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The Morning Line

A Glossary of Pain

[Apologies, but my WordPress publishing app is so screwed up that updates for Friday may be somewhat limited. RA] Wednesday’s quiet opening was a fooler that gave no hint of the ferocious selling that followed. The Dow and the S&Ps opened moderately higher, extending a two-day rally that traders obviously assumed would continue. Instead, the broad averages rolled over in the first hour on light selling that picked up tempo as the day wore on. This is dangerous price action, considering that the stock market is headed toward a Friday late in September. It suggests that the next leg down, starting by week’s end or possibly Sunday night, will come only after bears have suffered at least a day of ratcheting pain. For their part, bulls are unlikely to turn ebullient, just complacent. Watch for the news to cooperate, offering a sordid mixture of headlines from the global police-blotter.

Covid-19, Unmasked

There was not a mask in sight Saturday afternoon on the Ocean City NJ boardwalk even though it was packed with strollers, including your editor. Although it’s not possible to tell from the picture which are political liberals and which are conservatives, it’s probably safe to say that voters of both persuasions were well represented in the dense throng. The beaches and boardwalks in South Jersey and elsewhere are among the relatively few places where no one seems to give a damn about Covid-19. In such locales, the disease seems as powerless as the Wicked Witch of the East in Munchkinville. We know this because nearly everyone in America would be infected by now if it were otherwise. What about indoor spaces?  Popular wisdom has it that if you share a poorly ventilated room with someone who has the disease, and you breathe the same air for an hour or two, you are likely to become contaminated yourself (although not necessarily symptomatic). However, there is at least one bar in nearby Margate, NJ, where drinkers often stand two or three deep because all of the stools are taken. Three-way conversations are happening with faces separated not by the state-mandated six feet, but by 10-15 inches. On a recent weekend when I had dinner there — outside — the bar resembled a scene from a Heironymous Bosch painting, where earthly pleasures are celebrated with wicked abandon. If they turn out to be superspreaders, we should know by Halloween. Pancake Risk I had a mask-less breakfast Saturday morning with two friends, both physicians, in a restaurant that is famous for blueberry pancakes and which has been doing brisk business since 1946. The place has barely missed a beat during New Jersey’s lockdown.  One of these friends has treated dozens of Covid-19 patients, only one of whom got seriously ill. The patient, a mutual friend who stays in good shape by surfing year-round, was the only one of the bunch who did not start taking hydroxychloroquine, zinc and zithromax soon after becoming symptomatic. Some of my oldest friends have banned me from their homes merely because they know I’ve dined out — done so inside a couple of times. Maybe I’ve been lucky, or maybe I’ve had Covid-19 without even knowing it. I keep meaning to get tested, and I probably will one of these days. In the meantime, I will continue to wear a mask wherever required, and to respect the quarantine protocols of my friends, but also of strangers with whom I come in contact. Despite Trump’s promise of a vaccine by November, we all know it’s going to be a very long and difficult winter.

Excruciating Pain for Bears Suggests a Top Is Nigh

It was so challenging to stay short on Tuesday that the broad averages must surely be at or near an important top. This is an instinctual observation rather than a technical one, but I’m inclined to trust gut feelings based on the evidence. The two charts above illustrate the point. Notice that DIA, an ETF proxy for the Dow Industrials, head-faked on the opening bar to exceed a visually distinctive peak recorded four days earlier. The overshoot was not by much, but it would have sufficed to stop out bears using that peak to set a stop-loss just above it. Similarly, AAPL mau-maued bears on Tuesday’s opening bar with a gap-up, short-squeeze opening that exceeded the previous day’s closing price by nearly 3%. If that didn’t spook them badly enough, the stock staged a second-wind rally that brought AAPL within striking distance of the earlier high.  The stock then fell sharply for the remainder of the day, and for good reason: buying power from short-covering bears had been spent on the two fright-mask run-ups. The foregoing is not meant to imply stocks will necessarily collapse in the next day or two, but it’s obvious that Mr. Market is burning out shorts with the kind of brutal price action that could exhaust them soon. They are the most important source of buying power in a rally as grotesquely overextended as this one, and when the last of them has been gutted and disemboweled, it will be lights out for revelers.

How a Surefire Horse Lost by a Neck

[I wrote the following for the Sunday San Francisco Examiner two decades ago. I offer it as lighter fare in lieu of the usual rant about how the stock market is mentally ill, investors are besotted with greed, and the global financial system galloping toward ruinous deflation. RA] Talk about a sure thing! Here was the kind of inside information that one imagined tumbled from heaven into the ears of the anointed. It concerned not the stock market – we’ll get to that part soon – but a pacer named Happy Yankee A that was running in the seventh race at Roosevelt Raceway outside of Philadelphia one evening nearly four decades ago. According to my source, this horse was not merely a strong bet to win, he was an absolute lock, lead-pipe cinch. This horse absolutely could not lose. What’s more, the Yankster had looked so tired the last few times out that he would probably go off at fat odds. My tipster was Willie D, a storied acquaintance and unusually gifted confidence man who could loosen a mark’s checkbook the way a starfish pries open a clam. Here he was on the phone one Saturday morning – probably to everyone he owed – trying to burnish his karma with an offer of timely investment advice. One seldom saw or heard from Willie D around breakfast time, since that was when he usually went to bed. But that day he had stayed awake, he said, to get the word out. He wanted to give his pals enough time to borrow, beg or steal as much cash as they could by post time, the better to wager on the seventh race. A Jones for Pacers If word of Happy Yankee A’s expected trip to the winner’s circle had come from anyone else, I might have shrugged it off. After all, how many touts die rich? But a hot tip from Willie? It seemed too good to pass up. Although he had a serious jones for the trotters – one that often left him too depressed to get out of bed and too broke to buy a decent meal – Willie also had occasional winning streaks that would put him on top of the world, if only briefly. Over time, however, it was Willie’s peerless ability as a salesman that paid the rent. He could in fact sell just about anything to anybody: Persian rugs, estate jewelry, sterling tea sets, tires — and at county fairs and flea markets, a mysterious-looking gizmo known as the “SparkMaster” that was guaranteed to double one’s gas mileage. But handicapping horses was his first love, if not a steady source of income, and he followed the sulkies around the U.S. to create an endless summer of betting opportunities: at Santa Anita, Freehold, Meadowlands and Kentucky’s Red Mile. It was one summer, nearly 40 years ago, that he stumbled onto a fabulous secret that for a short while produced more sure-fire winners than a set of loaded dice. It was based on an observation that seemed to have eluded not only the attention of the rubes in the grandstands, but the astute instincts of the $100 bettors in the clubhouse. You see, Willie’s million-dollar ticket was to wager only on trotters hitched to a single-pole bike, the rig on which a driver sits. The shaft trailed directly behind the horse, using advanced principles of physics to reduce torsional drag. Only a relative handful of drivers ever came to use single-shaft rigs, and few outsiders seem to have realized what a considerable advantage they provided over conventional two-pole bikes that were attached to the horse on both sides. But Willie D surely did, and before the monoshaft was banned from the circuit later that season, it was his ticket to Fat City. ‘This Horse is a Lock-Up!’ As chance would have it, neither Happy Yankee A nor any of the other entries in the seventh race would be pulling a single-pole bike on that particular night. It didn’t matter, though, Willie reassured me. “The horse is a lock-up,” he said, “and it’s got nothing to do with the bike.” That was the clincher. I hadn’t wanted to rely on mere physics to give me and edge, but rather on some criminal scheme that made the seventh race as predictable as the next day’s sunrise. But I didn’t have much time left that day to raise a decent stake. It was a weekend morning and most banks back then did not have ATMs, so I spent the rest of the day cashing personal checks at local stores. By the time I’d hit up the hardware, the five-and-dime, a pharmacy, a supermarket and a candy store, I’d scrounged about $300, equal to about a week’s pay for me back then. We digress now to a story that may sound familiar to many of you. It concerns the hot tip that is bound to come the way of any investor who is looking to double his money fast in the stock market. My tipster this time was not a confidence man, however, but a highly successful lawyer who told me that a large publicly listed company was about to be acquired by another at a price well above the market. He said he was too close to the deal to take a stake in advance of the buyout, but that anyone who jumped on the stock in the next day or two would be handsomely rewarded. How sure was he about this? “The ink on the contract is already dry,” he said. The buyout would be consummated by midweek. Saved from Greed As it happened, I did not take the plunge, but I would be lying if I were to tell you that my first impulse was to abide by the law, which strictly prohibits trading on insider information such as my source presumably possessed. No, it was only my inability to raise the approximately $6,000 it would have taken to buy 100 shares of the stock that saved me from my own greed. That, and the still-pungent experience of having waited six years for another such “done deal” to materialize. If you can sense where all of this is leading, perhaps you’ve been burned yourself acting on a supposed tip from the inside. The truth is, most of the time even the insiders themselves don’t know how or if a deal is going to turn out. Over the course of my adult life I’ve probably heard about 50 such buyouts, but only a relative handful ever panned out. And the ones that did were consummated months or even years after the date the tipsters had specified. Fading in the Stretch The lesson in all this is that next time someone phones with a hot tip about a stock whose price is about to double, you should grab your checkbook and run the other way. If it’s a well-connected friend who says the ink on the deal is dry, tell him you know someone who got his just desserts after acting on those very words. As for the Yankster, he went off at 5-to-1, bolting like greased lightning from the gate. Out front by two lengths – make that four lengths – he blazed down the back stretch. At the final turn, it was Happy Yankee A by a two lengths, now a length, now a neck, uh, now . . . trailing . . . by a neck. Fading, fading, fading . . . And you know the rest. Willie D went home that night zero-for-seven, too disgusted to stick around for the eighth race. I went home broke, never to be so easily swayed by a tipster.

Watch the Dollar Call the Fed’s Bluff

It’s obvious that the U.S. dollar is the only thing occupying investors’ symian brains at the moment, since stocks are moving in lock-step against it. Even gold and silver have been kow-towing, reacting to every dollar zig with a precisely measured zag. That’s why I recently shifted my technical focus from AAPL to the Dollar Index (DXY), starting with a September 1 low in the latter that missed a longstanding Rick’s Picks correction target by just six cents. If the dollar continues to rise, virtually every trend in effect since the March 23 low is due to reverse. Debtors around the world will not be able to survive a strengthening dollar, nor will the charlatans at the Fed be able to do much about it. Their 2% inflation target is such a lame bluff that Powell, if he were honest, would admit the banksters are praying for it, not managing it.  A rising dollar is about to unmask all of them as fakes. It may also prompt pundits, eggheads and the news media to acknowledge that Fed ‘policy’ since the S&L debacle 30 years ago has been just hocus-pocus the banksters have made up as they’ve gone along. The very idea that America can return to prosperity by having the Fed ‘buy’ trillions of dollar worth of government debt is patently absurd. It is a free-lunch scheme hatched by crackpots that is believed only by economic imbeciles.

How Mr. Market Could Fool Us All, Big-Time

AAPL topped last week within a hair of an important rally target at 135.98, prompting this headline atop last Thursday’s commentary: “Is This the Start of the Big One?” If so, it is long overdue. Valuations are worse, even, than at the height of dot-com mania, led by vertical spikes not only in AAPL, but in the shares of Tesla, Amazon, Chipotle, Google, Facebook and a few other world-beaters. Portfolio managers have thrown a mountain of Other People’s Money at a relative handful of stocks that are deemed likely to flourish in these economically challenging times. The geniuses keep dumping more and more money into the same few stocks because they evidently are clueless about what to do next.  This has caused the value of some big companies still doing brisk business during the pandemic to soar into the hundreds of billions of dollars, or even into the trillions. Crazy. Throughout the mania, we’ve focused more on AAPL than on any other stock simply because it is the one stock that no portfolio manager can be without. Under the circumstances, if a forecaster gets AAPL right, he invariably gets the stock market right. Rick’s Picks has succeeded well at this, remaining foolishly bullish against all common sense and wisdom. But last week’s sharp selloff, coming at a time when most investors were already getting antsy about valuations, has many wondering whether it will mark the end of the party or just a healthy correction. Labor Day Expectations Our take is that the weakness occurred because too many investors had expected stocks to drift higher as they often do ahead of Labor Day weekend. However, there are a couple of reasons why we should assume higher prices will soon return. For one, the selloff generated too much bear-market buzz, especially among professional forecasters, to be the real thing. And for two, buyers were already back at it on Friday, putting a hardwood floor beneath the market that prevented the selling from snowballing. Believers and skeptics seem evenly divided at present, balancing order flow in give-and-take fashion that could make the markets boring for another day or two. A memorable top like the one shown in IBM’s chart (above) is more likely to occur when bulls and bears are both crazy-bullish. This would happen if the broad averages were to blast off later in the week to new record highs. It would make bulls more bullish than ever, but it would also cause bears, fearful of a runaway rally, to throw in the towel and cover their short positions. Although they would not be true believers in the rally, they would be thinking nonetheless that stocks, having shaken off their recent bout of weakness so quickly, were bound for the wild blue yonder. Today’s featured chart captures mass psychology as it played out in IBM in 2007-08. I use the chart as a teaching tool for the Hidden Pivot Course. You can see that things ended very badly for Big Blue’s shareholders, but also for bears forced to cover at the top.  So diabolically seductive was IBM’s last gasp that we can infer Mr. Market was intent on launching a bear market with a devastating collapse that would take everyone with it.  Even gurus blessed with the ability to predict major highs very precisely did not escape ruin, or at least embarrassment. Notice the peak labeled ‘False top’. It came very close to a bull market target at ‘D’ that I’d sent out six months earlier. It came so close, in fact, that I was all but certain the bull market was over when Big Blue subsequently fell more than 12% in just a few weeks. Setting the Hook You can imagine how I would have been patting myself on the back at that point, since the top had occurred close enough to my D target to allow me to get very short at an apparent major top. Then something very surprising happened: The stock whipped around and was soon challenging the old highs. Bears frantically covered their short positions and bulls waxed ecstatic. Ironically, when the stock finally achieved my original D target exactly, I did not have the guts or good sense to get short again because I expected the breakout, powered by maniacal short-covering, to go much higher. Thus, when the stock pulled back from the marginal new record-high, I and everyone else misread it as a correction. Certain of this, we bought the stock as it fell. The next rally was spectacular, creating a spike on the daily chart that proved what geniuses we all were. We grew more bullish than ever, while the last, hardiest bears succumbed once and for all. That’s when Mr Market sprung a trap from which few would have escaped. The stock plunged from $124 to $79, adding to the incredible carnage of the dot-com bust. It was devastating for millions of investors, and it could only have happened if the crowd was dead wrong at the top. The lesson here is that we should never presume to know what Mr Market has in store for us. If it were otherwise, we would all be rich and everyone’s guess about where and how bull markets top, and bear markets bottom, would always be correct. Regarding last week’s selloff, although it could conceivably be the start of a bear market or a major correction, I doubt it. In any event, we’ll know more once we seen how stocks behave on Tuesday and Wednesday. Some key bellwethers and the broad averages were poised to generate powerfully bullish ‘impulse legs’ with relatively modest rallies. If they shrug off last week’s selloff in just a couple of days, as appears possible, we will see new record highs very shortly. It is then that we should be particularly careful, since a rally like that has the potential to set a trap that would put a fitting and diabolically disguised end to the craziest bull run ever. ______ UPDATE (Sep 8, 8:26 p.m.): Although I was expecting some spillover from last week’s selloff, it is more urgent and powerful than I’d anticipated. I got stopped out bottom-fishing Tuesday in a place where the E-Mini S&Ps “should have” bounced. This is worrisome, since it implies “everyone” is buying the dip. I’ll be looking to short the rallies myself, waiting for one strong enough to entice buyers who may have grown skittish over the last few sessions. If stocks simply fall, I’ve updated with precise downside targets for numerous symbols, including DIA and AAPL.

Is This the Start of the Big One?

If there is reason for bears to be hopeful that Thursday’s savage selling was the start of the Big One, it is AAPL’s dramatic trend failure from slightly above a 135.96 target on the long-term chart. Using the Hidden Pivot Method, that was the last rally target that could be extrapolated from the weekly chart. The clear implication is that even if the stock is going to come roaring back, it will take at least two to three weeks for it to base.  Any less would be surprising, if not to say shocking, but we should not in any case underestimate the bold madness that has driven the rally since March 23. I’ve tracked AAPL very closely on the theory that if you get institutional shareholders’ most passionately beloved stock right, you get the market right.  However, I am shifting my focus to the U.S. dollar, which is in a so-far modest bounce from very major trendline support. If the dollar is changing direction following a nasty slide since March, then every other trend in motion since then is about to reverse as well. That would imply the broad stock averages and the FAANGs will fall along with crude oil quotes and bond prices.  For now, though, although Thursday’s slide was quite painful for many investors, we should not assume them incapable of a vigorous resurgence.  Arguably, Thursday’s selloff was caused, not by myriad factors cited by the usual ‘experts,’ but by widespread certitude that seasonality would keep stocks moving higher at least until Labor Day. So much for that theory. But if the weakness is meaningful, we should see it start to snowball next week, setting up a September crash that would have a good chance of being one for the record books.

Reasons for Holiday Jitters

Seasonality will be heavily on bulls’ side ahead of Labor Day weekend, but stocks will be bucking powerful headwinds thereafter, since September is historically Wall Street’s worst month. This September will be particularly interesting if two fledgling trends gain momentum. Specifically, the dollar has turned up from a promising spot, and AAPL for a rare change closed lower on the day. The psychotic spasms that undercut Apple shares apparently were caused by news that euroland’s regulators are taking a close look at the company’s app store. Investors have reason to be fearful, since it is a monopoly business that makes Microsoft’s criminal lockhold on web browsers 25 years ago look like pattycakes. The dog-bites-man story of the day was the oh-so-sly rotation of money into the Indoos and the S&Ps. With AAPL getting hit, DaBoyz took OPM ordinarily earmarked for the FAANG/lunatic sector and pumped it into the broad averages. Another day or two of this and the parabolic blowoff that has seized the Nasdaq 100 will infuse itself into the Dow Average and the S&P 500.

Something for bulls AND bears to root for….

An interesting day, Hidden Pivot-wise. AAPL topped 0.03% from a rally target I’d drum-rolled before the split, and the Dollar Index bounced sharply from within six cents of Hidden Pivot target that’s backstopped by a major trendline. Odds are against nailing the exact high in AAPL, which in dollar terms  is being driven by the most powerful and consequential buying mania in history, but we’ll have to see what the new day brings before we write off the target as just another flash-in-the-pan. The important thing is that many subscribers evidently made hay as AAPL rampaged toward the rally target. If the stock and the dollar have in fact begun major reversals, that would be a very big deal, since every other lunatic trend in motion since March is about to reverse as well.  The Nasdaq 100 did not look toppy at all, but that hardly negates the possibility that it is about to plunge into the molten pit of hell. Regardless of which side of the craziness you’re on, you can cross your fingers and root for a satisfying outcome.

Greater Fools Dive into AAPL Following Split

AAPL didn’t waste any time demonstrating why DaBoyz split it four-for-one, effective Monday morning. The stock was up a scandalously undeserved $6.18 at one point, or more than 5%, although the gain was not nearly as noticeable as it would have been prior to the split. The pre-split rise would have been $24.72, making it one of the most powerful rallies in recent memory. It won’t be remembered that way, however, since the $4.16 closing gain is just not a very impressive number.  What is impressive is that it put about $70 billion more dollars into the financial ether, inflating pension and sovereign funds sufficiently to feed, house and clothe California’s six million retirees from now until Christmas. The stock still has a little ways to go before it reaches the 134.37 target we’ve been using as an upside objective. At the rate it’s going, AAPL could be there by Wednesday. Better watch this one closely, because if the shares are topping, so is the stock market. The big question is whether the bull market can be stretched out for long enough to allow DaBoyz to cash out of other megacap stocks that they are immersed in up to their eyeballs: TSLA, AMZN, GOOG, CMG, NFLX.  Hedge funds and pension funds have trillions of dollars locked up in these stocks, and they desperately need to unload them on the rubes, since they offer horrible value at these levels. Keeping the market levitated for the year or two it could take to split and reprice them for the hoi-polloi will be be quite a trick, even for the Masters of the Universe.

New Weeks Begins with Bears Already Trapped

Index futures and bullion have opened moderately higher Sunday evening, suggesting DaBoyz are in no hurry to lighten up on inventory.  I’ll weigh in later this evening when there is more evidence to judge the mood of investors, but at the moment, they seem quietly confident. I have provided some ambitious rally targets in my latest tout updates below, and there should be little doubt they will be achieved. ______ UPDATE (Aug 31, 12:22 a.m.): What began as a quiet rally has turned into yet another bear squeeze that could exhaust shorts by dawn. At that point the E-Mini S&Ps could be trading at the 3545.50 target sent out earlier, spent but incapable of pulling back to any significant degree. 

Traders Freak Out Over…Well, We’re Not Actually Sure

Thursday’s psychotic price action showed what’s on the tiny, fevered brains of traders as they continue to drive the broad averages to ridiculous heights. Supposedly, the wack-jobs wanted Powell to say more than he did in his keynote address Thursday morning at the Jackson Hole conference.  Here’s the Fed chairman in his own words. Judge for yourself whether a more measured response on Wall Street might have been appropriate: “Our longer-run goal continues to be an inflation rate of 2 percent … Our new statement indicates that we will seek to achieve inflation that averages 2 percent over time. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.”  This is about as dog-bites-man as Fed announcements get, and so we should probably factor out the highs and lows Powell’s words produced on the intraday charts when we calculate targets for the near-to-intermediate-term. They will be rally targets, to  be sure, since there is no evidence that Fed policy, such as it is, has caused investors more than a few nanosecconds of concern.

Gold, Silver Not So Easily Bullied These Days

Bullion bulls should be enjoying the show even though silver and gold futures have gone nowhere for the last couple of weeks. Comex Gold has been pounding on a midpoint Hidden Pivot support of intermediate degree almost daily, and although the futures have traded slightly beneath the support a couple of times, most of the action has been above it. Silver has been even more recalcitrant, defying bears to push it down to a midpoint pivot at 25.66 (shown in chart above). So far this week, the September Comex contract has traded no lower than 26.09. Although both silver and gold could breach their respective midpoint supports and fall, respectively, to as low as 1837 and 22.75, this appears unlikely at the moment. In fact, bears could keel over from exhaustion if they are not able to breach the midpoint pivots by Friday. If that happens, it would clear the way for a strong rally Sunday night.  Although there is always the chance of a rout such as occurred for a single, ugly day two weeks ago, these episodes are becoming increasingly rare and fleeting. There are obviously enough buyers around to push back hard on days when bears don’t have help from some source, or combination of sources, that ignorantly treats bullion like brick dust. _______ UPDATE (Aug 26, 10:29 p.m.): A 1907.50 correction target sent out to subscribers Tuesday night came within 90 cents of nailing the low of Wednesday’s $55 moonshot.  Many subscribers reported getting in near the bottom, so I’ve updated with fresh guidance and targets. The Silver tout has been updated as well, so check it out!

Why AAPL Is Such a Crowd-Pleaser

An obsessive focus on AAPL has paid off for us by taking the guesswork out of the stock market’s rally. As long as Apple shares are moving higher, so will the broad averages. And as long as we have price targets we are confident in, we can trade with an aggressively bullish bias no matter how strong our skepticism. There are good reasons to be skeptical, too, not least of which is that AAPL’s price has doubled since March with no corresponding expectation of an increase in earnings. The shares have benefited in particular from the fact that every fund manager who wants to keep his job is heavily weighted in the Cupertino firm because the stock has never let them down. It is the biggest crowd-pleaser of them all, adding $40 billion in ‘wealth’ to the financial system with each $1 gain. More than any other stock, it allows city, state and county pension funds to pretend they are healthy.  And so it keeps going up because, well, because it has to. How long can bulls keep it up?  Until it hits 537.23, at least, according to our technical runes. That’s exactly $33.44 above Monday’s closing price, and we’ll be bullish as all get-out until it gets there. After that?  We’ll let the charts speak for themselves.

Why Surfing the Big Moves Is So Difficult

The E-Mini S&Ps ended the week a millimeter shy of a well-advertised rally target at 3402.75, poised to achieve it when index futures start trading again Sunday evening. If we were so confident the target would be reached, why, you might ask, didn’t we simply buy a dozen contracts weeks ago and avert our eyes as the futures made their way toward an all-but-inevitable rendezvous with 3402.75? The chart shows why such a strategy — why nearly ALL buy-and-hold strategies — are so diabolically difficult to employ. For although there may have been little doubt about whether 3402.75 would be reached, simply holding a few contracts for an “easy” ride would have subjected a trader to enormous strain, waves of excruciating doubt and many sleepless nights. Notice how the E-Minis’ incremental gains from one green peak to the next were punctuated by losses several times as large with each downdraft to a red-numbered low. That is Mr Market’s way of denying easy money to traders and investors who see “obvious” trends, and who think the path to riches entails simply sticking with those trends no matter what. It turns out that the ‘no matter what’ aspect of trading the big swings can be so harrowing that few of us have the balls or the discipline to ride out the inevitable wailing. shrieking days and nights. How to Die Rich We’ve all heard stories about some commodity trader who made a killing riding a monster move all the way to the top. A cursory look at the chart would seem to suggest this was easy — just up, up, up and aw-a-a-y, like AAPL and TSLA have been doing lately. On closer inspection, however, the steep uptrend is revealed to be a deception: the magnifying lens reveals how even parabolic rallies are fraught with heart-stopping dives, diabolical feints and spasms, each capable of producing as a by-product heart attacks, strokes and trader lives shortened by stress. Keep in mind as well that not all big-time traders die rich. They tend to increase the size of their bets with each new  success, and it is only the ones who are smart enough to quit while they’re ahead who retire on easy street. For most who attempt to trade, it can be a matter of quitting before you are too far behind.

AAPL Drags ‘Lunatic Stocks’ Higher, but Not the Dow

AAPL remains in thrall to madmen, mountebanks and child molesters, although this determined crew could run out of room to manipulate the stock moonward very shortly. The Cupertino firm’s shares rose $10 on Thursday, settling at 472.83 and adding a total of $40 billion of ‘wealth’ to the net worth of Switzerland and, probably, every homeowner within three blocks of Malibu beach. From here it’s no more than a three-day climb to 490.97, a potentially important rally target that Rick’s Picks subscribers have been using to suspend disbelief as Apple’s valuation climbed toward, and now above, the $2 trillion mark. Analysts say the manufacturer’s smartphones and computers are selling well, but of course they’d have to be selling very well indeed for the firm to rack up the highest valuation of any company in the history of the world. Looking ahead to the inevitable, there’s a limit to how high AAPL can go, and this will necessarily place a limit on how high the stock market itself can go. The Dow Industrials gained a paltry 47 points on Thursday, a divergence in relation to the lunatic stocks — AMZN, CMG, FB, GOOG, MSFT and NFLX — that will grow increasingly worrisome if it persists.  No one seems to have noticed it yet, but if and when they do, investors’ damn-the-torpedoes attitude is certain to prove far more fragile than it now appears.

Everything Went the ‘Wrong’ Way

An interesting day, since nearly everything went the ‘wrong’ way: stocks, the Nasdaq 100 and even the lunatic sector were down while the dollar actually rose. Bullion got hit pretty hard, crude fell, and AAPL’s solid gains from earlier in the day were reversed. Could the foregoing herald a major tone change? It’s possible, although I have my doubts. In any event, I will stay closely focused on a $490 rally target in AAPL, since there is strong technical evidence to suggest it will be achieved. If so, look for Wednesday’s selloff to reverse and for recent trends, including the bullish one in bullion, to resume.

Ahhh, the Suspense…

The S&Ps flirted with new record highs for the sixth straight day, waiting for news that could conceivably be used to squeeze shorts for a few headline inches. Besides the presumptive structural resistance at the old highs, there’s an important Hidden Pivot obstacle that was first mentioned here in early June.  Together they represent layers of supply capable of keeping stocks from soaring into the wild blue yonder.  For now, I’m looking for a marginal new high that could provide an excellent opportunity to get short. AAPL, however, is a wild card. Currently trading for around 463, it looks primed for a thrust to 490. The stock would make an enticing short at that price, but it remains to be seen whether the broad averages will be at or near highs that would offer an equivalent opportunity.

Buffett Takes a Symbolic Step Away from the Dark Side

Bullion fans were revved up after Friday’s close when they learned that Warren Buffett had taken a plunge in bullion, acquiring shares of Barrick Gold worth about $563 million. This is welcome news, but it is also small potatoes for Berkshire Hathaway. Recall that when the investment firm bought $9.7 billion worth of Dominion Energy’s gas transmission lines six weeks ago, it was seen as just a token bet on the energy patch. Still, if anyone is going to jump on a long-term trend before most have noticed it, it is Buffett. He may be a johnnie-come-lately compared to gold bugs who have been sitting on physical and accumulating mining shares for years, but it seems unlikely that Buffett would even bother with bullion if he did not see a favorable trend developing for the long term. Kissing Off Goldman Sachs To be sure, his defensive instincts are probably ratcheted to-the-max these days, in no small part because of the large position he has amassed in Apple. No one, least of all a legendary bargain-hunter like Buffett, could believe the consumer electronics firm’s shares offer good value for a current $2 trillion. It should therefore come as no surprise that the Sage of Omaha has been edging toward hard-money assets to preserve his capital in these way-too-interesting times. Perhaps even more significant than his gold bet is a corresponding decision to exit the remainder of his position in Goldman Sachs and to greatly reduce positions in JP Morgan Chase and Wells Fargo. We can reasonably infer that he sees lower profits ahead for paper-shufflers and deal-makers, and perhaps even for their trade desks. It does not require a big leap in logic to suggest as well that Buffett sees an end to financialization itself.  Although Berkshire has gone along with the global shell game for many years, albeit with far less leverage than the big banks, no one could believe he trusts a game that enriches mountebanks whose main skill is hyperleveraging snide. Gold bugs should take encouragement from Buffett’s move away from the Dark Side, since it symbolizes the possibility that honest money could someday return.  The consequences for debtors will not be pretty, but it is the only way back for a financial system that has been fatally compromised by hubris, stupidity and greed. _______ UPDATE (Aug 17, 6:56 p.m.): Buffett’s change of heart prompted a fascinating essay at ZeroHedge. Although in public he has never shown much respect for gold, it turns out that his father, Howard Buffett, considered gold-backed money essential to our freedom. Here’s the link.

Why No One’s Breaking Out the Bubbly

Shhhh! Don’t look now, but the S&Ps have tiptoed up to their all-time highs, presumably to attempt a quarterback sneak on Friday that would mute the hubris when they cross the goal line. DaBoyz don’t want to jinx the rally or call attention to its surreal nature. After all, except for a handful of grotesquely overvalued tech stocks and some fast-food chains, America’s economy, its largest cities and commercial real estate everywhere are slipping into a full-blown depression. Under the circumstances, the revelry on Wall Street is more than a little unseemly. In fact, it is a civilizational embarrassment whose dire consequences our children, their children and their children’s children will be living with for the next hundred years.

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