Rick’s Picks

We'll treat Santa rallies with caution, if not to say skepticism, as a result of Tuesday's take-no-prisoners onslaught. Mainly, it'll be a matter of keeping the word "DISTRIBUTION!!!" in mind whenever bulls seem emboldened. That goes for AAPL as well, my one-size-fits-all bellwether. The stock had switched on the charm Monday, all but shouting "Buy me!" from the rooftop as the session ended. This was before AAPL tripped an outright 'mechanical' buy signal midway into Tuesday's session -- one that met our criteria for jumping on that type of trade. Lo, the stock thwacked our bid, then continued relentlessly lower for the remainder of the day. This eventually stopped out the trade, but the thing to notice was that AAPL barely bounced after the last bull had been cast off. It does not bode well for the short-term. Nomura bank's man-in-the-trenches attributed the selloff to more or less technical factors while noting that his employer's 'CTA Trend Model' -- here's a mouthful of jargon -- "is again deleveraging massive notional in long US Equities expressions across SPX, RTY and NDX live." Phew! For a moment there, we'd though it was just run-of-the-mill fear that brought sellers out in droves. He also noted that the selling occurred in the context of a well entrenched global shift by investors out of stocks and credit and into government bonds -- all due, apparently, to a sharp turn in the economic cycle. Now they tell us! Think what it could have meant to us pishers if we'd known a day earlier what was on the tiny, fevered brains of algo traders and their Olympian Masters as the week began. The Masters' unaccustomed lust for Treasury paper has reversed the upward spiral in rates, a development that some will see as beneficial. But a fat

AAPL buyers are in hyperdrive, capable of dragging the broad averages higher not only in the days ahead, but quite possibly until New Year's. The stock is bound most immediately for the 187.42 target shown (see inset), but any higher  would put an alternative target at 188.95 in play. These targets are useful for trading purposes, but also for analysis. A decisive move past the lower number would put the higher in play. If it too is exceeded, that would be a sign that the uptrend is likely to continue, possibly after a tradeable retracement. As I have emphasized here repeatedly, as long as AAPL is moving higher the broad averages will continue to do so as well. That is why we should pay very close attention to the way the stock interacts with the two Hidden Pivot resistance points noted above.

Gold continues to make headway in herky-jerky fashion, failing to fully satisfy bulls but also denying bears much to cheer about. On Monday, the February Comex contract rallied to within a millimeter of the 1240.20 Hidden Pivot target shown. The pullback so far has been mild, encouraging the thought that the next pop will be good for a ride to 1259.80. Another encouraging sign is that some recent ‘mechanical’ buy signals in gold vehicles, including one in HUI, the Gold Bugs Index, have been winners.  We’d sworn off this type of trade in bullion after getting stopped out once in the futures, but they seem to be working again. This implies that buying enthusiasm has picked up a little over the last couple of weeks. For your information, the February futures is currently on a ‘mechanical’ buy signal that tripped at 1216.80, stop 1202.40.______ UPDATE (Dec 7, 4:00 p.m.): The February contract climbed as high as 1255.80 today. Just a smidgen more! We want buyers to blow past that Hidden Pivot, since that would announce their intention to push still higher. _______ UPDATE (Dec 12, 9:59 p.m.): Zzzzzzzzz. _______ UPDATE (Dec 16, 12:17 a.m.): The futures have rolled down without having achieved an 'easy' 1259.80 target, but also without having exceeded any external peaks on the most recent upthrust. Taken together, these signs of weakness suggest that gold's balky uptrend since August is not destined for greatness. We've made similar observations scores of times since the gold price peaked above $1900 in 2011, and the only thing that has changed is that bears have become too depleted to sell off bullion except for short periods when conditions are perfect. It is not a bull market we are seeing at this point, but neither is it much of a bear. _______

The tempo of the news has grown increasingly frenetic lately, even to the point where a humdrum summit in Argentina for world leaders has taken on significance. Usually, the more high-powered the guest list at these affairs, the less likely they are to produce an outcome worthy of our attention. This time, however, the world seems riveted not only on what might happen when Trump and his trade nemesis Xi Jinping meet for dinner Saturday night, but on what will not happen now that the President has canceled a G20 meeting with Putin. By the time you read this, we’ll know whether there is going to be an immediate thaw in trade relations between the U.S. and China. Regardless, many Rick’s Picks subscribers were able to place a leveraged bet on a positive outcome. This I had advised in Friday’s commentary, which touted the possibility of a thousand-point rally in the Dow if Trump and Xi strike a deal. Although I still view this as unlikely, we were able to get enticing odds on the bet. Pray for Comic Relief It’s also possible the weekend will produce a temporary respite in the tariff war.  Although that would not be sufficient to stimulate a thousand-point rally on Monday, it would very likely be good for a gain of that size over the next several weeks. In the meantime, we can only pray for distraction, preferably comic, from impeachment cacophony and the snipe hunt of Robert Mueller, the Pied Piper of his day. Trump Derangement Syndrome has become literally relentless, making the news all but unwatchable for most Americans and exceeding our collective patience like no outbreak of mass hysteria in memory.

It has been a while since I last updated this vehicle, which tracks interest rates on the U.S. Ten-Year Note. Long-term yields have been in an uptrend for the last 29 months that looks likely to continue. The most compelling reason to expect this is a run-up in early October to 3.248% that exceeded an important 'external' peak at  3.223% recorded back in 2011. Although the breach was slight, it was sufficient to generate a fresh, bullish impulse leg on the weekly chart. This usually augurs a continuation of the trend. I had raised the possibility here earlier that the upward spiral in long-term rates would be self-limiting because it would eventually choke off the U.S. economy. That is still logical, but the chart is saying rates will continue higher regardless of the state of the economy. Another interpretation is that the economy will get second wind, and that a recovery in the housing and auto sectors will renew upward pressure on rates. We shall see. But the bottom line is that rates are likely head higher in 2019._______ UPDATE (Dec 5, 6:03 p.m. ET): Yields on the 10-year have come down hard this week. While this has done no significant technical damage to the daily chart, it bears watching. A key trendline support lies just below, at around 2.87%. Let's see whether it holds. Regardless, it would take a print below 2.717% to generate a bearish impulse leg on the weekly chart.

We can debate whether the U.S. is winning the trade war with China, and even whether Trump understands how tariffs work (which apparently he does not). But if the President comes away from this weekend’s planned G20 dinner with President Xi Jinping smiling his orange smile and boasting of a deal, the Dow Industrials will be up a thousand points on Monday. To be sure, this is a longshot bet. Although China’s already weakened economy has taken a big hit from U.S. levies on its exports, the Chinese government has adamantly refused compromise, even on matters where they have no case to argue, such as intellectual property theft. In this category China ranks as the most corrupt, brazenly dishonest –and successful — country on earth, a virtual nation of perps and spies. However, by not giving an inch on patents, they risk alienating the rest of the world, even the wussy suck-ups in Brussels. Trump’s judgment is that his commie-rat counterpart will fold — if not at Saturday night’s tête-à-tête with Xi in Argentina, then eventually. With China’s economy just short of nosediving, Xi is running out of time. Will he give Trump something to brag about over the weekend? Probably not. But we’ll be pleased to take the odds if index call options on Friday are priced, as we are nearly certain they will be, to give us a 20-to-1 bet on the pass line.

Wednesday's monster rally was just the beginning of a surge that can end only when the last die-hard bear has thrown in the towel. Although the short-covering panic goosed stocks into the clouds, the wild-blue-yonder, blow-off phase lies just ahead. Hundreds of stocks, most crucially AAPL, lifted from the danger zone, shifting the herd's tiny, fevered brains from bearish to bullish in the space of just a single day. Perforce, all news will be perceived as good news for the remainder of the year. And, like clockwork, what I have cynically labeled the 'Santa Dead-Cat Bounce' will unfold even as mounting problems in three key sectors -- housing, retail and autos -- move temporarily offstage. Dog Bites Man!!! The trigger for the Dow's 617-point wilding spree was a few cryptic words from the Fed's current blatherer-in-chief, Jerome Powell. As the clock struck noon, he said something that was construed as dovish on interest rates, causing stocks to take off like the proverbial bat emerging from Hell. We'll leave the debate over exactly what he said to the infotainment world's talking heads and other useful idiots. But it boiled down to something every market-watcher on Earth already knew -- i.e., that although the central bank might tighten one more time this year just to be perceived as walking the walk, that will be it: no more rate hikes (and maybe even a little easing somewhere down the road...who knows?) To judge from Wall Street's reaction, we should assume that a thousand-point rally will greet Powell's inevitable announcement of -- who's counting any longer? -- QE4.

AAPL is struggling to hold above a crucial 'Hidden Pivot' support at $170, but if it gives way expect the broad averages to take another nasty leg down in sympathy. The stock is sufficiently oversold to be primed for a bear rally of perhaps 8-10%. But who would do the buying? Ordinarily, short-covering is the only source of bids strong enough to excavate a stock from a trough as deep as the one AAPL has fallen into over the last month. But a bear squeeze seems increasingly unlikely now that the threat of a tariff on iPhones is in the news.  Trump said Tuesday that he was considering broadening the trade war against China with levies on some high-volume consumer electronics products, including the iPhone. This could significantly impact the Cupertino retailer's bottom line, since Apple is already meeting stubborn price resistance from consumers who seem to have discovered they can live without the latest iPhone model for an additional year or two. Even if Apple ultimately dodges the tariff bullet, uncertainty about the outcome is likely to persist in the months ahead. Under the circumstances, investors should prepare for more weakness in Apple shares, which could drop quickly to the 162.43 target I broached here recently. With AAPL currently trading for around 174, that would represent a 6.6% fall and a 30% decline from the all-time high of 233 recorded nearly two months ago. ______ UPDATE (Nov 28, 2:13 p.m.): Tariffs shmariffs. What on earth was I thinking!!?? Fear of them is having zero effect at this moment on AAPL, which has blasted into the go-ahead zone with a mid-day short squeeze. It has removed the $170 support as an immediate concern and made the 10% rally noted above an odds-on bet.

All roads point relentlessly south, but there are too many 'D' targets of varying degree to get a confident handle on whence the inevitable upturn will occur. Instead, let's simplify the outlook by setting a screen alert at 57.42. That's where the January contract would exceed the two 'external' peaks we require to generate an impulse leg on the 240-minute chart.  The higher is of a lesser degree than the lower, but it'll do for our purpose, which is to know with confidence when crude's rally has turned into the real McCoy rather than just another dead-cat bounce. _______ UPDATE (Dec 1):  The January contract is struggling to hold above the 49.68 midpoint pivot shown here.  If it is decisively breached, that would put the pattern's 46.80 'D' target in play._______ UPDATE (Dec 2, 9:53 p.m.): News of a cease fire on tariffs between Messrs. Trump and Xi has turned the 49.68 midpoint support noted above into a launching pad. The recent lows there should hold for a while.