The dinky little 'A' high I've selected does not provide a worst-case low for this cinder block, but the 88.93 downside target shown will do for now. Only a powerful rally that creates an island-gap reversal could prevent a further fall, but we would first have to imagine its cause to become believers. It's easier and arguably more plausible to picture 'A' at the 102.95 high recorded in mid-July. That would give us a new, lower target at 86.31. It would equate to a 4.81% yield on the long bond, by the way. See this week's 'Morning Line commentary for further details.
The futures were saved by the bell on Friday after a deftly faked show of strength in the first two hours succumbed to gravity as the afternoon progressed. After being up more than 30 points, the December contract finished the week down nine points, just off the intraday low. There was discernible anxiety as the reversal unfolded, but no real urgency until the final 3o minutes. Fear is bound to carry over into Sunday evening, so look for a further fall to at least 4321.75, the Hidden Pivot target of the bearish pattern shown. Bottom-fishing when the futures get within a point of that number would require a trigger interval (TI) of 18 points, so the trade is recommended only for those of you who can pare that down to 6 points or less using a 'camouflage' set-up or your own trick. As always, an easy breach of so compelling a support would portend still lower prices to come. _______ UPDATE (Sep 26, 6:45): The futures caught a 15-point bounce from 4321.75 that last for two hours before succumbing to gravity. I am now focused on a 4220.49 downside target for the S&P 500 cash index that lies 53 points below. See my chat room post for further details. Here's the chart.
It has taken the stock two weeks to return to lows where we cashed out of puts for as much as a hundred times what we'd paid for them a week earlier. The trade came off an appealing 'mechanical' sell signal generated by the pattern shown, and there is no reason why this pattern cannot continue to work for us. For starters, that means we can expect more slippage to at least p2=159.95 once the midpoint Hidden Pivot at 172.24 gives way. This looks unavoidable, although I don't expect the dirtballs who manipulate AAPL for a living to go quietly into the night. The 164.90 downside target given here earlier remains viable and can be bottom-fished with a reverse pattern trigger interval of 4.50 points. Ask for guidance in the chat room when appropriate if you're unsure about how to whittle this down to a reasonable number.
I've reproduced a chart that goes back to 2019 in order to show clearly that there has been little drama in more than three years. Comex futures are trading about where they were in the summer of 2020, meaning there has been no net gain since then. The chart is unmistakably bullish and projects to as high as 2326.30 (basis the August contract), but that doesn't mean gold couldn't fall by $200 or more before it heads into, if not the wild blue yonder, then perhaps toward a towering cumulus cloud on the horizon. A pullback to x=1864.10 in the meantime would trigger a 'mechanical' buy with excellent odds for success, but we'll wait until it gets there before we discuss entry tactics.
We can dream about Silver's rise to the 36.24 target shown, but for the time being that's all it is: a dream. That's not saying the December contract could not break out within the next 8-10 weeks with a fist-pump above the 27.46 peak recorded in March 2022, but until that happens there is no point getting all het up about the prospect. At the moment, Silver has been tough merely to trade, since the futures have oscillated mostly within a single Hidden Pivot band for ten months. They are also trading toward the middle of a wider range that has persisted since July 2020. Bottom line, if you see anything even remotely interesting in this chart, you are hallucinating.
We're long 400 shares from a 'mechanical' buy at the green line (x=34.60). Friday's bull-trap rally on the opening bar strongly implies GDXJ will take out at least another low or two before it can get traction. So that we don't get caught like everyone else in a stressful second-guessing game, I'll suggest sticking with the 34.11 stop-loss I posted in the chat room on Thursday. My hunch is that a more tradeable low will occur near 33.21 (60-min, A=36.80 on 9/1). We can try again to get long there rather than suffering-and-shuffling along with the herd in the meantime. _______ UPDATE (Sep 25, 10:04 p.m.): Today's nasty dive stopped out the trade for a loss of about $200. This is a sign of rotten health, considering the textbook appeal of the pattern we used to get long 'mechanically,'
Crude turned sluggish last week, but not before generating a bullish impulse leg on Friday that will likely hold positive consequences for the near term. I say 'positive' while acknowledging that another turn of the screw could send the world's fragile economy into a tailspin. Pump prices are already above $4/gallon and will become headline news when it looks as though $5 is coming. To get in step with that eventuality, I've lowered the point 'A' low of the chart we've been using to produce a somewhat higher target at 94.76. A swoon to the green line (x=87.69) would generate an attractive 'mechanical' buy signal, but we'll wait until it is close to happening before we hatch a strategy to trade it. _______ UPDATE (Sep 28, 1:54 p.m. EDT): November Crude has plunged after topping a hair from the 94.76 target billboarded in the current tout. This adds to the evidence that The Big Picture may have changed, since the dollar and Treasury rates have also reversed sharply after achieving important Hidden Pivot targets precisely.
The bullish gap on the chart holds ominous implications for the global economy, since it removes almost all doubt that interest rates on U.S. Treasury Bonds are headed significantly higher. The rally looks nearly certain to reach 4.81%, the target of the pattern shown. The red line through which the gap occurred last Thursday is a 'Hidden Pivot midpoint resistance,' and it is where we look to get a firm handle on trend strength. When it is penetrated as easily and decisively as it was last week, this almost invariably results in a continuation of the trend to the target, in this case a 48.14 level that corresponds to a 4.81% rate. A tradeable corollary is that a swoon to the green line would be merely corrective, and that bond bears, far from being scared out of their positions, could double down on their bets with confidence. The equivalent rate for the Ten-Year Note would be 4.68%. Historical Downturn You should jot those numbers down, since they will allow you to tune out the din of pundits and economists arguing about how high rates are likely to go. With the economies of China and Europe already sinking into recession, and the U.S. about to do so when the inevitable bear market in stocks gets rolling, another turn of the interest-rate screw threatens a downturn that will be one for the history books. It will feature above all a strengthening dollar that will not only catch economist and policymakers by surprise, but also crush everyone who owes dollars. A ruinous debt deflation is coming, and it will make us nostalgic for the pesky consumer inflation that has ruled our economic lives since the wildly reckless credit-stimulus of the Covid years.
[Last week's commentary on the gathering economic storm elicited a light-hearted reminiscence from our friend Richard Charles of Alpine Capital. You'll find his recollection of some notable deflationists enlightening, and there's also a new word -- screwflation -- he has coined to describe a phenomenon that has yet to gain traction with eggheads at some of our finer universities. RA] Must have been something stimulating in that New Jersey aquifer we drank from, before saltwater and tritium from the Salem County nuclear plant made Bourbon the safer beverage. Since the Great Depression, an ever-inflating Fed made houses the number one wealth engine for the middle-class American Dream. Our Palo Alto home accidentally saw unbelievable nominal appreciation exceeding the original price tenfold -- or a hundredfold if you run the numbers with 10 % down on an adjustable-rate, fixed-payment, negative amortization at sixteen percent that everyone, especially the mortgage broker and realtor, told us was cuckoo. Merrill’s all-American asset manager back then in the mid-1980s, pipe-smoker Stanley Salvigsen, was a deflationist who actually shorted his home and made money. He was invited to leave Merrill for Comstock Partners before he died at 53 of a heart attack in the mid-90s. His offense: staying too short for too long. Bucking Merrill Lynch Gary Schilling had a similar experience in the mid-70s with Standard Oil, the San Francisco Fed, Merrill Lynch and White Weld. His complaint letter to Don Regan, Merrill's CEO and former U.S. Treasurer, attested that Schilling's disinflationary views did not comport with Merrill Lynch's bullishness on America. This is despite the fact that his unconventional ideas made money for the investment firms' clients. Back in Silicon Stanford Valley, the biggest bond bull-market in history bailed us out with rates that ultimately fell almost to 2%, freeing yours truly for a
The Dollar's impressive move off mid-July's 99.58 low will face a crucial test when it encounters the impediment shown in the chart, a Hidden Pivot midpoint resistance at 106.32 that lies less than 1% above. I am predicting an easy move through it, bringing the realization that the inflationistas have had it wrong all along; for in plain fact, consumer inflation was never going to be a big deal in comparison to a deflationary juggernaut of financialized debt totaling more than $2 quadrillion. So many owe dollars that inflation -- or better yet, hyperinflation -- would be a blessing. And that's why it is not going to happen, if for no other reason than that everyone has piled onto the same side of the bet. Those still in denial will be in for a shock as DXY continues to rally toward the 113.06 target. By then, there will be fewer dollar bears to muddy the picture, and the quacks who run the central bank, especially the hawks, will have their backs up against a wall.
