' short at the green line on December 13 an almost certain bet. The situation should be good for a winning option trade on the way down, but if the best opportunity should involve naked shorting, I'll provide more detailed guidance in the chat room on request.
