Rick’s Picks

Tuesday's strong upthrust got bulls' juices flowing in the Rick' Picks chat room, but I would caution you against letting your expectations get too high. Notice in the chart (see inset) that the A-B impulse leg begun in mid-August failed to surpass any of the peaks recorded when the futures were heavily distributed during the first two weeks of August. The doubts I've raised are nothing that another bullish pop on Wednesday or Thursday wouldn't cure, but we'll leave the burden with bulls until such time as that happens. In any event, the decisive move through the red line, a midpoint Hidden Pivot at 1205.40, has made December Gold a good bet to reach the 1226.50 target shown.  If they can do that and push just a little higher, exceeding an important 'external' peak at 1228.60 recorded on August 3, bulls can breathe a sigh of relief, since that would imply the rally is the first potential 'real McCoy' we've seen in a long while.

[The following was posted by Seneca in the Rick's Picks forum. I am sharing it with readers on the home page because I assume many of you find bear-market titillation -- or porn, as it is affectionately known at ZeroHedge -- as irresistible as I do. RA] The Dow Industrials are turning -- have already turned in many respects. Their current, all-time high is a market-walk ‘alone’, as Joe Granville was wont to say decades ago.  Major indexes are not confirming the high. Meanwhile, Apple and Amazon, have been responsible for nearly 30% of the S&P 500’s gain this year alone. More important are divergences seen in the last two trading days, with the Dow rising as most of the FAANG stocks got hit. Dow Will Fall by 70% In the bear market just ahead, look for the Industrial Average to shed up to 70% of its value over the next 2-3 years. Capitulation of the bond market is about to start as well, with a downward spike in the months ahead. Long-Term Treasurys currently trading for around 140 will fall to 128, creating a major buying opportunity for years to come. Big specs, a contrary indicator, are short to-the-moon. We watch closely and look for triggers -- signs that stocks are about to fall apart. But seldom do we get it right. 'What is obvious is always obviously wrong,' according to the old saw.  Complacency is what makes black swans black.

I'd expected the looming decision concerning Kavanaugh's Supreme Court appointment to weigh on stocks in the days ahead, but Wall Street evidently couldn't care less. The Dow was up nearly 200 points, taking its inspiration from headlines concerning Tesla (Musk has been ousted as chairman by regulators but will continue to run the company as CEO);  GE (a new CEO, Larry Culp, has been chosen); and NAFTA (as expected, Canada has joined the agreement). None of these events could be described as world-shaking, but that doesn't mean DaBoyz cannot use them opportunistically, as they so often do with dog-bites-man news, to goad bears into a short-covering panic such as we saw on Monday. I expect the rally to continue for perhaps another day or two, given the bullish look of some key charts, including ones for AMZN and the E-Mini S&Ps. I still regard the bull market as overextended and filled with dangerous bravado, considering that America will undergo a wrenching change both politically and economically if Trump loses his majority support on Capitol Hill on November 6. He is in fact likely to be impeached if that happens, reversing the nation's fortunes in ways that investors could no longer ignore.

Get AMZN right, as I have said here repeatedly, and you get the stock market right. We've been using a rally target at 2059.15 as a minimum objective, but today's chart (see inset) shows a bigger-picture target at 2176.18. This Hidden Pivot resistance lies 8.5% above current levels and should be considered an odds-on bet to be reached if and when the 2059.15 midpoint pivot has been decisively penetrated. Notice, however, that buyers recently stalled very near that number and that the stock subsequently relapsed, albeit only mildly so far. We should keep this impediment firmly in mind as the stock flirts with it in the days, or perhaps weeks, ahead. If at any point buyers are perceived to have blown past it, take it as a sign that AMZN is effortlessly on its way to 2176.18. This presumably would drag the FAANGs and the broad averages significantly higher, at least until the target is reached._____ UPDATE (Oct 2, 8:03 p.m.): Although there is still the strong presumption that the stock is headed significantly higher no matter what happens in a given day, its downturn on Monday from a high that did NOT surpass a prior 'external' peak deserves our cautious attention. The move was bearishly impulsive on the hourly chart, but we'll need to see a retracement and a second leg down before we can confidently assess bulls' mettle._______ UPDATE (Oct 4, 9:21 p.m.): The stock has fallen a not-so-mild 106 points since topping last week at 2033, but it'll take another forceful day of selling to generate a bearish impulse leg on the daily chart. Specifically, AMZN would need to take out both of the lows shown in this chart -- one of them internal; the other, external. Will bulls finally get their comeuppance? We can only wait

For the first time in recent memory, the E-Mini S&Ps are looking mildly interesting. Click on the thumbnail chart and you'll see that a pullback to the green line early this week would meet our technical criteria for an attractive 'mechanical' buying opportunity. The exact reasons for this are proprietary and I won't divulge them here, but suffice it to say, a bid at 2898.00, stop 2869.00, would be appropriate if the futures should fall to that level. Now click here for a longer-term chart that is flashing yellow, with the implication that downside risk outweighs upside potential at the moment. Notice that the December contract has sold off 40 points since topping a hair from a 2949.50 target where we would have turned cautious in any event. Under the circumstances, we will need to watch both charts closely in the days ahead, since a bullish resolution of the smaller chart would diminish, although not negate, the importance of the bearish longer-term chart. Conversely, if the futures stop out a long position initiated at the green line, that would strengthen the possibility that the 2947.00 high will turn out to have been an important one._______ UPDATE (Oct 1, 10:55 a.m. EDT): Stocks have begun the week in hyperdrive, goosed by bullish headlines concerning 1) Nafta (Canada will join Mexico); and 2) Musk (ousted as CEO but will continue to run Tesla). The rally has left the mechanical bid I'd advised choking on dust while also generating a bullish impulse leg on the hourly chart. This has slightly increased the already good odds of a continuation to the 2984.25 target shown. _______ UPDATE (Oct 3, 7:57 p.m.): Five of the last six sessions have featured bull-trap highs, suckering buyers into rallies that reversed sharply before the day was over. Are buyers 

So much is riding on the outcome of this week's FBI investigation that stocks are likely to remain unusually subdued until Kavanaugh's appointment is decided. If the Senate does not confirm him for a seat on the Supreme Court, this could brew a perfect storm for investors in October that would feature the following: 1) Democratic majorities in the House and Senate; 2) Trump as a lame-duck president; and, 3) a coincidental escalation of the tariff war with China.  Think of the 'Trump rally' in reverse and you can see how the Dow might be trading 5000 points lower in six weeks. Putting aside the effects Kavanaugh's rejection might have on the stock market, it would be catastrophic for America, turning seething hostilities across the red state/blue state divide into a potential civil war. This would likely happen even more quickly if Kavanaugh wins, since the left has threatened to impeach him and Trump.  They are certain to make good on this threat if they win big in November, unsettling America politically and economically for the foreseeable future. With the stock market trading in record territory, it is clear that investors are blithely oblivious to such risks and unprepared for the consequences.

For the first time in recent memory, the E-Mini S&Ps are looking mildly interesting. Click on the thumbnail chart and you'll see that a pullback to the green line early this week would meet our technical criteria for an attractive 'mechanical'  buying opportunity. The exact reasons for this are proprietary and I won't divulge them here, but suffice it to say, a bid at 2898.00, stop 2869.00, would be appropriate if the futures should fall to that level. Now click here for a longer-term chart that is flashing yellow, with the implication that downside risk outweighs upside potential at the moment. Notice that the December contract has sold off 40 points since topping a hair from a 2949.50 target where we would have turned cautious in any event.  Under the circumstances, we will need to watch both charts closely in the days ahead, since a bullish resolution of the smaller chart would diminish, although not negate, the importance of the bearish longer-term chart. Conversely, if the futures stop out a long position initiated at the green line, that would strengthen the possibility that the 2947.00 high will turn out to have been an important one._______ UPDATE (Oct 1, 9:44 a.m. EDT): Stocks have begun the week in hyperdrive, goosed by two bullish headlines concerning 1) Nafta (Canada will join Mexico); and 2) Musk (ousted as CEO but will continue to run Tesla). The move left the mechanical bid I'd advised choking on dust while also generating a bullish impulse leg on the hourly chart. This has slightly increased the odds of a continuation to the 2984.25 target shown.

Sen. Lindsey Graham stole the show Thursday with a scathing indictment of his Democrat colleagues that clearly framed the issue that will determine the outcome of November's Congressional elections. "I hope the American people can see through this sham!" an impassioned Graham declared to a vast TV audience. Many if not most Americans will have little trouble agreeing with him, but it remains to be seen how many of them will be sufficiently aroused to go to the polls, and how many left-tilting votes Thursday's hearing will change. Kavanaugh himself brought his own righteous indignation to the proceedings, calling them 'a disgrace'. His statement to the panel was highly emotional, and he fought back tears in recalling details of an exemplary and deeply virtuous life that diverged in the extreme from the boozing, serial-rapist picture of him painted by his accusers. So what comes next?  Perhaps unfortunately for Kavanaugh and his backers, his fate is to be decided at a moment in history when #MeToo's reign of terror has laid waste to more than a dozen powerful men. This will have put fear in the hearts and minds of nearly anyone who would even admit to believing Kavanaugh's denials, let alone publicly stand behind him. The climate of fear will have staunch support in the Senate from Hawaiian Sen. Mazie Hirono, for one, since she has already made it explicitly clear that she regards all men as guilty no matter what crime they've been charged with. If Hirono and her ilk held sway in the courts -- which fortunately is not the case, at least not yet -- Kavanaugh and millions of other decent men would be pilloried in the public square. Farting, Puking Were on His Mind The low point of the day was a clumsy attempt to embarrass

If the Kavanaugh hearings are held Thursday morning as scheduled, expect the markets to be relatively subdued, since the nation, even Wall Street, will be transfixed by the proceedings. No one except perhaps Dianne Feinstein could have predicted a few weeks ago that the hearings would turn as crazy as they have. Brett Kavanaugh seemingly had a lock on a Supreme Court seat when the Senate Judiciary committee concluded its questioning of him on September 7.  Now, with the outcome uncertain, there is speculation concerning who would replace him if his nomination fails. On the other hand, some observers are saying he could be confirmed by the Senate as early as Tuesday with more than the minimum 51 votes needed. Las Vegas bookies say Kavanaugh is no longer an odds-on bet to prevail, but they've been wrong before.