Rick’s Picks

Fed monetary policy inched toward suicide Wednesday with a 25-basis-point rate hike and a feint toward bumping up interest rates two more times next year. Are they trying to make certain that Trump doesn't get re-elected? This interpretation is sounding less farfetched each day as the banksters continue to flout a global economic storm that is gaining strength by the week. It is manifest in the faltering economies of Germany and China, but also in the U.S., where the housing and auto sectors have begun to implode. The Burden of Debt If that weren't enough to make Team Powell think twice about continuing to walk the walk, the collapse in oil prices is threatening to unleash a deflationary juggernaut on the financial world. The energy patch is where all the leveraging hellcats flocked when the U.S. began to emerge from the Great Financial Crash of 2007-08. Energy resources became a key source of collateral for heedless lending, which in turn created a global derivatives bubble with a notional value exceeding a quadrillion dollars. Every 25-basis-point rate hike increases the burden of debt on all of it, making a deflationary day of reckoning nearly inevitable. (Here's a letter to the WSJ that explains why the 'Fed put', far from being dead, is eternal.)

We risked small change ($60) buying the expiring 190/195 calls spread 20 times for 0.03, but it is no longer even a longshot bet. Instead of reversing sharply and pulling the broad averages with it, the stock has continued lower, putting considerable drag on the market. The even worse news is that Wednesday's decisive breach of the 161.60 midpoint support shown in the chart implies that more downside to 150.63 is likely. Even so, I am not recommending a mechanical short if the stock rebounds to the green line, since the C-D leg of the bearish pattern has developed so slowly. _______ UPDATE (Dec 23, 5:10 p.m. ET): The stock dove nearly $7 on Friday, slightly exceeding the 150.63 target before coming to rest pennies above it. I'd be surprised if AAPL fails to bounce from here, but we should be prepared for this nonetheless. Mr. Market denied us the opportunity to bottom-fish that we'd patiently waited for, but the risk of staking out a long position at Friday's closing bell, especially against such an onslaught as we'd witnessed, was unacceptable. If you did so anyway, please let me know in the chat room so that I can determine whether to establish a tracking position._______ UPDATE (Dec 24, 10:16 a.m.): AAPL obliterated the 150.63 support, so it's going even lower. Here's a new target at 145.66 that differs slightly from the 144.82 target given in The Morning Line. It should work nicely for tightly stopped bottom-fishing, but be prepared for Mr Market, the sonofabitch, to touch it a few nanoseconds before the closing bell. Be careful using options. The Dec 28s are extremely pricey, with 'implieds' nearly twice historical stock volatility and shedding time premium by the minute._______ UPDATE (Dec 26, 3:35 p.m.):  AAPL has uncorked a spectacular rally today

I'm prone to remind readers from time to time that I don't have a crystal ball. Although I hit forecasting bullseyes often enough, this feat is just a cheap parlor trick for anyone even a little bit familiar with the Hidden Pivot Method. Under the circumstances, I probably shouldn't be too disappointed when the crystal ball I insist that I don't have fails me. Or has it?  Yesterday I wrote that the stock market would tell us in advance whether the Fed is going to announce a rate hike on Wednesday following a two-day FOMC meeting. I had expected the evidence to be "crystal" clear, based simply on whether the E-Mini S&Ps surpassed 2616.75 on Tuesday. They missed by a mile, implying the Fed will tighten as "everyone" supposedly expects. But now I'm not so sure. Instead of crystal clarity, what Mr. Market delivered was just an 8 Ball tease:  "Reply hazy. Try again later." Too Many Uh-Oh's How so?  Well, the market turned weak on Tuesday, but for the "wrong" reason. Although Boeing and Apple shares looked feisty enough at the bell to lead the Dow 600 points higher, the rally died just halfway there. The reason is that our all-important bellwether AAPL went comatose after racking up a promising 2% gain in the early going.  This occurred when the Wall Street Journal, alluding to flagging iPhone sales in India, came out with a turd-in-the-punch-bowl headline:  'It’s Been a Rout’: Apple’s iPhones Fall Flat in World’s Largest Untapped Market. The headline doomed Tuesday's stock-market rally, although it took a couple of hours before the Masters of the Universe who manage bear-market levitations called it quits. Of course, they gave it the ol' sleazeball try at day's end, goosing the E-Mini S&Ps 30 points in a trice. But the effort

Although I've projected a further 3.3% drop in the E-Mini S&Ps over the near-term, we should remain open to the possibility of a stock-market reversal on Tuesday that would kick off the increasingly prayed-for Santa rally/dead-cat bounce.  The chart shows what would need to happen to trip the bullish signal. Specifically, the March contract would need to push above the small peak at 2616.75 that is labeled in red. Although that would generate only a minor bullish impulse leg on the 'hourly' bars, the timing of it a day ahead of the Fed's big announcement on Wednesday could hold particular significance. Tightening 'Expected' -- But by Whom? The central bank is expected to tighten one more time this year, but there are reasons to think such 'expectations' don't actually exist -- that they are merely being assumed by a mainstream media too lazy and stupid to provide a statistical basis for them. If the Fed "surprises" by not tightening -- presumably because they, too, can see that the stock market is falling apart, and that Europe and Asia are sliding into recession -- it will send U.S. shares soaring on Wednesday.  The news would also produce a major shift in market psychology, since investors' focus would change from anxiety about when the next tightening is coming, to "When will QE5 commence?"  The foregoing is admittedly a lot to infer from so simple an event as a rally above an obscure peak on an intraday chart. But we have nothing to lose from watching and being prepared for a bullish jolt, and much to gain if we are a day ahead of it.

The pattern shown is well-formed and compelling, with a 2480.75 target that lies 3.3% below these levels. It was not possible to project an equally high-quality target for the expiring December contract because its point 'B' low did not exceed a prior low as this one did. The visual differences are slight but nonetheless significant with regard to their respective accuracy and usefulness. Initial downside penetration of the 2652.63 midpoint support was weak, so we should be alert to the possibility of a significant upturn from somewhere north of D -- perhaps even from this morning's 2553.50 low. Odds of this would shorten if the futures are able to push above 2616.75 today.  That is where a minor but technically important 'external' peak lies, and its breach to the upside would signal a trend reversal capable of getting legs. If it happens, take it as a sign that the FOMC announcement due out Wednesday will be perceived as very bullish -- sufficiently so to trigger off the well-anticipated Santa rally -- or if you will, a Santa dead-cat bounce.______ UPDATE (Dec 18, 8:51 p.m.): See my comments in today's The Morning Line for a detailed outlook for Wednesday and beyond. Most immediately, downside targets at 2504.25, then at 2480.75, will remain in force unless a rally exceeds, respectively, 2576.25, and thence 2824.50 (yes, you read that last figure correctly)._______ UPDATE (Dec 19, 8:56 p.m.): A so-far modest bounce has occurred from a 2489.50 low that missed my 2480.75 target by 9.25 points. Ordinarily the failure of a downtrend to hit its mark would be mildly bullish, but only when the subsequent bounce starts exceeding external peaks on the intraday charts. A small one sits just above at 2519.00, but I'll want to see a more important one at 2568.00 exceeded

With the uncertainties of Brexit weighing on Britain and the EU, their respective currencies have been taking a beating. The euro is in a long-term bear market that has seen a drop from $1.60 in 2008 to a low early last year of $1.03.  Over that time, sterling has fallen from a surreal peak of $2.11 to a sobering $1.20. Although these trends do not speak well for the economic and political future of the European Union, they have at least delayed its demise. The real losers are German consumers of imported goods and services, since the D-mark would likely have lost little or no purchasing power globally if the currency were still around. This can be inferred from the relatively moderate, 28% drop that has occurred in the Swiss franc despite the burghers' diligent efforts to squash it to shield exports from the currency riff-raff of the world. As Old as Prostitution To give Brussels its due, trashing sovereign money is an extremely competitive game. That's because the global currency regime over the last century has amounted to a never-ending Devaluation Olympiad. The game is as old as prostitution, and all of the players at one time or another have been hellbent on using devaluation as a tool to boost exports. China's rising hegemon has raised the level of play, sort of like a Cuban baseball team insinuating its way into the Major Leagues. Regarding my outlook for the pound and the euro, the former looks like a good bet to fall at least to the $1.04 target shown (click on inset). You can expect a powerful bounce from that 'Hidden Pivot' support, but once it runs out of steam the relapse could take sterling down into the mid-$0.80s.  As for the euro, currently trading for around $1.14, it

The relentless plunge of the World's Second Most Valuable Company continued on Friday, making it all but impossible for the broad averages to rebound intraday or even in the final hour. AAPL now looks like a good bet to fall to at least 161.97, a midpoint Hidden Pivot support shown in the chart (inset), or possibly to 160.23, an alternative target given here earlier. If, heaven forbid, the stock closes beneath the lower number for two consecutive days, look for more downside to as low as D=151.36. That would equate to a 35% fall from the all-time high of 233.47 achieved in early October. We hold a longshot bet, the Dec 28 190/195 vertical call spread, purchased 20 times for 0.03 apiece. Total risk is $60 plus commissions, but the position has the potential to produce a profit of as much as $9940 if the stock reverses with a vengeance before year's end. _______ UPDATE (Dec 17, 9:56 p.m. ET):  You can bottom-fish the 161.96 target shown here with a very tight stop-loss, but please note that using the night-session bars yields an alternative target at 161.60. A decisive breach of this midpoint Hidden Pivot support would be very bearish, opening a path to as low as D=150.63 or alternatively (as noted above) 151.36._______ UPDATE (Dec 18, 8:55 p.m.): No change in my outlook or advice unless AAPL should exceed 172.57, the point 'C' high of the pattern shown in my last update.

Bulls and bears duked it out on Thursday for a third straight day, setting up a grudge match on Friday that could produce more volatility than we've seen so far this week. Whatever the case, I'd suggest using the chart shown (click on inset) to guide you. It implies minimum downside to 2623.13, a Hidden Pivot midpoint support that can be used to bottom-fish with a stop-loss as tight as 2622.75.  If it's hit, take it as a sign that the futures are likely to continue lower, presumably to the 2559.75 target shown. They could conceivably trace out a set-up for a mechanical short from the green line, so be alert to this possibility in the early going.  If I'm in the chat room when it occurs, I'll provide further guidance. _______ UPDATE (Dec 14, 12:30 p.m.): Today's plunge brought the futures within a hair of the 2591.44 secondary pivot shown in the chart (click on inset). Tightly stopped bottom-fishing would have warranted on Friday, but not within an hour of the closing bell. If the pivot is decisively exceeded Sunday night or Monday, you can assume the downtrend is likely to continue to D=2559.75. That would be a high-odds spot to attempt bottom-fishing with a tight stop-loss, but you should do so aggressively only if you've made some money being short on the way down._______ UPDATE (Dec 17, 2:12 p.m.): With the 2559.75 'hidden' support giving way, here's the new picture we must consider, with a 2456.50 target. Please note that although a whopping rally from here touching 2629.00 would feel like the stock market was back on track for a decent Santa dead-cat bounce, it would actually set up an enticing 'mechanical' short.

The stock market kept its cool Thursday, demonstrating yet again that traders are deaf, dumb and blind to whatever is going on in the real world. The Dow rose moderately even though the headlines were a full shade darker than usual. Trump was threatening to punish GM for closing an auto plant in Ohio. (He could kill two birds with one stone if he waits for his nemesis Musk to take over the company.) The Saudis were planning a sharp cut in oil exports in order to drive up prices; the U.S. budget deficit hit a record in November; and Pimco raised the odds of a recession over the next 12 months to 30%, a nine-year high. Despite the menacing tone of the news, the Industrial Average eked out a 70-point gain while the S&Ps fell slightly. Let's hope retailers don't chime in with a dour yuletide report or we're liable to see a Santa rally in reverse. Seasonality is strongly in bulls' favor, but if DaBoyz are unable to seize the advantage on Friday to end this unusually turgid week, Wall Street will face a ponderous overhang of supply come Monday.