Microsoft

The large gap opened by last Thursday's selloff left the stock well below ponderous supply. Mere bullish buying cannot possibly penetrate it, only a short squeeze powered by a headline that at the moment lies beyond imagining. The deficit will have to be recouped relatively quickly -- within the next 7-10 days, say -- or it will grow even more challenging psychologically. DaBoyz are certain to attempt a last-ditch distribution, which may require taking the stock even lower first to dry up selling. This is a dangerous game, even for the sleazy predators who make their living manipulating this stock, and we'll probably see them attempt the obligatory short squeeze in the days following the election. Trump looks like a lock-up to win, but if his victory gets tied up in the courts, or worse, the squeeze won't work. From a technical standpoint, the stock is on a 'mechanical' buy signal -- the second in two months -- but I am not recommending that you trade it. _______ UPDATE (Nov 8, 12:28 p.m.): The stock has turned so wishy-washy that the lowly H&S pattern I mentioned earlier has my attention, sort of. If MSFT pops, I'd expect a top near 455, implying it is not going to new record highs. A selloff would still need to crack 385.58 to activate the H&S, and the longer MSFT screws the pooch by going sideways, the less likely this will become.

MSFT would somewhat outperform the E-Mini S&Ps if it achieves p2=444.97 around Election Day. Although the secondary pivot is not as reliable a place to go short against the trend as a midpoint Hidden Pivot, the fact that the 4.4% rally it would take to get it there is so close to my predicted 4% rally in the S&Ps makes the target worth considering as a short. We'll look to buy near-the-money puts with a week or two left on them when MSFT hits 444.97. If you're keen to trade this one, stay tuned to the chat room or your email notifications when the stock gets close.

I'd recommended a mechanical buy if MSFT came down to x=405.66 (corrected), but the correction has gotten no closer than 408.17.  The signal will remain viable as long as the stock doesn't close for the week above 415.74 first. A conventional stop-loss below c=385.57 would be too wide, so you should only initiate the trade with a reverse-pattern trigger on a chart of small degree (aka 'camouflage').  Stay closely tuned to the chat room and your email 'Notifications' if you want to stay apprised in real time.

I've led the list this week with our #1 bellwether, MSFT, because it may have more to tell us about the bull's condition than the E-Mini-S&Ps. They topped last week a tick from the 5868.50 rally target I'd sent out to you a week earlier, theoretically maxing out upside potential for the time being. MSFT, on the other hand, may already have topped. It has been struggling mightily against the weight of an incipient head-and-shoulder pattern that could eventually mark the top of the bull market and take the stock down 100 points. Neither chart is conclusive by itself, but taken together they argue for strong caution.  In addition, MSFT never quite reached the drum-rolled 449.54 target of a lesser but still important pattern, shortening the odds that a major top is in. We'll be better able to judge once we've seen the downtrend play off the 400.47 midpoint support of this pattern, which began with an authentic, bearish impulse leg that exceeded a major external low (April 25's  388.03). Use this number as a minimum downside projection for now, and expect MSFT to drag the stock market lower. ______ UPDATE (October 18, 9:33 a.m.): A chat room denizen asked for a more granular picture, and I replied as follows:  "[The stock is] a tough call, since minor ABCDs in BOTH directions have been achieving their D targets. This suggests bulls and bears are stalemated for the time being. I hate letting a head-and-shoulders pattern decide it for me, but the one linked here looks prettier by the week. Even so, a pullback to the green line (x=405.38) would trigger a promising 'mechanical' buy.

I have higher targets outstanding, but this picture is more interesting, since it suggests that however much MSFT corrects, it will eventually take out the record 468.35 target recorded in July.  The pullback precisely from p=383.17 affirmed the pattern's reliability, and the shallow pullback that followed, which did not allow a 'mechanical' buy, attested to the uptrend's power. The subsequent poke past D=456.88 provided yet more evidence that new highs are coming. The overshoot may look relatively small, but a pattern this well-formed should have shown the same, precise stopping power as the red line (p). One last thing to notice is that, although MSFT's correction off the top was steep and wrenching, it did not quite touch the red line. Thus did the steep rally deny us a second 'mechanical' buying opportunity. This is an unmistakable sign of strength to come, and it will temper my big-picture permabearishness. Most immediately, look for this retracement to come down to p=400.47. It can be found on the weekly chart, where A=468.35 on 7/5.

MSFT has gone flaccid -- deservedly so, given September's steep run-up. I haven't given up on the 449.52 bull market target featured here for the last six weeks, but I am currently favoring a more ambitious one at 464.76 that provides extra room for a bull that has seemed all but unstoppable since 2009. Both are derived from the reverse pattern shown, and each should evince sufficient stopping power to be shortable. We are unlikely to be gifted with a pullback to the green line for a 'mechanical' entry. However, a somewhat less appealing opportunity would materialize on a correction down to p=425.17.  A bid there would require a stop-loss at 411.97.

I've given the 449.52 rally target so much ink that it's probably time to fixate on a higher Hidden Pivot just in case. It lies at 464.76, which, because of its close proximity to July's 468.35 record, should not be expected to show precise stopping power. Still, it will lie in the bowel of what we should regard as the 'discomfort zone', just shy of the bullish breakout that nearly everyone will be expecting, Whatever hysterical price action this causes will assuredly be tradable, since it is all just impulse legs. However, I will be focused more attentively on movement above the old high, since that would create favorable psychological conditions for the kind of bull trap that wants to take everybody down with it.

I've been talking about the 449.42 rally target for more than a month, which is probably reason to think it won't work. Still, I cannot imagine the futures blowing past it on the first try. The reverse pattern from which the target is derived is too clear and compelling not to stymie the thundering herd, even if only for a day or two. A shallow pullback that lasts for perhaps 2-3 days and works bears into a state of nervous exhaustion would be warning them to dive for cover. Would they even want to know at that point that there would be another opportunity to lay 'em out at 465.90. That's the D target that maxes out reverse-pattern possibilities with the lowest 'a' that is not part of a conventional pattern.  (Note to Pivoteers: This is what I call a locked point 'a' high or low, a term worth remembering and asking about.)

We've had our sights trained on a 449.42 rally target for a month. Given MSFT's premier bellwether status, this was sufficient reason to infer that the bull market as a whole had further to go despite a mounting pile of good reasons for its imminent collapse.  We also said that if the stock corrected down to 401.54, this would present a back-up-the-truck buying opportunity for an implied 48-point ride back up to 449. The first phase of our plan came to pass last week when MSFT plunged 17 points, or 4%, before settling at 401.82 ahead of the weekend. Although the stock initially trampolined $10 after kissing the target in the early morning, it relapsed to end the day, and the week, with an $8 loss. Although this may have been scary for investors who have ridden the stock down from the record 468 achieved in early July, it still looks like a juicy buying opportunity for those who have been waiting for fire-sale prices. Indeed, the 'reverse abcd pattern' shown in the chart would appear to offer great odds for anyone buying at the green line. A $16 rally to the red line (p=417.50) seems assured, although a follow-through to D=449.42 can no longer be confidently touted as a near certainty. Even if the stock does achieve D=449.42, that would leave open the possibility of a 1929-type secondary top in both MSFT and the broad averages. Alternatively, if MSFT continues to fall, surpassing the C=385.58 low of the pattern projecting to 449.42, that would be strong evidence that the bear market investors have feared for years has begun. _______ UPDATE (Sep 11, 9:49 p.m.):  MSFT has now rallied $23 from within a hair of the 401.54 correction target flagged above, in my tout, my weekly commentary and the chat