July Silver aborted a textbook 'mechanical' buy at 36.349 last week, a sign that there is something wrong below the surface despite the 12% rally in June from 33 to 37. Perhaps bulls just need a breather? SI is notorious for reversing after stopping out previous highs and lows. This is what it did on Friday, bouncing 50 cents after dipping a couple of ticks beneath the 35.580 low recorded on June 12. However, I doubt the reversal will get legs, since the move following the breach of a too-obvious support. We'll give it the benefit of the doubt nonetheless while stipulating that the uptrend must surpass three small peaks, the highest of them at 37.045, to regain our respect.
The 96.36 downside target we've been using remains viable. The current, countertrend move would need to surpass the 'external' peak at 100.54 recorded on May 29 to imply the long-term downtrend may be about to change. Even then, that would generate a 'mechanical' sell signal that we would likely ignore. More immediately, anything above 99.39 early in the week would be a faintly bullish sign.
Tulipmania and the South Sea Bubble have nothing on the bunco game Wall Street has been running with Microsoft shares. I write on this subject often because the numbers are so huge, and because the game, which is intertwined with the biggest financial con-job in history, is not one you will ever read about in The Wall Street Journal or on Bloomberg.com. It thrives on the madness of crowds and grows bigger with every uptick in MSFT and the galaxy of stocks in its vortex. Microsoft's share price has gone from 393 to 483 since April, adding roughly $687 billion to the macro ledger. That is twice the size of California's budget for 2025. It would buy a Porsche 911 for every man, woman and child in New York and Chicago, or a super-deluxe Disney World vacation for every family in America. A clue to how the game works lies in the relentless smoothness of MSFT's ascent. You could comb through a thousand charts without finding one remotely like the one pictured above. You don't have to be a technical analyst to see that the long rally has been tightly controlled every step of the way. This kind of price action is quite rare, but what makes it extraordinary is that it is not happening to just any stock, but rather to the most valuable stock in the world, a $3 trillion company with a lock on the operating systems of a billion-and-a-half desktop computers. The stock has been ratcheting higher on relatively thin volume and a dearth of bullish buying. Short-covering has done most of the lifting, with more urgency and power than merely optimistic investors could ever supply. Ka-Ching! MSFT's manipulators knew what they were doing when they goosed the stock into a sensational short squeeze on April
There were few headlines out of the Middle East over the weekend, mainly because only Israel and Iran are capable of judging the damage, and neither is saying much. Wall Street, on the other hand, seems quite confident that whatever is happening, and irrespective of the outcome, it will be quite bullish for stocks. As much was evident on Friday, when the lunatic sector (aka 'the Magnificent Seven') bounced back from heavy losses early in the session, then spent the remainder of the day building a plateau from which stocks can launch anew when the all-clear signal comes. This would be appallingly reckless behavior, but we have become used to it as the stock market has increasingly decoupled from geopolitical and even economic reality over the last decade or so. It's possible investors are simply envisioning a brighter tomorrow, with Iran no longer able to export terror to the world. China and North Korea will continue to threaten, of course. But their ability to spread malice and death will be significantly impaired once Israel has cut off the arms and legs of their Iranian proxies. Jihadism will still be with us, and active to the extent its chief sponsor, Qatar, has plenty of crude oil to sell. But perhaps with the inspiration of nuclear terror in remission for a few years, and an entire generation of jihadi leaders rubbed out by Israel, the world might enjoy a period of relative peacefulness. How odd would that be? [Check out my latest interview on This Week in Money. It delves into the mania that has seized investors in stock and real estate assets.]
I've identified bearish targets well below these levels at, respectively, 81.64 and 77.49, but I'm giving every countertrend blip the benefit of the doubt so that I am not caught unawares if an important turn comes. This blip was Thursday's gap-up rally above two prior peaks on the daily chart, one of them 'external'. That generated a bullish impulse leg, implying Friday's mild sell-off was merely corrective. (The weakness also failed to reach a downside 'd' target, which adds to the short-term-bullish picture.) Let's see what the new week brings. If TLT can push above the 88.21 'external' peak recorded on May 7, that would be worthy of serious attention. ______ UPDATE (Jun 20): A tedious, disappointing week, although by no means cause for despair. TLT still needs to fist-pump above the 88.21 peak from May 7 to command our respect.
Last night's explosive move through the 70.82 midpoint Hidden Pivot of the pattern shown has removed any doubt its 86.51 target will be reached. It seems improbable that there should be a lid on an energy market that is now on wartime footing, but that's what the chart implies. However, if the move even slightly exceeds the target, and thence early April's slightly higher 'external' peak at 87.63, a lurch toward the magnetic $100 mark would probably become inevitable. In any event, your trading bias should be aggressively bullish until such time as 86.51 is reached.
There's no point in sugar-coating it: minor, bullish impulse legs on the daily chart have not been strong enough to reverse the horrific carnage in U.S. Bond markets. Absent some hitherto unimagined turn of affairs, we should expect TLT's slide to continue down to the 77.49 target shown, at least. The short-lived rally in early April to the green line triggered a theoretically profitable short, so we know the pattern is working. It now says p2=81.64 will be the next stop on the way down, so let's use that as a minimum downside objective for now,
The chart promises relief shortly for T-Note rates. The pattern shown suggests they are an opportune short at the green line (x=4.512%), stop 4.630%. That does not necessarily mean they are about to fall all the way down to the 4.161% target. But it does imply that rates will ease to at least p=4.395% before they head higher again, if they do. The secondary pivot, p2=4.278%, promises a tradable bounce as well, although not necessarily a durable bottom.
Sloppy action since mid-May has transformed a slightly promising picture for the dollar into a sorry mess. The bearish pattern shown has already signaled a profitable 'mechanical' short at the green line (x=100.58), and there's no reason it will not continue to dominate DXY until the 96.36 target is reached. The pattern is sufficiently clear and compelling to suggest that a tradable bounce from 'D' is likely, but if not much of a bounce materializes, it'll be time for Katie to bar the door.
The stock market is in a topping process, brazenly manipulated by white-collar carnies who cut their teeth at Sloan, Wharton and Stanford. These newly trained ass-bandits have been working Microsoft shares to hold the broad averages aloft while they offload inventory to widows, pensioners and assorted other bag holders. I described in detail how this game works in a previous commentary. Even though Microsoft, the world's most valuable company, has a $3 trillion capitalization, it costs the perpetrators almost nothing to drive the stock vertically higher, adding hundreds of billions of dollars of gaseous asset inflation (aka 'wealth effect') to the global ledger. Flimsy Reasons When last week ended, the world's largest-cap stock was poking its greasy little snout marginally above the previous all-time high at 468.35 recorded last July. This breakout will not have gone unnoticed by a million dip-buying homunculi, since it is no longer a dip they are buying, but the latest move into thin air. Although MSFT will continue to outperform all other stocks for reasons implied above, I doubt it's short-squeeze histrionics can drag the lumpen mass of securities significantly higher. At best, the also-rans will make marginal new highs until the last buyer runs out of flimsy reasons later this summer. It has never been clearer that mass mental-illness, far more than invented 'fundamentals', is what drives stocks higher in the late stages of a bull market. If news mattered, the 1914-ish darkness of today's headlines would have crushed the Dow six months ago.
