Rick’s Picks

DaBoyz more than held their own Wednesday, keeping the Dow airborne for six hours even though buying interest was practically nil. This is an achievement of sorts, and it suggests that although upside potential will be limited to whatever the stock market's masters can milk from daily mood swings, there would appear to be little enthusiasm for a hard selloff at the moment. In such circumstances, the blue chip average, currently trading for around 24,600, could waft above 25,000 with little ado. That number is psychologically important because it is where investors would start to believe that a rally to new all-time highs is actually possible. From a purely technical standpoint, the chart suggests that a decisive push past the 24,736 'midpoint pivot' would put the Indoos on track for a move to as high as 25,229 over the next 3-5 days.  The Dow is already trading above the 24,332 midpoint of the steep correction from early October's all-time high, but it won't run into serious supply until around 25,200, where tons of stock changed hands between bulls and bears in the sine wave of late October/November. Housing Slump Deepens It seems incredible to me that stocks could make any headway at all, given the darkening economic picture. It grew still more ominous Thursday with this headline atop the front page of the Wall Street Journal: "Slump in Housing Market Deepens". What could cause this situation to change so suddenly as to make possible a run-up in the Dow to new highs? My imagination fails me on this question. Barring some epiphany, I'll continue to see every new inch of the uptrend that has unfolded since Christmas as an increasingly juicy opportunity to get short.

I’ve bent over backwards lately second-guessing my permabear side, on a hair-trigger as I wait for the short squeeze from hell to begin. Instead, the Masters of the Universe who supposedly control the stock market like it’s a PlayStation game can barely muster a decent rally other than fleeting ones on the opening bar. Have I perhaps overestimated the sleazeballs? Probably. Regardless, it all comes down to whether they can consistently push stocks above previous peaks on the hourly chart. This generates bullish ‘impulse legs’ that are the building blocks of a healthy bull market. Lately, the builders have been quite timid, to put it charitably. Gloomy Headlines It's hard to blame them, given the dispiriting drift of the news. Here are a half-dozen sobering headlines just from Tuesday: 1) Home Sales Posted Steep Fall in December; 2) World Braces for Slower Growth; 3) Silicon Valley’s Unbridled Optimism Gets Fresh Reality Check; 4) Stock Market’s Next Hurdle: Tech and Industrial Earnings; 5) UBS Warns Downturn Isn’t Over Yet After Clients Pull $13 Billion; and 6) Shutdown Could Hit Already-Lousy U.S. Home Sales.  Sobering facts -- indeed, sobriety itself -- are the last thing Wall Street wants. The idea of carefully measured analysis is anathema to bull markets. Unfortunately for investors, this is exactly what has come to bear recently on erstwhile world-beaters like Facebook, Amazon  and Apple. I seriously doubt that Apple will be able to recover to new all-time highs any time soon. Even so, and regardless of the glum economic picture, the charts of the following stocks show each of them to be capable of rallying to new all-time highs in as little as three weeks: NFLX, NKE, TSLA, MSFT, GOOG, AMZN and BA.  In fact, AAPL is the exception, with a chart so ugly that it looks

Index futures were being primed Monday night for a resumption of last week's moderate uptrend. It was built for sustainability rather than speed, and that's why those of us who have been hating everything about the stock market lately should be careful not to underestimate its potential. Its devious sponsors are clever, to put it mildly, and they have been very cautious about letting the short-covering bears who are driving it get too far ahead of themselves. My 2728 target for the E-mini S&Ps lies about 70 points above, implying a further Dow rally of perhaps 600-700 points is coming. Concerning why we distrust this rally no matter how high it goes, here's yet one more reason, from the latest edition of The Wall Street Journal: "Investors are increasing their cash holdings at the fastest pace in a decade, highlighting doubts about the durability of the stock market’s rebound in the first weeks of this year."

Buyers shredded a key resistance on Friday, leaving little doubt about whether they'll achieve the 2728.25 target shown in the chart. It lies 57 points above, and if and when the futures get there, the Dow Industrials, which settled at 24,706, will be trading for around 25,200. In an update sent out Thursday night I'd suggested getting short if stocks rallied strongly to end the week but pulled back in the final hour. The fact that they barely pulled back at all will have left bears badly on the ropes, where they will remain unless some horrific headline over the weekend bails them out. In the chat room before the close, I mentioned taking a small short position, but this was just a token contrarian bet based on the rally's unstoppable look.______ UPDATE (Jan 22, 10:46 p.m. ET): Tuesday's plunge brought a tinge of doubt to the 2728.25 projection, but it will remain valid in theory until such time as sellers exceed the point 'C' low at 2567.25. Actually, ES would become a mechanical buy in theory if it comes down to 2607.50 (the green line in the chart)._______ UPDATE (Jan 23, 5:09 p.m.): The futures bounced from 2612.50, five points above our tripwire for a mechanical buy. It remains viable, although I'll suggest paper trading this one unless you know how to convert the set-up to 'camouflage' in order  to cut the initial risk of about $2000 per contract down to as little as $60.

My enthusiasm appears to have been premature, since the futures are close to turning intraday charts that had been bullish into dross. The daily chart remains positive, but there is evidently more work to be done on the 'hourly' to build a base for a sustainable rally. However long it takes, the next upthrust will need to exceed a very small 'external' peak at 1304.50 recorded in mid-June to keep the bullish trend begun in August healthy.

How high does this bear rally have to go to fool us into thinking it's the real deal? You don't have to be a technician to answer that question -- just look at the chart. From a visual standpoint, a  move up through the red line would surely get investors' juices flowing. The reason is not just that the Dow would appear to be within shooting distance of the old record high, it would also have pushed past two important peaks created during December's steep plunge. Do we trust our lying eyes at that point? Not unless we want to get slaughtered with the rest of the bullish herd. For as convincing as the rally might seem, it could easily fail above 25,000 due to the bountiful supply that accumulated between 25,500 and 26,000 last year in the February to July period. Mr. Market's M.O. Allow for the additional possibility that the bear rally could fail at any time -- i.e., now -- and the risk could be particularly high if the broad averages end Friday strongly on the upswing. The Dow looked unstoppable at Thursday's close; if the binge were to continue for another day, it would leave bulls feeling giddy and bears nauseated. What a beautiful trap that would set! It would perfectly fit Mr. Market's M.O., which unfailingly makes important tops all but unshortable. To heighten the deception, Mr. Market would avoid ending Friday with stocks at their highs; otherwise, it would be tempting for bears to short into what they'd perceive as an unsustainable burst of exuberance. A measured correction off the peak of a powerful rally would leave them less eager to challenge the mood of the day. Conversely, the appearance of sustainability and moderation would fool bulls and bears alike into expecting Monday to

Buyers blew past a promising rally target at 2636.50 on Thursday, implying they’re spoiling for more.  In fact, the effort exceeded virtually every Hidden Pivot resistance identifiable on the intraday charts, including one at 2642.50 shown in today's chart (see inset). Although the pullback from the intraday high was sharp, bulls had recovered most of it by early evening, leaving shorts badly on the ropes for Friday. All of this makes a move to new recovery highs seem inevitable — so much so that a trader might well have asked at Thursday's close, “How can I go wrong taking a long position overnight?” It is when we start thinking this way that a bell should go off warning us to consider the opposite — i.e., a punitive selloff from out-of-the-blue.  Bottom line: We’ll be hell-of-bullish at the opening, but ready to unfurl the yellow flag at the first sign of a stall.

Although Rick's Picks was itching to short into strength as Wednesday began, we stepped aside when buyers came on stronger than expected. Their bravado didn't last long, however, and by day's end bulls looked spent. Even so, the intraday highs easily exceeded some short-term rally targets (see chart inset), implying that a moderate pullback from these levels should be regarded as a buying opportunity. In the weeks and months ahead, we'll need to get used to this kind of herky-jerky price action, which reflects distribution in a bear market. This is a delicate operation, and the smart guys who carry it out must take great care to avoid giving bears even a faint whiff of weakness. This was not a problem when the short squeeze commenced on December 26 with the subtlety of a trebuchet hurling a Chevy Suburban into the sky. Bears dove for cover and have spent the last three weeks cowering. Making Big Mammals Disappear But they’ve grown less intimidated as the rally’s trajectory has flattened, and this is going to pose a problem for those charged with levitating a stock market that may have seen its best days for a long while. They'll have to make it past Q4 earnings reports -- no small feat if the companies fail to deliver. Even so, you should never count DaBoyz out, since these sleazeballs are very good at what they do. Like a great magician, they can make an elephant -- or a bear -- seem to vanish in front of our eyes, even when we know it's just a trick.

The broad averages wafted higher Tuesday after being stuck in a holding pattern for more than a week. Although the ascent was gentle for most stocks, the hard-hit FAANGs caught fire, with NFLX leading the pack on a nearly 7% gain. The company announced an 18% rate increase in its most popular plan, which will now cost $13 a month instead of $11. Wall Street loves a company that can make a price increase stick in these very competitive times, and it will allow Netflix to step up the bidding war for A-list talent and content.  While NFLX was streaking higher, the shares of Disney were falling by almost 2%. The company will have to match Netflix dollar-for-dollar to stay competitive, but it won't be easy, since Netflix' pay scale is outrageous. For example, they paid comedian Chris Rock a reported $40 million for two one-hour specials. Nice work if you can get it. But will such extravagant outlays pay off in revenues? The jury is still out, but the suspicion grows that the bidding war has grown too costly to sustain.