Rick’s Picks

With almost no buying interest over the course of the week, DaBoyz still managed to maintain altitude. They did so after slightly exceeding a 2811.25 rally target we'd been using as a minimum upside projection. Although I expect the move to hit 2851.75, a Hidden Pivot first identified here nearly a month ago, we can use a lesser target at 2833.25 (see inset) for now. The futures tripped a mechanical buy signal on Wednesday when they pulled back to the green line (2781.60), but I did not explicitly recommend the trade because it looked like it would be a tough slog with some overnight holds. ______ UPDATE (Mar 4, 11:56 a.m.): This is the nastiest bull trap we've seen in months -- a reminder that DaBoyz have been faking a rally for more than a month with precious little buying power -- other than from short-covering. Today's downdraft has been orchestrated to renew the phony uptrend's sustainability. The deception was masterfully executed because it allowed DaBoyz to distribute stock and get shorter above Friday's closing prices for sixteen blissful hours.  This will give them room to buy when the shakedown hits bottom.

DIA opened on a big gap that looked bound for our 263.39 target, but it turned out to be a bull trap. The subsequent relapse tripped a textbook 'counterintuitive' short that produced a quick profit, but sellers couldn't finish the job. The bullish finishing stroke was not very impressive, but it generated a new rally target at 263.63. (3-min, A=257.60 on 2/21). Ordinarily I would advise shorting there only if you've made money on the way up. In this case, however, the uptrend has been so treacherous that I'll recommend a modest short, tightly stopped, at the target. We'll look at expiring out-of-the-money puts if the trade sets up right. _______ UPDATE (Mar 4, 6:42 p.m.): Today's plunge negated the rally target and shorting strategy.

(I wrote here earlier that a public-pension bust is coming that will usher in the Second Great Depression. Could California, Illinois, Connecticut, New Jersey et al. avoid disaster by raising taxes? That's what John Jay, a regular contributor to the Rick's Picks forum, thinks they will do. I strongly doubt it, however, since there is no way the revenuers will be able to squeeze blood from a stone. It is therefore predictable that the workers will ultimately get stiffed on their pensions because there won't be sufficient funds to honor their contractual claims. A catastrophic deflation is coming because it is the only way our massive, manifestly unpayable debts can ever be settled. Hyperinflation could do the job in theory, but I've written extensively on why this "option" is extremely unlikely, especially during the initial stages of a global economic collapse. Following are John's comments, which are interesting regardless of how one believes the endgame will play out. RA) As far as public pensions go, the states you mentioned already have a solution: Just raise taxes to the point of confiscation. Illinois is planning to give state assets to the pensions, California is working on killing Prop 13 so they can make $20k a year in property taxes on a 60-year-old, termite-infested shack a reality. None of them are backing down on taxes. Good luck finding a judge anywhere who will rule that pensions must be cut to balance the state budget. Drifting into Feudalism The population of Connecticut has remained more or less stable for decades, but the size of government budgets has tripled. In California, 13 million people are on the Medi-Cal state health care program. Anyone with an interest in history can see the accelerating drift into Feudalism. Twenty-two million government workers who produce nothing of value

The live feed from Hanoi has been riveting. Trump and Kim appear to be getting along well.  The President pats his counterpart on the back, the dictator smiles. They share a laugh as they walk through a garden. Kim's haircut looks oddly flattering. Everything seems to be going so nicely that one could almost forget that he has at times acted like a madman. As for Trump, he is his usual self, but with the abrasiveness held in check. Besides giving hope to the world that peace and prosperity could break out on the Korean Peninsula, Trump has effortlessly upstaged the Democrats during what was to have been their hour of redemption. They are tuned not to the summit, but to their own witch-hunt bent, obsessively bent on proving Trump colluded with Russia to steal the election. Not only did Thursday's grilling of former Trump lawyer Michael Cohen produce no evidence of this, it may have iced Mueller's probe. What We Know for Sure... One thing even Trump's detractors would have to concede is that whatever happens in Vietnam, and whatever the President says while he's there, it won't be scripted. We can be certain he will speak his mind, as he always does, and that he will not claim a deal has been made unless this is so. We also know that unlike his predecessors, Trump will not promise North Korea a wad of cash.  Another thing we know, something that no other U.S. President before him has been able to convey, is that Kim the Madman is in fact a rational actor. If it were otherwise, Trump would not be meeting with him. If a deal does result and North Korea agrees to de-nuclearize, we will see black smoke billowing from the ears of Congressional Democrats, the Norwegian

Rick's Picks avidly follows the stock market's ups and downs each day, as well as the way it is influenced by the Fed's silly obfuscations. On some days it feels as though the cheerleaders at The Wall Street Journal et al. are overdoing it, generating enough hubris to stand economic logic on its head. But let's not kid ourselves. Whether this rally has a week to go, a month, or even a year, the central bank's narrative of an economy so strong that it could overheat and produce inflation is a con-job. For in fact, every penny of debt we've accumulated over the last 40 years represents pent-up deflation waiting to implode in some unscripted moment-from-hell. Economists have made a fine science of explaining these boom times with data that ignore a darker reality.  Let me clarify just how grim our predicament is with a simple question:  Do you actually believe that millennials who can't find good jobs, who owe $55,000 on average and live with their parents will be able to foot the bills for the Baby Boomers' Medicare and Social Security?  Try and argue that monetization, or perhaps an explosion in household savings, will cover the shortfall and you'll only sound like an imbecile. Public Pension Sinkhole The public pension system is in equally bad shape, and although this tectonic sinkhole is at least talked about, no one has a clue about how Illinois, California, New York, New Jersey, Connecticut and a bunch of other profligate tax-and-spenders will be able to keep retirement checks flowing when their respective treasuries are empty. For now, though, nearly every dime that states can raise with new taxes or deliberately mischaracterized bonds is going toward pension liabilities. And while the pols would have us believe the added revenues will help keep the

The recent plunge in Heinz-Kraft shares reminds us that even Warren Buffett can make a mistake. A couple of years ago, it might have seemed as though the Sage's portfolio was impervious to downturns, given its heavy focus on the basics: food chain, railroads and insurance companies. As it happens, his bet on such time-tested brands as Oscar Mayer, Jell-o, Kraft Singles, Kool Whip and Cheez-Whiz has tanked, a victim of changing tastes. Even KHC's venerable Maxwell House label has fallen on hard times as consumers weaned on Starbucks have developed a jones for something more exotic than a cup of joe. No one is crying for Buffett, though, and he himself seems unconcerned. If you owned auto-insurance giant GEICO and Burlington Northern Santa Fe railway, which can carry a ton of freight 500 miles on a single gallon of diesel fuel, would you be worried?

I'd love to tell you that bulls have been sniffing glue and that they are long overdue for a brutal comeuppance. However, it turns out they are anything but wild-eyed, and their expectations are relatively subdued.  AIAA's most recent survey found that 35.3% of investors are 'neutral' right now -- the highest percentage in seven months.  As for bulls, they are at 39.3%, only slightly above the 38.5% historical average. This seems incredible, given that stocks have been in a vertical climb since January despite a pronounced slowdown in U.S. housing, autos and retail, and signs of distress from two of the world's biggest economies, China and Germany. Despite these considerable negatives, the Dow ended last week within striking distance of record highs. If the blue chip average were to exceed the peak shown in the chart this week, bears had better dive for cover. Going With the Flow Corporate buybacks and safe-haven money from just about everywhere else on the planet seem incapable of powering the rally indefinitely, especially if corporate earnings have peaked as seems likely. But for now we can only move with the herd and hope we are nimble enough to avoid getting trampled when it reverses.

Last week's encouraging 6% gain triggered a theoretical 'buy' signal at x=34.82 for a shot at 61.54. It could take a year or more to reach that Hidden Pivot, and although it is not pie-in-the sky because of the impressive look of the pattern, we'll focus for now on a more realistic target at 43.73 for now. That is the pattern' midpoint pivot, and it can serve as a minimum upside objective for now. Stay tuned for guidance on option spreads that could offer a cheap way to leverage the move. _______ UPDATE (Mar 4, 6:45 p.m.): Two weeks of selling have generated a so-far weak impulse leg on the daily chart without altering its bullish look or that of the longer-term chart shown in the inset. _______ UPDATE (Mar 6, 10:15 p.m.): The 'bullish look' alluded to above will endure until such time as mid-January's low at 29.25 is exceeded. Looks aside, the plunge from Feb 20's high at 35 is more than a little discouraging.  GDXJ looks like it will test the 29.25 low before it can turn around. _______ UPDATE (Mar 21, 9:36 p.m.): The 34.07 rally target shown in this chart is tied to a tired-looking impulse leg, but GDXJ should get there anyway because of the larger, bullish ABC pattern that is also pushing this rally. Will it take a week? We shouldn't be surprised if this proves to be the case, since that's the way gold rolls.______ UPDATE (Mar 28, 9:34 p.m.): Once again, gold has snatched defeat from the jaws of victory, causing this junior-miners ETF to fall 3.5% in the space of a few hours. It became a 'mechanical' buy at 32.05, stop 30.60, but the signal is weak and the trade is therefore not recommended. _______ UPDATE (Apr 1, 10:32 p.m.):

The rally sputtered out between two Hidden Pivots noted here earlier (1345 and 1354) but we'll give bulls the benefit of the doubt because upthrusts have consistently been exceeding external peaks going back to last summer. For now, stick with the ambitious 1378.70 target broached here earlier. If the pullback hits X=1305.80 it would trip a 'mechanical' bid that may be worth considering. Here's a chart that shows the pattern yielding the 1378.70 target. _______ UPDATE (Feb 28, 9:35 p.m. EST): The correction begun a week ago from 1350 looks bound for at least 1309.30. I expect a bounce from within 3-4 ticks of that number, but the futures may ultimately have to test a low at 1304.70 recorded on Feb 14 to get traction. _______ UPDATE (Mar 1, 8:02 a.m.): It is NOT a healthy sign that April Gold has failed to hold the crystal-clear support at 1309.50 (slightly corrected from earlier). Let's see if the 1304.70 low holds. If not, and the 'C' low sits right, I may suggest a 'counterintuitive' buy. Stay tuned to the chat room for timely details.