Microsoft

The stock's coy poke above the 434 high from January 6 was bullish, but the rally would need to continue above a second peak at 440.94 recorded ten days earlier to affirm the bullish case. Several profitable 'mechanical' buys have triggered at the green line, but the only one signaled so far at the red line was a loser, hinting that the uptrend, such as it is, has weakened. Watch for DaBoyz to pull out all the stops to distribute MSFT at relatively rich prices. They did it last week with two gap-up openings, and they will likely use the same strategy until it temporarily stops working.

Here's a view of the precarious ledge I mentioned in the current Morning Line. MSFT has twice pounded on the 415.57 midpoint Hidden Pivot support without penetrating it.  The pattern is too obvious to be precisely dependable, but as I have mentioned repeatedly, midpoint pivots often work well even in lousy patterns. This p midpoint is well located to give us confidence in its prescience, since there is nothing structural to the left of it that our dull-witted competitors will conflate with 'our' unique support. If it is breached decisively, or the stock closes for two consecutive days beneath it, expect the selling to continue to at least p2=394.68. Since MSFT is still the world's most important stock, that would have quite bearish implications for listed stocks on exchanges around the world.

MSFT still looks bound for the 393.65 'd' Hidden Pivot target shown. The downside penetration of the pattern's p midpoint was not dramatic enough to guarantee this. Still, the fact that the pivot turned into resistance immediately after it was first penetrated is hardly a bullish sign. Although the point 'a' high of the rABC pattern is too small and nebulous to be regarded as a surefire winner for bottom-fishing, it is nonetheless a 'locked' coordinate that doesn't need additional justification. Odds for bottom-fishing p2=409.05 are not compelling because the pivot coincides with one at 410.29 recorded on November 21.

The daily chart yields a much clearer picture than the 30-minute displayed here last week. It yields a 420.18 'd' target that can be used to bottom-fish the now three-week selloff with risk very tightly controlled.  The downtrend did not demolish the midpoint Hidden Pivot support (p=438.17) on the way down, and that makes more weakness to d less than ironclad. However, it looks likely, and the gnarliness of the pattern suggests the turn from 420.18 would be sufficiently precise to allow for the tightest imaginable stop-loss. Please note that if MSFT is in a downtrend that has further to go, all U.S. stocks will be under similar pressure. _______ UPDATE (Jan 3, 10:56 a.m. EST): The trade was an easy winner using a reverse-pattern (rABC) to trigger, since the stock caught a nearly $6 bounce from 420.66. It eventually went lower, however, and is in the throes of a short-squeeze bounce off yesterday's bombed-out low at 414.85. Despite the ferocity of today's rally, I now expect the stock to fall to at least 409.05, and thence to 393.35. Plan on getting short with a tight stop if the bounce hits 430.07.

Microsoft would trigger a 'mechanical' buy if it falls to the green line (x=433.65), but I suggest paper-trading this one unless you are an expert because the point 'a' low is so nebulous. I rate the pattern a middling '6.5' (out of 10). Even so, price action at p, even in lousy patterns, is usually useful for analyzing trend strength. In this case, the initial upthrust that impaled p was sufficiently decisive to imply that d=448.70 is entirely likely to be reached. Will the miserable pisher-of-an-'a' change the odds? We're about to find out.

MSFT sold off hard after wafting into the middle of the supply zone I'd detailed here last week. Accordingly, I've used a somewhat unorthodox, bearish reverse pattern to tell us whether there is any conviction behind the selling. Use 438.46 as a minimum downside target for the near term, and don't hesitate to try bottom-fishing there, especially if you know how to set up a 'camouflage' trigger that would limit entry risk to no more than 5-10 cents per share. If sellers crush the 'hidden' support at 438.46, expect more downside to D=420.76. That would be a big deal, since MSFT's recent strength has restored it to its position as the most important stock in the world -- not merely a bellwether, but THE bellwether for the everything bubble. _______ UPDATE (Dec 18, 11:59 p.m.): It's possible that my decision to resurrect Microsoft as our #1 global bellwether may have caught a very important top. MSFT's unsettling plunge today was nastier than we might have expected, especially considering the company's revenue stream from recurring subscriptions is practically bomb-proof. And yet, the stock fell 3.76%, trailing only Amazon and Tesla in the megastock loser's column. The latter's share price is so bloated with Musk-worship in a dangerously saturated EV market that TSLA will undoubtedly turn out to be the best short in the lunatic sector once the bear market has run its course.  I'd warned in the current 'Morning Line' (see above) that Mr Market might throw the kill switch at the height of Santa season, the better to crush the multitudes who evodently fear an ugly surprise, if it materializes, early in the new year. If Wednesday's selling picks up tempo into week's end, we'll have our answer: a Christmas bloodbath for investors. How very clever it would be for

The chart shows two invisible impediments that could trip up bulls this week. The first lies at 446.62, the D target of a conventional pattern begun from 400 in early September. The second is a trendline resistance from a head-and-shoulders pattern that will come in around 455. Together, these potential rally-stoppers represent thick layers of supply between current levels and July's record 468. The oddity is that until July MSFT had been leading the market higher. Is it about to resume that role after underperforming lunatic-sector stocks for the last several months? We should be ready for this possibility in any event, so stay tuned for updates in the days ahead. _______ UPDATE (December 12, 10:45 a.m.): A diabolically sick time for MSFT to be short-squeezing higher just when the lunatic sector is coughing and wheezing itself to death. One could almost believe the chimpanzees who purport to 'manage' money actually do meet in a smoke-filled room to plot each gratuitous, stupid sector rotation. If the stock hits 460, I'll throw in the towel on that promising head-and-shoulders pattern that has perfectly defined and controlled the stock's ups and downs for the entirety of 2024.

Continue to use the 435.90 target given here last week as a minimum upside objective and an optimal place to get short. A rally to that 'reverse' Hidden Pivot resistance would not affect the textbook perfection of a head-and-shoulders pattern that has been under construction since January. The pattern seems almost too pretty to work, but even if it doesn't, I still expect 435.90 to provide an excellent opportunity to make money betting the 'don't' line. Use put options at the 432 strike with three to ten days left on them. Be sure to check the chat room and your email 'Notifications' for updated guidance, however, since it might be necessary to modify the trade to obtain the best possible odds. ________ UPDATE (Dec 5, 1:10 p.m. EST): MSFT gapped through the 435.90 pivot on an opening-bar short-squeeze, but I still doubt it's going much higher. There are two places you can look for a downturn, both of them voodoo numbers:  440.18 and 455.10. If the stock reaches the higher, it will trash the still-perfect head-and-shoulders pattern, but without negating the possibility of a major top forming well shy of the all-time high at 468.36 recorded in early July.

I've always treated MSFT as an infallible bellwether. My narrow, if not to say obsessive, focus has served us well, since MSFT has stayed consistently a step ahead of the broad averages, and even ahead of other stocks in the lunatic sector (i.e., the atrociously misnamed Magnificent Seven). But the long bull market has not conditioned us to think that when MSFT acts like crap for an entire year, as it has, that it is signaling a possible end to the bull market. This I will infer, however, implying that the failure to produce an easy 'mechanical' winner after falling to the green line on November 18 is further evidence of a waning bull.  This observation would be strengthened by a dip below C=405.57 without having first achieved D=435.90. The target and pattern will remain viable as long as 405.57 is not breached.