Rick’s Picks

Minor and middling Hidden Pivot targets have shown little resistance to the rally, which has gained a steady 15-20 points a day mostly due to short-covering, low volume and the absence of dedicated sellers. Most immediately there is the 3012.50 target we've been using to keep us comfortably aligned with the trend. I still expect it to show some stopping power, but don't be shocked if it doesn't. Short there with a tight stop-loss, provided you've made money on the way to it. Above this 'hidden resistance' sits another target broached here earlier, an ambitious one at 3114.50. Like virtually every other major or minor rally target we've used over the years, it must be reckoned a shoe-in to be reached. But based purely on the look of the chart and the very labored penetration of the 2923 midpoint pivot, it would appear that an ascent to 3114.50 is not quite a done deal._______ UPDATE (Jul 10, 9:23 p.m. ET): The futures popped to a marginal new high at 3007.50, five points shy of our target. The shallow correction since suggests it will be reached soon, but any higher would put another at 3051.75 in play. (60-min, A= 2917.75 on 6/27). _______ UPDATE (Jul 14, 5:30 p.m.): The futures spent a remarkably boring Friday head-butting the 3012.50 target before short covering drove the September contract to close two points above it. This means the uptrend is likely to continue -- most immediately to at least 3029.75, the secondary pivot associated with the 3151.75 target.

By signaling a move toward easing, Powell has made ready to cushion the U.S. against an economic slowdown that has been gathering force around the world. Although it is never wise to fight the Fed, we should be very guarded this time, scanning the horizon for signs of monetary-policy fissures. They are not likely to be obvious right away, since loosening will initially have a bullish impact on stocks. The mere prospect of a rate cut has already spiked the Dow Industrials above 27,000 for the first time, and the rally appears to be gathering force, presumably ahead of a blowoff top by late summer or early autumn. It will increasingly draw capital from outside the U.S., since the economies of Asia and Europe are deteriorating rapidly. China's attempts to stimulate domestic spending have failed, and unsold cars are piling up on the lots. As for Germany, the erstwhile economic engine of Europe, its GDP most recently grew at an annualized rate of 0.7%. Don't Get Trapped The U.S. is not an economic island, and GDP growth is certain to slow as America's major trading partners sink into recession. It seems predictable nonetheless that U.S. stocks will continue to move higher, at least for a while, for the reasons noted above. This will occur with further softening in interest rates and GDP falling. Wall Street may be able to pretend for yet another few months that the U.S. will skirt recession. But when rates on Ten-Year Treasurys drop below 1% and head into negative territory sometime in 2020, the jig will be up. At that point there will be no denying that America's economy has fallen into the same liquidity trap that has long vexed Japan and which has spread to Europe, if not yet China. The resulting epiphany will

I hesitate to use the word 'ominous', but the S&P 500 (shown here in ETF form) is close to generating a very bearish stochastic signal on the long-term chart. When ascending price peaks are matched by descending stochastic peaks, this is often a harbinger of trouble. In this case, there are not the usual two tops headed toward such a divergence, but three, each diverging relative to the other two. A simple way to interpret this is to say that the S&Ps have been unable to get as overbought with each successive, record peak. The implication is that traders/investors have grown less enthusiastic about buying as the S&Ps have achieved a series of record highs spaced weeks apart. What to Watch For The divergence would become menacing if the blue line were to roll down through the red line. This would occur if, over the next several weeks, each new price bar closes on successive Fridays toward the lower end of the bar as the S&Ps go higher or sideways. Alternatively, if the rally continues for a couple more weeks, with Friday closes toward the upper end of each bar, that would negate the divergence and turn the stochastic indicator benign (or at least in more felicitous agreement with the uptrend). We won't know for at least another 2-3 weeks which is about to occur, but because a third diverging peak could have such dire implications, the chart is worth monitoring closely. _______ UPDATE (Jul 14): Friday's close at the very top of last week's price bar diminished the odds of a bearish stochastic divergence like the one described above. Another strong close this week and the chart would look much less threatening.

The Dow closed above 27,000 for the first time on Thursday, giddy over the Fed chairman's recent embrace of more easing.  In two days of testimony before Congress, Powell left little doubt that the central bank is about to lower interest rates by 25-50 basis points. However, only a moron could believe this will mitigate the impact on the U.S. economy of slowdowns in Europe and China that are already well under way. What it will do is goose U.S. asset prices so that they are even more insanely overvalued than they are now, which in turn will attract flight money from Europe and China. Sounds like a perpetual motion machine, right? We all know that such a contraption does not exist, and that pumping U.S. stocks into the ionosphere at a time when business around the world is slowing dramatically is a recipe for disaster. Party on, Wall Street!

Fed Chief Powell supposedly has strong support inside Congress to fend off Trump's calls for lower interest rates. How do we know this? Well, there was this headline atop the lead story in Wednesday's Wall Street Journal: 'Powell's Support Inside Congress Is Deep'. And here was the sub-hed, in case you missed the point: 'Lawmakers on both sides say they would oppose any bid to oust the Fed chairman'. Perhaps it was just bad timing, but the financial world's newspaper of record has rarely looked more stupid. Oust Powell??  Give us a break!  Less than a year into the job, the guy is looking like a potential hero in the promiscuous borrower/lender Hall of Fame, a worthy successor to 'Easy Al' Greenspan.  For at the moment readers were savoring the WSJ story with their morning coffee, Powell was on Capitol Hill, telling Trump and the loose-credit rabble exactly what they wanted to hear -- i.e., that money can be made to grow on trees, and that he will be more than happy to make this happen later in the month, when the FOMC next meets. On this news, U.S. stocks and gold shot higher, yields fell, and on Wall Street, at least, all seemed right with the world. If there is any surprise in this, it is Powell's obligingly donning the Fed chairman's traditional knee pads without making any of the usual face-saving obfuscations. You'd think he would at least feign token resistance, since he knows how badly he is being played by Trump and Wall Street. For make no mistake, by putting the U.S. on a likely course toward negative interest rates, he has one-upped even his philosophical mentor, Easy Al. Sucking up to monetary doves and giving them a whiff of cocaine as the broad stock averages flirt

The chart shows the New York Composite Index going back to the start of the bull market in 2009. It is from our friend Peter Eliades, editor of Stockmarket Cycles, who notes that the high achieved on July 5 precisely reached a trendline that has held important implications for the aging bull throughout its history. The two red circles represent the trendline's anchor points which, in Peter's word, 'mystically' define the line's slope. They occurred, respectively, at the intraday lows of August 18, 2017, and June 28, 2018. Targets Well Above Unlike the Dow Industrials, the Nasdaq 100 and the S&P 500, the NY Composite Index has yet to hit a new record high. However, a decisive move past the trendline would greatly increase the odds of this happening. Like Rick's Picks, Peter has unfulfilled targets well above these levels in the S&Ps. His lie in the range 3200-3400, ours at 3095. The S&P cash is currently trading for around 2979. As long as these targets remain viable, and regardless of whether stocks weaken over the near term, there is little reason to think they will not eventually be achieved.

Investors are showing acute symptoms of Mad Sheep’s Disease, so obsessed are they with Fed monetary policy. To judge from the stock market’s weakness on Monday, Wall Street is now 100% dependent on stimulus from the Fed, or at least regular hints of it, to keep the ten-year-old bull market going. Consider Friday’s report that the U.S. economy added 224,000 jobs in June. Although that is well below peak levels, it suggests that hiring is continuing at a healthy pace even as the economy cools. Ordinarily that sort of news might be expected to hold stocks buoyant. In this case, however, it produced only a knee-jerk selloff because it ostensibly reduced the odds of Fed easing before August. Kowtowing to Wall Street’s Greed Recently, even the most dovish banksters have struggled to concoct a plausible reason for loosening, given that the stock market is trading near record highs. But the easy-money mob has grown so shrill and persistent lately that Powell was ready to gun the supply of funny money for no good reason. Now with hiring strong and steady, the Fed must feel positively embarrassed about having to kowtow to Wall Street’s naked greed. (Don't worry, all you sheeples, that won't stop them from doing the wrong thing.) In the meantime, we should expect the stock market to act out the terminally afflicted logic of chronic Fed-itis. To borrow Ricardo Montalban’s famous phrase, as far as investors are concerned, it is better to look bad than feel good.

Europe took competition to a new level last week in the global currency-devaluation olympiad. Nominating the politically-minded IMF chief Christine Lagarde rather than a blue-blooded financier to run the ECB is akin to making Trump chairman of the Federal Reserve. No longer can we pretend that the staid protocols of old-school banking still obtain in the financial realm. Instead, there is a strong whiff of desperation as Europe readies a last-ditch attempt to stimulate itself out of a liquidity trap with the ECB's deposit rate already at minus 0.4%. No one could possibly believe that bringing rates down even deeper into negative territory will have a lasting impact on the intractable unemployment, anemic economic growth and coming deflation that threaten to snuff prosperity in the eurozone. The alternative is to turn the region into a fiscal-spending free-for-all by lending promiscuously to the likes of Italy, Greece and Spain. Presumably, this would come with Germany's reluctant assent and the feckless instruction, "Go to town, guys!" Powell's Dilemma This is unfortunate for Fed Chairman Powell and his nascent plan to propagate yet another QE blowout. He's practically had his arm twisted off by easy-money advocates and, having donned the knee pads that came with the job, is ready to do their bidding. But now, try as he might, it will be difficult to force the dollar lower. He'll have to settle for mere asset inflation in the U.S., as though there weren't enough of that already, and scant hope of shrinking the trade deficit. Not that anyone will much care.  Higher share prices will continue to obfuscate a multitude of sins, allowing Wall Street to revel for yet more weeks/months/years until the deepening economic woes of our trading partners, including China, eventually hit home.

August Gold pulled a Pearl Harbor on bears and skeptics Tuesday, reversing early morning weakness with a surprisingly sharp rally. I'd expected another two weeks of corrective action myself after bullion's impressive run-up in June. However, the chart (inset) shows the futures to be bound most immediately for at least 1446.90. If so, that would be a new recovery high and an encouraging sign that even bigger things lie ahead. Specifically, a 1504.00 target would be in play if the August contract closes for two consecutive days above 1444.40 or trades more than $12 above that price intraday. Please note as well that a $150 plunge from around 1460 would not be the disaster it might seem at the time; rather, it would set up a textbook buying opportunity according to the proprietary rules Rick's Picks subscribers follow for 'mechanical' trades. ______ UPDATE (Jul 7, 5:05 p.m. ET): Last week's surge peaked just shy of the 1444.40 midpoint resistance, implying that bulls have run out of steam for the moment. Here's a chart that shows it. The futures will still need to close above 1440,.00 for two straight days, or trade more than $12 above this Hidden Pivot intraday, in order to clinch a follow-through to 1504.00. In the meantime, there is no 'mechanical buy' set-up to use on the daily chart, since the rally topped well below our sweet spot before the pullback. _______ UPDATE (Jul 10, 9:29 p.m.): The futures are in the third week of the correction I'd forecast above, seemingly eager to break out of a 60-point consolidation range. The pivot at 1444.40 remains crucial to the completion of this task.