Rick’s Picks

Although coronavirus is still viewed as unlikely to derail the bull market, it has noticeably sapped its strength. We don't feel it so much when stocks are ratcheting blithely higher as they did last week. But when you see half of those gains erased in mere minutes as occurred this morning, it's warning us to watch out for trouble. For the moment, that means focusing on the 3380.63 midpoint resistance shown in the chart. The 13-point rally required to get it there seems likely, and I'll suggest using it as a minimum upside projection. But I will also be looking to get short there, if only for a quick scalp, since I mildly doubt that bears are nervous enough to deliver the usual short-covering panic on-demand. If they can sit back and just enjoy the news, including most recently Apple's sobering, virus-wary guidance, perhaps then the supposed Smart Money will get the comeuppance it has been courting for years.

On February 2, based on reports from subscribers, I established a tracking position of 400 shares @ 28.39. I am still suggesting that you exit half at 29.42, but we'll keep the remainder for a shot at much higher prices (see chart inset). If GDX eventually reaches the 36.66 target, we could book a profit of as much as $1,886. It could take a while, but we've already proven we can endure a brutal grind waiting to collect our first payoff. It is not yet in the bag, though, since the stock was still 27 cents shy of the 29.42 profit target at today's high. Fortunately, the uptrend looks sufficiently robust to get us there on Wednesday. This trade is what I've described to you in the past as the kind of no-brainer opportunity Rick's Picks tries to offer from time to time in order to make your annual subscription pay for itself, even if you rarely follow my touts, Trading Room instructions or 'request session' actionable ideas. GDX offered a relatively cheap play, and the trade could have been done on margin in an account with less than $12,000 (or $6,000 if you halved the size to 200 shares). The trade was deliberately chosen and precisely timed to address subscribers' keen interest in gold and to ameliorate their recurring frustration trying to make money in a precious metals sector that has been become notorious for misbehavior. The actual buy recommendation was simple and straightforward, allowing subscribers to buy the stock pennies off the bottom of a hellish dive. We subsequently came close to getting stopped out on a relapse, and although our grueling 'hold' caused me to lose patience at one point, I stuck to my discipline and let the trade run. I hope you learned something valuable about

I like the 301.60 target shown in the chart enough to suggest a play linked to it. Buyers took a couple of days to get loft above the 291.61 midpoint pivot, but it looks now like it is about to become support for a shot at D. If we assume that it will take perhaps two weeks to get there, we can use the target to set up an option trade that will risk very little if we are wrong but produce a substantial gain if we are right (aka 'leverage'). Accordingly, I'll recommend  buying the March 6 299/302/305 butterfly spread four times for 0.32 or better, contingent on DIA trading 292 or higher, good through Friday. If you can leg into the position for less using, for one, an rABC pattern to do the long side first (i.e., buy four 299s; the 305s can be acquired later, since they won't move that much), then by all means do so. If you don't know much about butterfly spreads, you should pass up the trade and wait for an opportunity you fully understand. A simpler strategy would be to leg into a vertical call spread, such as the 300/302.50 for 0.30 or less. Stay tuned to the Trading Room for further guidance on this, since it will require real-time strategizing. You can help out by letting me know of your interest. _______ UPDATE (Feb 18, 8;22 p.m. EST): In the Trading Room this morning 'Hammer' reported doing the butterfly for 0.32, so I'm establishing a tracking position of four spreads. The worst loss possible is $128 for a shot at a gain of up to $1,000 -- pretty good odds if you think the bull market will continue to shrug off the coronavirus threat. _______ UPDATE (Feb 23, 9:45 p.m.): Far

The 3425.25 rally target shown in the chart looks potentially useful -- not only as a minimum upside objective for trading from the long side, but as place to attempt shorting either with a tight stop-loss or an rABC pattern of lesser degree. Note that the futures took a strong bounce Friday from the red line, the pattern's midpoint pivot. In retrospect, we can see that a bid there would have produced a quick gain of as much as $850 per contract. Is there a rule we can formulate that would make it easier to exploit such opportunities? Let me try, as follows: Attempt a 'mechanical' buy at the red line if an earlier pullback from our proprietary 'sweet spot' fails to come down to the green line where we typically initiate the trade.  As always, the stop-loss on such trades is equal to a third of the differential between the entry price and the D target. I should also mention that the C-D follow-through leg, or at least what exists of it so far, did not exactly blow past p=3364.38. This implies that a move to D is not quite a done deal, even if the pattern looks strong enough to get the futures there. _______ UPDATE (Feb 19, 7:12 p.m. EST): The 3425.25 target billboarded above has served us well. Here's a smaller pattern with a lesser target at 3415.00 that can be used on Thursday to improve your odds of engaging profitably with the futures, whether long or short.

The dollar's steep rally this month is close to generating a powerful impulse leg on the daily chart. Just another 0.15 points (see inset) and DXY will exceed an external peak at 99.25 recorded back in early October. That would refresh the bullish energy of the chart while increasing the odds that any weakness, unless severe, would be corrective and therefore a buying opportunity. This scenario is congruent with my bullish outlook for T-Bonds, but it would also keep gold under pressure. This could turn out to be less threatening than it sounds, since precious metals have held up well recently not only against a strong dollar, but in the face of a stock-market rally that has been nearly relentless. _______ UPDATE (Feb 19, 7:34 p.m. EST): The Dollar Index is closing fast on a clear Hidden Pivot resistance at 100.01. If bulls blow past it, that would suggest that still higher prices, possibly  significantly so, lie ahead. Here's the chart. _______ UPDATE (Mar 2, 11:11 p.m.): After missing the 100.01 target by a dime, DXY has plummeted $2.61. The key to the chart lies in the fact that the high was bullishly impulsive because it exceeded a small but distinctive 'external' peak at 99.89 recorded in May 2017. This suggests the plunge of the last two weeks is corrective and that when it ends bulls will regain dominance.

AAPL has been churning for a month, generating a series of stochastic peaks on the daily chart that could spell trouble over the near term. The picture would grow even more more menacing if the stock were to roll down from these levels, since the corresponding stochastic peak this would create would diverge from the two that preceded it. We'll wait to see how things plays out over the next day or two before we draw any conclusions, but it would appear that bullish fervor is weakening and that the stock is being deftly distributed by the Masters of the Universe. _______ UPDATE (Feb 19, 8:15 p.m. EST): Bad news from AAPL has produced a predictable response: a two-day short squeeze that has brought the stock to within inches of a new all-time high. This is funny and even entertaining, but also instructive as to Wall Street's mindset and the disease that has been driving the bull market for months. I haven't given up yet on the idea that price action since around mid-January has been massively distributive. We may find out within the next week or so, but in the meantime I'll recommend bidding 0.40 for a few Feb 28 305 puts just in case, good through Thursday. _______ UPDATE (Feb 20, 6:26 p.m.): The puts climbed to 1.30 today on unusual weakness in the stock. Alas, we were not aboard because the options had traded no lower than 0.49, missing our cautious bid by nine cents. Even so, I've advised subscribers who got short on their own initiative to hold onto at least a portion of their positions in case the downtrend gains momentum. Here's an updated chart that suggests AAPL would need to fall hard to fully correct overbought excesses that built up over the last two

Not only are dips being bought reflexively and with ostentatious zeal, those who are doing the buying are the same carnies who have in fact engineered the dips. Although Thursday morning's dip went a little lower than I'd expected before the sleazeballs predictably turned things around, what we should have observed is that no one on Wall Street has any fear whatsoever that coronavirus will endanger the global economy. It is just a useful 'story' where they are concerned, and it is being employed to manipulate stocks lower whenever portfolio managers are in the mood for bargain hunting. They exhausted sellers around 5 a.m. on Thursday, and it was up...up...up for the rest of the day. Now, if and when short-covering decisively breaches the 3381.63 midpoint Hidden Pivot where the rally stalled, the 3414.75 target shown in the chart will be in play as a minimum upside objective for the near term. A pullback to the green line (3365.00) first would trip a 'mechanical' buy signal, but I am not enthusiastically recommending a play because the correction will not have come from our sweet spot.

I put out a 'mechanical' trade in the chat room, a buy at 3363.00 that stopped out 3 1/2 hours later for a loss of $400 per contract. It did so after narrowly failing to achieve a profitable exit target at 3371.00. The set-up was enticing, but because it failed we can only infer that there is more weakness yet to come.  Bulls got off to a strong start, seemingly oblivious to the potentially disruptive effects of coronavirus on the global economy.  In retrospect, the strength seen early in the session seems to have been a show of bravado. We'll step aside for now, but be ready to act if the futures signal opportunity. My hunch is that it will be to the downside, especially since the intraday high occurred just above a potentially important Hidden Pivot target at 3369.25 that I've been drum-rolling since February 3. Meanwhile, here's a smaller chart to stay closely oriented to the trend. Weakness breaching the 3345.25 target shown would signal that bears are about to go on the offensive. ______ UPDATE (Feb 12, 12:25 a.m. EST): The futures are in a mild short-squeeze on zero volume in the dead of night. This has negated the bearish pattern shown in the chart, but I don't trust the rally and doubt that it will get very far. _______ UPDATE (Feb 12, 9:07 p.m.):  The futures plummeted nearly 20 points in mere minutes early this evening. Go figure! Here's a chart to help you make hay from their senseless histrionics.

I mentioned shorting this wacko-powered gas-bag in the The Morning Line, which is publicly viewable, but without divulging any proprietary details. Ordinarily I would advise waiting for SPX to hit the D target at 3477 (see inset) before we place a bet. In this case, however, I have a strong gut feeling that the target may be too obvious to reward us for doing what many others who use ABC or Gartley 1-2-3 patterns will be attempting to do. Bull markets have been known to die somewhat shy of picture-perfect D targets like this one, and I don't want to miss a great opportunity to bet the 'don't pass' line if that should happen here. It is not incidental to my argument that hubris surrounding the stock market, the economy and Trump's presidency has reached a deafening pitch.  Everything seems just a little too perfect, and the bull market has no right anyway to be rampaging at a time when the coronoavirus threat to the global economy is still unknown. China has already shut down economically, and commodity markets, especially oil and copper, have fallen sharply to reflect this, even if, conspicuously, the crazed U.S. stock market has not. I mentioned in my Morning Line comments that we will have an enticing opportunity to make money on this trade even if the S&Ps turn around after falling and surge to new record highs. Odds are good, in my estimation, that once they hit the X trigger at 3199 they will fall to at least p=3051, where we could take a partial profit or perhaps cover the entire position. Here's a chart that shows the pattern, with the rABC shorting set-up. Those of you who trade futures can interpolate using the E-Mini S&Ps, which move almost point-for-point with the cash CBOE