The Indoos dove more than 300 points last week after topping at the precise intersection of a well advertised trendline and an important Hidden Pivot target. The two obstacles together represented the most formidable technical challenge bulls have faced in more than a year. Ordinarily we might expect a correction lasting at least four to six weeks. But these days, four to six days of weakness seems more likely, given the relentless enthusiasm of buyers and the very narrow list of stocks on which they have trained their buying power. So where to next? I'd suggest using a 30299 target for now. It comes from the weekly chart and is the secondary (p2) Hidden Pivot of a rally pattern begun from A=15,503 in February of 2016.
For more than a decade the bull market has flouted trendlines, Hindenburg Omens, Hidden Pivot resistances, cycles, channel tops and other ostensible rally killers, so there's little reason to think it will not soon overcome the double whammy of some new impediments it encountered on Friday (see inset). We recently discussed the imposing DJIA trendline shown in the chart because it precisely capped three rallies earlier in the year; on Friday it came within a few points of nailing the high of yet another. What I hadn't noticed before is an additional resistance, a 28,738 Hidden Pivot target that fell within a tenth of a percent of Friday's high. Long experience has taught us that bulls are likely to be frolicking above this seemingly crucial technical threshold soon, presumably bound for Dow 30,000. Even so, there are reasons to doubt they will do so before 2019 ends, and that even if they should push the Indoos to new record highs early in 2020, they are unlikely to blithely ignore the unsettling problems of two corporate giants, Boeing and FedEx. Rather than get worked up about the possibility of a major top, we'll simply adopt a cautious, if not to say mildly bearish, trading bias for the remainder of the year. In practice this will entail monitoring minor, downtrending abc patterns for signs of waxing strength. If they should start exceeding their 'd' targets, that would mean the dominant trend -- a.k.a. the bull market -- is weakening or worse. ______ UPDATE (Dec 30, 5:15 p.m.): A good start! Bears were understandably skittish about going on the attack for a rare change, but they did manage to push the Dow down by 183 points. Interest in the markets is next to nil at the moment, especially in the chat room, so
Because this vehicle was designed to tempt suckers into buying puts and calls, we don't bet on it very often. Only when it has fallen to a compelling, precisely targeted low do we consider buying options, and even then we buy only cheap ones with just a week or two left on them. This time, a 15.66 target that seemed too enticing to pass up drew our interest. On Friday, $200 worth of calls we'd bought a week earlier to satisfy a gambling jones vanished in a puff of smoke when they expired worthless. Looking ahead, I see little likelihood of jumping back in until such time as the 9.92 target shown is hit or closely approached. The S&Ps would probably have to rise well above 3400, and the Dow above 30,000, before this happens. It seems incredible, but that's what the chart says, and it says it clearly.
Friday's modest leap narrowly missed our still-interesting trendline, which came in at around 28,661. Because it is rising with a slope of about 12 points per day, we should look for resistance on Monday at 28,673, moving up to 28,721 by week's end. If and when it is hit, plan on buying some cheap DIA puts with about two weeks left on them. Be ready to jump on it if this happens on the opening bar. Otherwise, I'd suggest waiting till the close for a better deal. It will always be highly speculative to bet against a bull market that has been chugging along for more than a decade, so don't overdo it. This is just to have a horse in the race. ______ UPDATE (Dec 23, 6:05 p.m.): The trendline comes in Tuesday at around 28,705, as near as I can make it. My gut feeling is that the Indoos will get within 10-15 points of this 'hidden resistance' before feeling its downforce. If you are keen on getting short, the instruction above still applies. ______ 'UPDATE (Dec 26, 12:30 a.m.): For Thursday, I estimate the trendline will be at 28,712. The trading guidance given above remains viable. Last week's 28,608 high got close enough to the line that we should be open to the possibility that the anticipated top has already occurred. _______ UPDATE (Dec 26, 5:14 p.m.): Use 28,721 for Friday. If it's hit, don't be surprised if this occurs four seconds before the closing bell. Buy a few puts anyway -- what could possibly could go wrong over the weekend?
My 3229.75 target precisely contained last week's rally, but we shouldn't kid ourselves that it will turn out to be the Mother of All Tops. Assuming buyers make short work of this Hidden Pivot resistance, the next stop on the path to infinity would be the 3252.75 target shown. Notice that the pattern's point 'A' low is just a little pisher and therefore unlikely to produce an important 'D' high. Sliding 'A' down to the much more compelling A2 would yield a weightier 3348.75 with a midpoint resistance at 3209.88 that was decisively exceeded last week. I mention it just to be on record with a seemingly absurd -- at least for this permabear -- prediction. My gut feeling is that we'll eventually see the E-Minis trading at those levels, implying Trump actually is a shoe-in for reelection. Paradoxically, the only thing that could derail him would be a bear market. Even then, it's difficult to imagine any of the Democrats, including Hillary, beating him. _______ UPDATE (Dec 26, 12:38 a.m. EST): I expect the 3252.75 resistance noted above to show stopping power, potentially short-able, but if the futures slide past it the next resistance, unnoted above, would be at 3260.50. This is the secondary (p2) Hidden Pivot of a major ABCD pattern where 0n the daily chart A=2882.00 on 10/10. _______ UPDATE (Dec 29, 8:55 p.m.): The 3252.75 target was exceeded, but only by 1.25 points. A short from my number with a tight stop could have been worth as much as $800 per contract so far. Anyone on board? I haven't established a tracking position because no subscriber mentioned it. _______ UPDATE (Dec 30, 5:21 p.m.): This pattern produced an rABC trade Monday from p=3128.88 that could have been worth as much as $350 per contract. The 3205.75
The trend has turned lazy this week, but we should not fail to notice that bulls haven't given up much ground. Rather than hang out yet one more potentially important top, I've focused on a minor one with a pattern that on Friday generated a mechanical buy signal. The ABCD here is gnarly but text-book beautiful, and that's why I expect a pullback precisely from the 3215.00 target. More immediately, a mechanical bid at the red line (3184.00), stop 3173.50, would offer decent odds. I'd rate the trade a '6.7' because the eventual move past p was labored and not especially sharp or decisive. ______ UPDATE (Dec 18, 10:50 p.m. EST): Now that FedEx shares have joined Boeing's on the disabled list, we need to give more weight to the possibility that the stock market's tedious oscillations this week are just distribution. Keep in mind that if an avalanche is coming, it will be telegraphed by small abcd patterns exceeding their 'd' targets. _______ UPDATE (Dec 19, 5:54 p.m.): The futures are within a millimeter of the 3215.00 target, which can be shorted using a stop-loss as tight as 3216.25. If it's hit and decisively exceeded, the next stop will be 3229.75, off this pattern. Both targets look like high-odds spots for a precise turn.
Okay, so I couldn't help myself. Just when you thought I'd run out of bull-market targets, here is yet another -- and it's not even based on the Hidden Pivot Method. Still, the trendline looks very appealing, and besides, it'll give us something to shoot at as the lotus eaters force stocks higher into year's end. The trendline comes in at around 28,692 on Christmas Eve, and that seems as logical a place as any to look for a potentially tradeable top. We'll attempt to buy some cheap DIA put options if and when the Indoos get there, so stay tuned. More immediately, a caveat: The stock market has felt heavier than usual these last two days, and buyers will have to pick up the pace to avoid doing a Lomcovák. without having achieved the target. _______ UPDATE (Dec 19, 6:01 p.m. EST): The pace quickened with a moderate rally, but this was not sufficient to trigger a short-squeeze. The week has put most traders in a coma, so don't be surprised if Friday shocks us by being interesting.
A 3227.50 target that lies 1.6% above Friday's close can be used as a minimum upside objective for the near term. It is not the same pattern I used to project 3206.25 for the December contract because the point 'A' is somewhat lower (and also a little unorthodox). The equivalent low would yield a 3218.50 target, so we should prepared for a possible stall at that price. Any higher would indicate 3227.50, a Hidden Pivot that looks like a good place to try shorting, especially if you've been long for at least a part of the ride north. It could be bumpy, since the futures struggled to get past p after stalling there a week ago.
The chart refreshes an old rally target, a major Hidden Pivot at 283.97 that we've been using to stay unemotionally on the right side of the trend since last spring. The target still looks likely to be reached, presumably before Christmas. With Aramco hitting $2 trillion following its recent IPO, AAPL became the world's second most valuable company. Even so, it remains the most important bull-market bellwether, since no portfolio manager can be without it and because the company can do no wrong in their eyes. But I'd be very surprised if it spears the target on the first try, since this Hidden Pivot is so clear and compelling. We'll plan on getting short if and when the stock gets there, but if it happens later in the week than a Tuesday, options expiring the following week will be the play. Buy the first put strike at which the options are trading for less than 1.00. _______ UPDATE (Dec 17, 8:35 p.m. EST): Just one more inch! Bid 0.30 for eight Jan 3 265 puts, day order, but only if the stock has not traded above 284.15. Be prepared to lose it all, since this is a very speculative bet that seeks to precisely intercept a steep rally. ______ UPDATE (Dec 18, 11:04 p.m.): Leave the bid in for another day, but don't pay up. _______ UPDATE (Dec 22): If at least two subscribers report buying puts when AAPL topped on Friday at 283.54, I'll establish a tracking position. Meanwhile, if the stock goes any higher without a correction, it would shock me. _______ UPDATE (Dec 23, 6:12 p.m.): The stock has hung up at the target, creating uncertainty no matter how you've decided to play it. The puts traded within a penny of the 0.30 bid I'd suggested, so
Thursday's fleeting upthrust tripped a theoretical buy signal at the green line. Ordinarily it would be easy to overlook or ignore it, since buy signals since late August have come to naught. However, gold's price action has been so tedious and frustrating in the interim that we should take extra care to avoid missing the turn when it comes, especially since the impulsive thrust that occurred last summer was so powerful and promising. Most immediately, we'll use p=1529.50 as a minimum upside objective and trade it aggressively. In practice, this will mean looking for rABC and 'mechanical' setups in charts of small degree. Stay tuned to the Trading Room if you're interested. _______ UPDATE (Dec 23, 6:22 p.m. EST): The futures are headed most immediately to 1497.30 (60-min, A=1459.80 in 12/2 at 4:00 a.m.; B=1491.60 (12/12). I expect a stall, possibly tradeable, within two ticks of the target. But if buyers blow past it, that would shorten the odds of reaching p=1529.50, my current minimum objective in a larger pattern. ________ UPDATE (Dec 26, 12:45 a.m.): Buyers handled the 1497.30 resistance with ease, all but clinching more upside to the p=1529.50 target noted above. It was first broached here 11 days ago with Feb Gold trading nearly $40 lower. An easy push through it would shift our attention to the pattern's 'D' target at 1605.90. This number seemed like pie-in-the-sky when the buy signal triggered on December 12, but it is growing less farfetched by the day. ________ UPDATE (Dec 31, 4:43 a.m.): The futures have hit 1529.00 tonight, effectively fulfilling the target given above. A two-day close above this Hidden Pivot resistance, or an intraday spike to around 1538, would shorten the odds of a further rally to 1605.90. ______ UPDATE (Jan 5, 10:24 p.m.): Tensions with Iran have
