Rick’s Picks

Requiring buyers to hit 1293.20 before we give gold the time of day has paid off once more by keeping us from getting sucked in by this morning's ill-fated rally. The futures hit 1292.80 before doing what they always do -- i.e., turning tail with a vengeance. The selloff so far has amounted to $11, but because of our 1293.20 stipulation, we were not among the bulls who got trapped by unwarranted enthusiasm. The chart (inset) shows new downside levels and targets. The lowest of them lies at 1245.40, and it closely corresponds to a bigger-picture target at 1244 that aired here earlier. This Hidden Pivot support will become my minimum downside projection once gold has bounced from yet another Hidden Pivot support at 1262.70 that has kept us properly cautious for nearly a month.

Sellers exceeded the 2865.75 downside target shown, implying they are not yet done. The overshoot was just 3.25 points, but that's sufficient for us to infer that the rally is corrective and therefore, at some level below 2938.25, an opportune short sale. Granted, there's room to raise the point 'A' high a tad to produce a lower 'D' that would have precisely contained the selloff. But the one I've used is too clear and compelling to ignore, and that's why I am relying on it to give me an accurate read on the dominant trend. Alternatively, however, and just in case, a thrust above C=2938.25 would be warning bears to dive for cover. _______ UPDATE (May 9, 8:06 a.m.): Weakness overnight has put a 2831.50 target in play. There's potential for a 'mechanical short' to materialize if the futures rally to x=2882.50 (stop 2900.00). Here's the chart. _______ UPDATE (May 9, 2:21 p.m.): The relapse amounted to a very nasty 50 points. Shorts panicking to get 'em back have reversed the selloff from 2836.25, five points shy of my target, recouping 70% of the day's losses so far. I am skeptical about this rally but would become a (temporary) true believer again if it hits 2930.75. This is a tick above an interesting 'external' peak on the hourly chart.  

This week's 900-point selloff is technically very similar to the 1000-pointer that occurred between February 25 and March 11. Both exceeded two prior lows on the daily chart, generating bearish 'impulse legs' in the process. Now, even if the Dow should recover much or most of it in the days ahead, it would not change the troubling fact that two diving feints occurred within such a short time span. This is akin to that ominous cough in the second reel of a Hollywood melodrama. The bull's vital signs are failing, and, for a score of reasons that I've written about here,  it seems an unlikely time for stocks to get second wind. Even so, I will continue to stick closely to big-picture technicals that, at least theoretically, still give the bull plenty of room to run. The picture would change dramatically for the worse, however, if the Indoos were to fall a further 757 points, or 2.91%, exceeding 25,208 to the downside. A corresponding drop for the S&P 500 Index would be 163 points, or  5.65%. As for the Nasdaq (QQQ), still trading near last autumn's record highs, a 17-point drop to 169, or 9.1%, would likely be the death knell for the aging bull.

Remember: However nutty price action gets, it's all just impulse legs. Two tariff-related downdrafts within the last 24 hours have produced the tradeable pattern shown (click on inset). There are two ways you can play it: 1) bottom-fish at p=2905.25 with a bid a tick above that midpoint Hidden Pivot, stop 2903.75; or 2) get short at the green line 'mechanically' if the trade sets up exactly as shown. You'll be on your own if either order fills, but you should take a partial profit on half the mechanical short if it falls to the red line at 2905.25.

Shades of Smoot-Hawley!? Stocks plummeted for the second time in less than 24 hours Monday when Trump signaled to China's trade negotiators that he means business. A long-delayed, $200 billion hike in tariffs will take effect on Friday because the Chinese reneged on commitments they'd already made. I don't say they allegedly reneged or that they reportedly reneged, since no one ever believed for a minute that the scumbags were interested in giving the U.S. an honest deal. Why should they want to play fair when their goal is to cultivate trade with Europe, Asia and the rest of the world at America's expense? It will simply take them longer now, since, besides raising levies, Trump will take strident measures to thwart China's epic theft of intellectual property, and push back more aggressively against Beijing's generous subsidies to key industries. Wall Street did not take the news well, and for good reason: Americans will pay a steep price as the trade war with China escalates as seems all but certain. The Dow fell nearly 600 points when the initial story broke Sunday night that talks had broken down.  Traders spent Monday's session clawing most of it back with the crucial help of stalwart short-covering. But after the close, the trade story took a turn for the worst when it was announced that new tariffs would actually be implemented by week's end. Dow index futures dropped 200 points in a blink -- a loss that will be more difficult to recoup a second time because the negotiations are now obviously kaput. Watch 'Em Work! Even so, don't expect the fund managers to simply throw in the towel. They still control a vast sea of Other People's Money that has few places to go other than into U.S. stocks. Ten years of

Fever took hold of the stock market as the week ended, stoked by the best unemployment numbers in half a century. Two days earlier, shares had fallen sharply as investors registered their disappointment in the Fed's latest pronouncement. Obfuscator-in-chief Powell had said the central bank would hold steady and that the economy seemed in fine shape. But the markets reacted as though they were hoping for just enough bad news to push monetary policy toward easing. No matter. By Friday, the virtues of an actual strong economy won out over hopes for a weakening economy deserving of stimulus. The buying spree we saw in celebration of this newfound contentment seemed likely to accelerate in the week ahead. A key feature of the melt-up since January has been the steady rise of some FAANG stocks beset by troubling news. Boeing is enmeshed in a deepening scandal related to the fatal crash of two 737 Max aircraft. But however disconcerting the news on a given day, the stock has either risen or remained buoyant (click on chart inset). Apple's iPhone sales have been weakening, but that hasn't inhibited the stock's wilding spree. And Facebook, taking regulatory flak every time Zuckerberg speaks, has soared on news of a broad but unimpressive change in the company's business model. Finally there is Google, which plummeted 10% last week on news that they are losing ground in advertising to Facebook and Amazon. The selloff seemed certain to mutate into a routine shakedown, however, and before the week ended, Google shares appeared once again to be firmly in the grip of the weasels who manipulate them, always with an eye toward new-record highs. A Millennial Peak Scanning the business pages, the overall impression is that the U.S. economy has never been stronger and that nothing could possibly

Dollar bears seem to be everywhere these days, so perhaps it's a good time to revisit the longer-term charts, which remain bullish. Notice that each visually significant upthrust in the Dollar Index exceeded an external peak. This has serially refreshed the bullishness of the chart while implying that any bout of weakness is merely corrective.  However, a key resistance lies not far above in the form of a 100.71 midpoint Hidden Pivot. Although this number can be used as a minimum upside target for now, DXY would need to push decisively above it, to perhaps 103 or higher, before we could infer that the 113.16 'D' target is solidly in play. At that point, p2=106.93 could be used as a minimum upside objective. In an earlier DXY tout, I provided a long-term view as well as a detailed explanation of why I think the dollar is ultimately headed much higher. (Note: DXY represents a basket of currencies that is 60% weighted toward the euro.)  An extremely strong dollar would be congruent with the global deflationary collapse that I believe is necessary to correct millennial excesses of debt in the financial system. I see this as unavoidable. For my essay on the coming debt deflation, click here.

The futures trampolined last week from 1.00 point above 2900.00, a round number whose psychological importance seems obvious in retrospect. They are bound now for the 2972.75 target shown in the chart (click on inset) and should have little difficulty getting there, judging from the way buyers blew past the midpoint pivot at 2937.00. Now, a pullback from the green line from no higher than 2949.50 should be used as a mechanical  buying opportunity, stop 2900.75. ______ UPDATE (May 5, 6:21 p.m.): None of us imagined there was still bad tariff news out there to disrupt the markets, but that is exactly what has happened this evening with a bellicose tweet from Trump. This too shall pass, but the slimeballs who work the markets on Sunday evenings have taken the E-Mini S&Ps down 54 points so far in order to make certain that any buying they have to do is sufficiently discounted to turn a profit on Armageddon. There's a Hidden Pivot support at 2894.50 that is working thus far to contain the fraudulent air pocket, but I wouldn't lean on it too heavily._______ UPDATE (May 6, 12:15 pm.): The fraudulent air pocket seems just a tad overdone at these levels, but if it snowballs, the futures could fall all the way to 2800 to pick up 'structural' support from some key lows recorded there in late March. The resurgent tariff war and a shooting war between Israel and Hamas that is threatening to go out of control are providing a double whammy, but it's impossible to estimate how much of a bounce stocks would get if there's a cease-fire agreement overnight.

Sometimes we're blessed not to possess insider information. Several pointed examples surfaced in the last few days. If we had known, for instance, that Fed Chairman Powell would tell the world on Wednesday that the U.S. economy is holding steady as a rock and that no changes are contemplated in monetary policy, we'd have jumped on call options a day earlier. Lo, the Dow began a 500-point plunge the moment he began to speak, turning our would-be call options into dross. Go figure. And then there was Yeti, a terrific young company based in Austin, TX, that makes some of the best cooler chests and thermoses we've ever owned. On Thursday they announced their first profitable quarter, reflecting a swing from $3.3 million in losses a year ago to a $2.2 million profit in Q1. The results beat analysts forecasts, and yet the stock got sacked, down nearly 10% intraday and fully 18% from a 36.60 peak recorded earlier in the week. Can you imagine how you might have reacted if someone had whispered in your ear a week ago that Yeti was going to report its best quarter ever.  The May 35 calls were trading for around 2.50 at the time and would have seemed an easy bet to double. Instead, they lost more than 99% of their value, trading down to 0.02 before day's end. TSLA Rallies, But Why? Finally there was Tesla, which announced it would try to raise $2.3 billion by selling stocks and bonds. Founder Musk had insisted earlier that money-raising would not be necessary, but he changed his tune after the company reported one of its worst quarterly losses in history. Sell the stock short just ahead of the news? Not on your life. The stock was up as much as $16 on Thursday,