I've lowered my target for Treasurys so often that it's time to face the music. The 73.69 'D' Hidden Pivot shown in the chart is where this ETF proxy for the long bond is probably going, and it is not a pretty picture. The punditry, editorialists and Bloomberg bozos can blather all they want about the economy's supposedly soft landing, but this is wishful thinking. Interest rates are headed even higher, and this will crush markets that owe their artificial robustness to easy financing; cars and houses, to name just two. It will also turn the irreparable devastation in commercial real estate into a catalyst for the Second Great Depression. The chart pattern is too clear to deny, especially since it has already worked several times to produce profitable 'short' trades on the way down. A second test of p2=85.44 could conceivably turn this cinder block higher, but we shouldn't look for miracles. ______ UPDATE (January 5): TLT continued to hover near death's door, extending its distributive, sideways scuddle for another week. It would need to pop above 88.91, an external peak shown in this chart, to emerge from purgatory. _______ UPDATE (Jan 10): TLT stopped scuddling, the better to plunge anew. It ended the week with an imminent test in prospect of the 82.42 low recorded in October 2023. A two-day close beneath it would all but ordain more progress down to 73.69, a target that would have seemed unimaginable when this symbol spiked to a covid-era peak at 179.70 in March 2020.
The chart shows interest rates on the Ten-Year Note rising over the next 8-12 months to 5.5% from a current 4.5%. This will devastate the economy and lay bare the delusion that America's economy is booming. The 5.5% figure is deceptive, because, presumably, it will be achieved with asset values falling. If we repeat the experience of the Great Financial Crash of 2007-08, that would imply real rates (i.e., adjusted for deflation) rising to as high as 6%-10%. That would usher in an economic depression at a time when the U.S. economy is in much worse shape to weather adversity than in 1929. Back then, a third of the workforce was tied to the agricultural economy, literally living off the land. This time, perhaps 80% of the workforce is tied to bullshit. That figure is not invented, by the way; it is simply extrapolated from Musk's firing 80% of Twitter's employees without impairing the company's ability to carry on normally.
It has been years since the E-Mini S&Ps created a bearish impulse leg of daily-chart degree. They did so last week, however, with a plunge that breached the required two lows: a small 'internal' from December 10, and the external low at 5921.00 recorded on November 19. The implication is that the urgent short-squeeze rally on Friday will sputter out shortly, allowing the futures to resume their well-deserved slide into hell. It will be interesting to see whether this happens before New Year's, which would be the kind of shocker that takes everyone, bull and short-covering bear alike, down with it. This seems difficult to imagine, given that the rigged support system for the stock market is ubiquitous. It includes Fed funny-money, portfolio managers locked into a handful of high-fliers, and share buybacks by companies with many more tens of billions than they know what to do with. Be patient, permabears. Your day is coming, probably sooner rather than later.
GDXJ is probably within no more than five points of groping its way to the bottom of the textbook head-and-shoulders pattern shown in the hourly chart (see inset). If it's going to revive sooner rather than later, though, the secondary pivot at 43.44 would be a logical place for this to occur. You can bottom-fish there with a tight stop-loss, using expiring call options if you've got the chops. I've used a dubious one-off 'A' high here, and the pattern could turn out to be governed by the marquee high at 55.58, so plan accordingly.
The Dollar Index pulled back hard on Friday, half-correcting the steep upthrust from two days earlier. Given how the uptrend impaled the midpoint Hidden Pivot (p=107.36), there is little room for doubt about whether D=109.30 will be reached. As noted earlier, that would keep weight on gold. It would also set up a potential 'mechanical' buying opportunity at p=107.36. We don't often do this trade at p, but the trend is so strong that waiting for a relapse to the green line (x=106.39) might leave us empty-handed when the turn comes. _______ UPDATE (Dec 28): The dollar has hovered stubbornly aloft, denying us an opportunity to bottom-fish at the red line (p=107.36). The trade recommendation remains viable nonetheless.
I am playing fast and loose with crude's 'technicals' this week, since chat-room interest in this symbol appears to be dead. As such, I have little reason to provide potentially tradable ABCD coordinates. Instead, here's a perfectly serviceable pennant formation with the January contract falling to around 67.50 before it gratuitously reverses direction. Nudge me in the chat room if you actively trade this symbol and require more-detailed guidance. A bearish bias is warranted, albeit with close attention to the vicious feints and head- and foot-fakes that have always characterized this vehicle's movement.
[The following analysis was contributed by my friend Larry Amernick. His work has appeared here in the past, including excerpts from The Amernick Letter, which is no longer published. He is a former president of the Technical Securities Analysts Association of San Francisco.] Last Wednesday’s brutal response to a mildly hawkish Federal Reserve announcement triggered two opposite market signals. First, the unusual nature of the sell-off in technical terms told us that the great secular bull market that began in 2009 is probably over. Second, the intense selling generated oversold readings that were bound to produce a short-covering rally, as they indeed have. The stock market is always coming and going at the same time, depending on which time frame one is using to measure the trend. It is an irrational and sometimes fragile creature of human emotions, and that's why it can be so difficult to predict. Nevertheless, let’s take a closer look, using the October 1987 Crash for comparison. It turns out the tape was actually more bearish this time, even though losses in percentage terms were nowhere near those of the earlier crash. In 1987, the McLellan Oscillator, which measures breadth, was a scary -110.14; on Wednesday, however, it registered an astounding -203.34. The advance/decline line differential was just as scary: -1921 in 1929 versus -3468 this time. The three-day exponential moving average was -1594.85 versus--2444.89. 3% Versus 22% Why did the market drop a mere 3% on Wednesday, compared to 22% in 1987, even though tape action was arguably worse this time? Although many stocks fell, they did not collapse; they moved only a few percentage points lower. It was the astounding breadth readings that made the difference. Call it a foretaste of what could come in January. For good measure, I have applied a volume
T-Bonds got crushed last week, reversing precipitously from within an inch of what would have been a bullish breakout. The gap down through p=91.82 all but guarantees the downtrend will continue to a minimum D=88.78, a Hidden Pivot support that can be bottom-fished by interpolating the target for March T-Bond futures. The reversal is likely to work precisely if at all, so you can use a stop-loss as tight as 3-4 ticks (or a 'camo' trigger) to get long. If the target is easily penetrated, that would be bad news for bonds and correspondingly bullish for interest rates. Higher rates would of course keep pressure on gold.
Last week's rally ended with 10-Year rates sitting just above a midpoint Hidden Pivot resistance at 4.38%. If Monday's close is above this number as well, that would portend more upside to D=4.63%. This would be bad news for all who owe dollars, a class of businesses and individuals whose size is almost beyond imagining and which includes commercial real estate developers who have been hanging on for dear life. It will also put further pressure on bullion, which has faltered in recent weeks. If there's a silver lining, higher rates will also constrain our elected representatives in Washington from spending like drunken sailors.
The futures bottomed Friday at a key support, the 30.728 midpoint Hidden Pivot of a pattern that projects to as low as D=28.18. The pattern is gnarly enough to offer some potential trading opportunities, including bottom-fishing at p, p= p2=29.456 or even D. Also, a rally from the sweet spot between p and p2 would set up an enticing 'mechanical' short from x=31.999, stop 33.275. As always, a decisive penetration of the midpoint support (p=30.728) would portend more slippage to at least p2, or possibly D.
