The week ended with an unsettling pause when the futures went into a trance rather than leap off a cliff. Settlement was just above a low made on October 4, beneath which lies a nearly 100-point drop to a secondary Hidden Pivot at 4138. What shocks is that DaBoyz did not cause the futures to feint briefly beneath the low, the better to run them up the wazoo of shorts enjoying a rare moment of self-satisfaction. In any event, the 100-point fall looks like it's in-the-bag, even if half of it occurs Sunday night. That would make the futures a potentially opportune buy when they reach p2=4138.
It took nearly two weeks for bears to recoup their mojo after getting sucker-punched by a suspiciously buoyant market following the October 7 Israel massacre. Although the attack could lead to a nuclear conflagration and world war, Wall Street kept its cool while trade desk sleazeballs deftly distributed shares to the rubes. But Fridays are often clarifying, since they force traders to guess how America's mood might change or intensify over the weekend. That would explain why stocks fell hard to finish the week. But this followed nearly two weeks of perverse strength, presumably because there is virtually nothing for anyone to be bullish about at the moment. Geopolitical news grew still grimmer last week, even as shares hovered until Wednesday as though they were gathering strength for one more psychotic upthrust. A 'Theoretical' Buy We should never discount this possibility, as the chart reminds us. What it says, in coldly disinterested technical terms, is that the Dow Industrials became a theoretically enticing buy when, with dubious prescience, they bottomed on the green line just hours before the Hamas attack. Under the simple rules of the Hidden Pivot System, this triggered a 'mechanical' signal to get long. Although this doesn't't necessarily mean we should expect the Indoos to rocket to new all-time highs, it does portend a rally to at least the red line (34,455) before DJIA relapses to beneath C=31,428. This bullish set-up usually works, so don't be surprised if a preternaturally powerful rally develops amidst growing darkness in the real world.
Even though Friday's rally was the best we can recall in a long time, there are still reasons to believe it may not have been the usual fraud. We'll know once we've seen how buyers handle the green line (x=2041.60). Ordinarily a hit there would trigger a succulent 'mechanical' short to as low as D=1777.10. My hunch, though, is that the rally will liquefy the Hidden Pivot resistance and keep on going, ultimately surpassing the nasty, bull-trap summit at 2129.70 recorded back in April. In the meantime, using x=2041.60 as a minimum upside objective, we have a hundred points of bull-friendly turf to play with. ______ UPDATE (Oct 18, 9:10 a.m.): Buyers had little trouble pushing past the 1955.40 'D' target of a gnarly pattern this morning, implying they will be gung-ho to take on an important 'external' peak at 1972.40 before pressing on to an all but inevitable rendezvous with $2000. Here's the chart. The move targets a minimum 2068.00 on the daily chart (reverse A=1885.20 on 3/8).
Friday's pop through the red line left no doubt that the rally will reach the 23.695 target of the middling reverse pattern shown. We can trade confidently with a bullish bias until then, but it is what happens thereafter that matters. A decisive move through the Hidden Pivot or a two-day close above it would portend a likely follow-through that tests the 26.940 peak recorded in May. In any event, the next 80 cents of the ascent looks so certain that we might expect half of it to occur when the futures resume trading Sunday evening. _______ UPDATE (Oct 16, 12:03 p.m.): Don't believe bullion's sluggishness today; it is being stage-managed by big players who are even more eager than you or I to buy the stuff before it takes off.
Inspired by gold's ballistic move on Friday, I've used an ambitious reverse pattern to project a 42.09 rally target. It is clear and compelling, implying it will work not just for getting trend and targets precisely right, but enabling some profitable trades along the way. The red line (p=36.28) should produce a stall, possibly tradeable, since it closely coincides with a 'voodoo' resistance. Still less uncertain is that GDXJ will achieve the midline, a 7% move from here.
Last week's breakout from an impacted consolidation zone that was in its tenth month brought greater clarity to a big-picture pattern projecting to as high as 124.72. DXY could still fool us with a swoon beneath July's 99.59 low, but this seems most unlikely, given that the dollar has finally caught the scent of a central bank crisis looming in the not-too-distant future. The picture is so grim for the ECB, which issued trillions of euros in snide carrying negative rates, that the Fed is certain to come out on top. That means the dollar will, too, even though the debt deflationary this will produce is an unwanted outcome, especially by Europe. Perhaps they should start gathering firewood now, since there are going to be many cold winters in the future if fuel must be purchased from their good friends Russia and Iran. ______ UPDATE (Oct 20): An imminent close above the green line for a second consecutive month would make p=112.16 our minimum upside target for the near term.
I've altered the picture somewhat to produce an uglier but still logical downside target at 146.25. That's $38 below the one at 164.90 given here previously, and there is compelling clarity to support it, including the precise bounce from the red line, p=172.24. The pattern has already produced a $13 winner from a 'mechanical' short at the green line and would likely produce another if this remarkably vicious short-squeeze can get there. I say 'remarkably' because AAPL swam perversely against the tide for most of last week. Stay tuned to the chat room and your email 'Notifications' for tradeable guidance, keeping the 100-bagger from puts bought a few weeks ago in mind.
Like most rallies, last week's dubious surge drew its power almost entirely from short covering. When war broke out the previous weekend, few traders came to their desks Sunday evening eager to buy stocks. Since there was no institutional selling -- there never is, except for the last few days of each quarter -- it was left to Joe Sixpack and the usual village idiots to dump index futures into a void that the smart money had thoughtfully prepared for them. Sellers were spent by the opening bell, and when stocks failed to go lower on scary news from Gaza, disappointed bears began a short-covering spree that didn't peter out until Thursday's opening. Things went steeply downhill after that, achieving a low on Friday precisely at the top of Sunday's gap. It was a typical week in which sound and fury ultimately signified nothing. Looking ahead, expect stocks to fall in earnest, since the only buyers in town -- panicky bears -- have been decimated. Most immediately, this should produce a test of the 4236.00 low recorded on October 4. _______ UPDATE (Oct 18, 9:23 p.m.): Far from being decimated, it would appear bears have been tortured sufficiently to reinvigorate their worst instincts. Short-covering all day long was painful to watch, let alone experience, and even though the futures finished lower, the rally looks like it's about to get second wind. Use this pattern, with a 4461.75 target, to get a tradeable handle on the futures. The first 'mechanical' trigger off our sweet spot seems likely to produce a winner.
Price movement in this vehicle, a proxy for the biggest, deepest commodity market in the world, is so squirrelly that the chart, stripped of its right-hand axis, could be mistaken for that of a Vancouver penny stock. Even so, there is no trouble discerning the 98.72 rally target, nor in sticking with it through the inevitable feints, swoons, kamikaze dives and bottle-rocket rallies. The target is a presumptive weigh-station enroute to the $117 target of a bigger pattern that was the subject of a recent commentary.
The chart journeys back to 2021 to capture the weight and relentlessness of the downtrend, a full-blown bear market that has cut the price of this vehicle by 53% since its covid-era peak in March 2020. Over that time, interest rates on the long bond went from 0.8% to 5.05%, a so-far high achieved two weeks ago. Was that the top? I doubt it and still think TLT will fall to the 80.84 target before it can turn around. To even hint of a better outcome, the current rally would need to exceed 89.49, an 'external' peak recorded Sep 29 on the way down.
