Microsoft

The double top is so striking that a contrarian might have expected it to be exceeded to the upside eventually. That prospect looks at least somewhat less likely now that the stock has begun to recede from it. However, we should look for support at 444.08, about 28 points below, where the d target of a reverse pattern lies. It can also serve as a minimum objective for the next 4–7 days, and as a place to attempt bottom-fishing with a tightly constructed ABCD pattern of minute degree.

It's a stretch to compare Magritte's famous painting to Microsoft's chart, but here goes.  The Belgian artist's point was that you could not stuff a two-dimensional representation of a pipe with real tobacco.  Should we therefore try to divine Microsoft's future just because its stock chart features an in-your-face double top? I read it as bullish because it's too obvious to be bearish. So, how should we trade it? A reverse-pattern, long-term rendition of the chart will simplify this task.  It is saying the stock will become a back-up-the-truck buy when it falls a further 13% to 431.89. I will also assume, speculatively at the moment, that a breach of the midpoint Hidden Pivot support (p=493.67) is very likely. When it happens, that will cue up p2=462.78 as our minimum downside objective. Worst case for the intermediate term: 431.89, the 'D' target. We can infer that the stock market's performance will mirror MSFT's. That means, although a sharp drop lies ahead for the broad averages, it won't necessarily signal the end of the nearly 17-year-old bull market.

MSFT's double top is so obvious that we should be cautious about believing the party is over. My read is that the dirtballs who manipulate the stock for a living had no alternatives. Although they short-squeezed earnings news for all it was worth, they lacked the wattage and the daring to push above July's 555 peak. The subsequent relapse was so nasty that it will require some time to build a base capable of supporting a push to new record highs. So many bulls got sandbagged by last week's Whoopee Cushion ride that the retracement will probably take out the 492.37 low recorded early in September. Since the stock market and Microsoft will continue to stay roughly in synch, the foregoing implies that the bull market is due for a significant and possibly protracted correction.  I have no interesting Hidden Pivot targets at the moment, but that shouldn't preclude our trading this feisty little monster between feints.

We settled on MSFT, the second most valuable company in the world, as the mine canary that would signal the end of the bull market. So far, it is saying we should stick with the uptrend, albeit with one foot on the fire escape. The chart shows a logical path to the 547.12 rally target identified here earlier. It is not a done deal, since buyers did not exactly trash the midpoint resistance (p=519.75) on first contact, nor have they broken free of its gravitational pull.  Even so, there is almost no chance that p2=533.43 will not be achieved.  Any pullback to the green line (x=506.06) in the meantime should be regarded as an excellent 'mechanical' buying opportunity. ______ UPDATE (Oct 28, 2:59 p.m. EDT): Microsoft's decision to dive into fee-based AI has tacked on yet more hundreds of billions of gaseous 'wealth-effect' value to its shares.  Today's volumeless stab through the green line (x=543.00) has shortened the odds of a further run-up to p=592.94. I have my doubts the stock will achieve D=692.83, so we should be ready to short the bejeezus out of it at p, provided we've made plenty of dough on the way up.  Here's the chart.  

I featured Microsoft at the top of last week's list because it looked primed to test my theory that the bull market is over. The stock did in fact go against the bearish grain by triggering a 'mechanical' buy at the green line (x=506.00).  The subsequent rally has yet to develop legs, however, and would need to pop decisively above p=519.75 to offer a profit-taking opportunity as well as evidence MSFT is capable of reaching the 547.12 target. If that is what the world's second-most-valuable company's shares are about to do, it means the broad averages are going to rally strongly as well. My gut feeling is that this bounce will not be memorable, let alone record-breaking, but I'm keeping an open mind.

I've put MSFT at the top of the list because it is about to provide the clearest test of whether a bear market has in fact begun.  No matter how bearish one's outlook is for the stock market following Friday's stunning reversal, MSFT would trigger an irresistible 'mechanical' buy signal if it touches the green line (x=506.06), as seems likely. That doesn't necessarily mean the implied bounce will achieve d=547.12, effectively reviving the bull market. More likely in my estimation is that a weak bounce will carries no higher than p=519.75, the midpoint Hidden Pivot. Whatever happens, the second most valuable company in the world cannot but reveal the health of the bull market, or lack thereof.

MSFT is in a messy, timid bull cycle that points to 547.12, about 6% above.  I am tracking a long position from 506.06, since I'd suggested buying there 'mechanically' ahead of the pullback. (A separate long position from 493 that was initiated on my say-so is being tracked at GoldenMeadow.eu )  Further progress to 547.12 is hardly a done deal, as the stock has yet to decisively penetrate the midpoint resistance at 519.75. But bears look too tired to resist MSFT's inexorable upward drift, and so a move to the target must be regarded as likely. We may know more as the new week begins, since the E-Mini S&Ps ended the week with a moderate selloff from within a split hair of a rally target I'd drum-rolled at 6803.

The thieves who manipulate this behemoth for a living partied hard in the final moments of Friday's session, goosing MSFT $7 just ahead of the bell. Usually it is in the opening minutes of the day that we see them diligently at work, stealing hubcaps in full view of SEC regulators. Wall Street loves these guys, since they have been responsible for creating untold trillions of dollars' worth of vaporous 'wealth' since the bull market began in 2009. Friday's criminally inspired spike was relatively modest, worth approximately $7 billion to portfolios that hold Microsoft shares. The irony is that the sleazeballs who purport to control this stock, among others, are themselves the unwitting slaves of mysterious technical forces they will never completely understand. The chart shows exactly how this works, with Hidden Pivot levels that can be used to gain a profitable edge over the riff-raff and algos. They already enabled us to get long just a hair off the September 5 low at 492.37.  More recently, the stall at 519.75, the pattern's midpoint Hidden Pivot resistance, could have been shorted on Friday, but for the fact that it occurred on a vicious upthrust with just a few minutes remaining in the session. But there are still several potential trades that can be milked from the pattern, including a 'mechanical' buy on a pullback to the green line, and two potential shorts in places that Rick's Picks subscribers will recognize. Trading should be fun -- and what could be more fun than going up against machines incapable of distinguishing a chickpea from a garbanzo.  (The difference, says comedian Will Durst, is that a guy would never pay $200 to have a garbanzo sit on his chest.) ________ UPDATE (Sep 27): If you followed my guidance (see above), you should be long

Microsoft could go either way, but we should be able to gauge its mood by paying close attention to the two levels shown in the chart. If the stock moves higher, it would trigger a minor buy signal at 506.6, which could be a good opportunity for a ride to 519.75, or even to 547.12 if the trend catches fire. Alternatively, a decisive breach of the midpoint Hidden Pivot support at 493.67 would signal an imminent fall to at least 462.78, or possibly even 431.89 if any lower.  ______ UPDATE (Sep 12, 2:20 p.m. EDT): The stock finally got off the fence today with a cattle-prod assist from its clever handlers.  It popped above 506.06, tripping a buy signal to at least 519.75, but possibly as high as 547.12. This is equivalent to Punxsutawney Phil failing to see his shadow, since it will extend Springtime on Wall Street (cue up the Mel Brooks number) for yet another few weeks, or perhaps months. Please note, however, that the rally would fall a tad shy of the old high.  For those of you who are keeping track, DaBoyz effortlessly added about $88.6 billion of fraudulent 'wealth effect' to the global ledger with this morning's gap-up, short-squeeze opening.