Although this week's commentary discusses why the dollar's weekly chart looks interesting, the daily chart shown is equally interesting in another way. DXY spent most of the week stalled precisely at the 106.07 midpoint Hidden Pivot resistance of a bullish pattern that projects to as high as 108.15. The way in which buyers handle this obstacle cannot but accurately predict the dollar's course over the next several weeks. In any event, and however unlikely, a swoon to the green line (x=105.03) would trigger an enticing 'mechanical' buy.
Of all the markets tracked by Rick's Picks, the dollar arguably has been the most interesting. This might seem paradoxical, given the relatively placid look of the Dollar Index chart above. Although there has been moderate turbulence since early last year, the overall impression is of a transoceanic flight cruising within a vertical range of several thousand feet. Most striking has been the dollar's ability to hold aloft a mere 4% below 2022's peak of around 115. This is tough to square with apparent reality, since the greenback's global hegemony for the last 90 years has come under increasing challenge -- from the BRICs, for one: Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates. It were as though they had ganged up on the schoolyard bully, changing the way international trade in goods and commodities is settled so that dollars are disfavored in every meaningful way possible. Most recently, the Saudis announced with some fanfare that they would sell as much oil as demanded of them for payment other than in dollars. As the chart makes clear, however, if this had any discernible impact on greenbacks, it was to have caused their slight rise. Why the seemingly anomalous behavior? A logical explanation is that global trade flows are but a relatively small portion of the uses to which dollars are put. The entire market for crude oil, for example, is estimated at around $2 trillion per annum. This may seem like a big number, but it is a pittance in comparison to the dollar sums that change hands in financial markets. There the tallies reach into the quadrillions of dollars -- thousands of trillions, that is, if such numbers are even imaginable when tied to the flow of actual business. Compare that to global
Crude oil's exuberant spree over the last three weeks recalls Bruce Willis' memorable line from Die Hard: "Yippy-ki-yay, motherfucker!" Weren't 'They' supposed to keep energy prices subdued until the November election? If 'They' means Joe Biden's keepers, one wonders whether the sinister Obummer has that kind of pull any longer with OPEC. Whatever the case, July Crude looks all but certain to hit the 87.31 target shown in the chart -- a 20% gain over prices that obtained at the beginning of June. Too bad for all of us, since pump prices looked ready to dip below $3 before greedy Big Oil recovered its grip. So here is the world's largest commodity market, allocating the world's most important resource, trading like a Vancouver penny stock. The good/bad news is that the wild swings will continue until the energy markets lie broken and smoldering in the Second Great Depression.
TLT has a long way to go to recoup losses since 2020. The chart shows three daunting resistance numbers at relatively lowly levels that eventually will give way. However, we should be grateful that this ETF proxy for Treasury Bonds is unlikely to approach covid-era highs near 180, since that could only imply a world in deep economic depression. The recovery of U.S. Bonds has unfolded slowly since TLT bottomed at 82.42 eight months ago. The gain off the lows is about 14%, and while that might not seem like much, it is impressive considering the staggering amount of U.S. paper dumped on the market in the past year by sovereign holders, particularly China and Russia. Although the dollar and its unbreakable lock on seignorage may stir up the envy of other nations, they cannot remain players in a financialized world if they stray too far from the greenback. That's why last October's lows for T-Bonds may yet endure, even as forecasts of their demise and the bankruptcy of the U.S. persist. Even in bankruptcy, the U.S. will still look like a safe haven to the rest of this blighted, godforsaken world.
I've used a continuous monthly chart to project a 6136.25 target for the E-Mini futures. A corresponding target in the cash S&P Index (SPX) lies at 6118.34. These Hidden Pivots look likely to be reached, although not necessarily precisely, since the patterns from which they are derived will be all-too-obvious to every trader and technician in the game. They are nonetheless sufficiently compelling to not work in some fashion, presumably tradeably. In each instance, buyers had little trouble pushing past the respective HP midpoints, and that's why I'm so confident the corresponding targets will be achieved. If the trend maintains its current slope, that should happen by no later than mid-October if not significantly earlier.
If you're wondering when the miners are going to take off, this week's chart offers a sodden dose of reality. Notice first that GDXJ is currently trading about where it was in 2013. Lows a few years later near $15 followed the cliff dive from 2011's exhilarating precipice at 180. Who could have imagined that, 10 years later, mining shares would still be scuddling lazily along, tormenting investors more or less in proportion to the limit of their patience? Yes, this ETF could take flight at any time, like a bat from hell. And it will -- just not on our time. If there is anything to console us in the meantime, it is the ease with which this vehicle's gratuitous swings can be traded. Now, for instance, you can stay short down to 38.32, or do covered writes until then, and then reverse your position when the target is reached. That would be 2.60 below the so-far retracement low off May's 47.25 peak. Don't sweat the details.
Hey, all you twenty-something, failure-adjusted, peach flavored hard seltzer-drinking, avocado toast-munching, downwardly mobile, squishy-gendered, Robin Hoodie, World-of-Warcraft miscreants: Listen up!! If you're as desperate as I think you are to fatten your crypto wallets, you'll need to pay up to find out exactly where bitcoin is headed next. Hint: The last three digits of my current price target are xx191. This will be a last-chance, bargain-basement retracement low before bitcoin blasts off for hyperspace. I've published the super-secret correction target in my chat room, and you need only click here for a free, two-week trial subscription that will give you instant access to the chat room and all the other nuggets of tradeable information that lie behind the Rick's Picks paywall. No credit card is necessary, since that would only add to the unpaid balance, metastasizing at 21.99%, that has been devouring you limb-by-limb like a flesh-eating bacterium. _______ UPDATE (June 29): I've lowered my precise correction target (hint: it is below 56,000), a modification that has changed its last three digits to xxx709. UPDATE (July 5): Whether you subscribed or not, I hope my warning prepared you for the disaster that has unfolded in bitcoin. It has actually exceeded the original downside target, and so I've posted an 'extension target' in the chat room. It is my worst case at the moment and is below 51,000. Click here to sign up for a free two-week trial, no credit card required.
The disconnect between tight Fed policy and a U.S. economy on the brink of recession is growing more unsettling every day. A key question is which economy we are talking about, since there are two distinctly different ones that Fed actions can affect. The first is the economy of consumer goods and services. It is about to keel over dead. This will be a very big deal, since consumption accounts for 70% of the nation’s GDP. Most of it comes from the broad middle class, which is staggering under the weight of higher costs for nearly everything. Some of those costs, particularly for car and home insurance, must be fully borne no matter how high they go. Other outlays are discretionary and include food, travel and entertainment. Those sectors of the economy are close to being asphyxiated by high prices and high interest rates, even as delinquent payments for cars, homes, credit card balances and rent climb into the red zone. The other economy comprises financial assets, and it is flourishing as never before, dancing in the ether. Soaring stock prices and home valuations have made many Americans think and act like they are rich, and they are continuing to spend freely. An estimated 10% of America’s 131 million households have net worth of $2 million or more. That is an impressive number, but it is not nearly big enough to prop up an economy whose health is determined by the other 90%. These days, the 90% are barely keeping McDonald’s afloat, even if East Side foodies are paying reservation specialists $500 or more to snag a decent table on a Saturday night. A 1930s Spiral The two economies have put the Fed in an inescapable bind. If the central bank loosens, the additional inflation this is likely to cause
Bearishness on the U.S. dollar reached a shrill crescendo last week after the Saudis began accepting other currencies for oil. Some seem to think this will move the world away from the dollar as the global reserve standard, but I strongly disagree. The dollar's indispensability for propagating a $2 quadrillion derivatives shell game is far more crucial to its supreme status in the world's heavily financialized economy. Crude oil is certainly a large market, but it is puny in comparison to the nominal value of derivatives traded digitally around the world. The chart shows the dollar ensconced in the upper range of a wedge formation, An upside breakout without a cyclical correction down to the lower line would be very bullish, however illogical it might seem to dollar bears (aka 'inflationists'). When the breakout occurs, it will leave the punditry, eggheads and bloviators who would consign the dollar to ignominy with some serious explaining to do. Suck it up, dudes!
The September contract looks all but certain to reach the midpoint Hidden Pivot at 5587.75 shown in the chart (inset). The rally has been powered by relentless short-covering and gap-up squeezes on the opening bell, but I doubt it will punch through p effortlessly. There is always that chance, however, and if it does, then we should assume that D=6155.25 is in play. The target may look like it is miles above, but it is only a 12% move from Friday's close. The distance could be traversed in as little as 8-10 weeks, which, looking back to the summer of 1929, would warrant our being on high alert. Wall Street should be pretty stoked by then about Trump's impending return to the presidency, so it would be the perfect time for Mr. Market to pull the plug.
