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The Morning Line

Bears’ Last Chance to Take a Shot? (See update for results)

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Bears eager to get short near the top of the stock market’s inexplicable rampage could have just one chance left before shares blast off for infinity and beyond. This is the clear implication of the chart included with my latest forecast for the Nasdaq 100 (see below). On Tuesday the E-Mini Nasdaq futures peaked almost precisely at a long-term Hidden Pivot resistance located in a place that has been known to show magical stopping power. The futures sold off more than 4o0 points after touching it, but they recouped more than half of it Wednesday, showing no sign of fatigue at the bell. The 9604 high could conceivably mark the end of the vertical rally since March 23. However, if the June contract closes above the 9585  pivot for two consecutive bars on the weekly chart, that would make a run-up to 10,571 an odds-on bet. That is a little more than 9% above the all-time high at  9763 recorded in February, and it would make this spring’s sensational running of the bulls even more inexplicable and frightening. Although health officials are cautiously optimistic about a vaccine, Wall Street is quite obviously wildly optimistic. ______ UPDATE (May 28, 6:37 p.m. EDT): Subscribers in the Trading Room around mid-day could have jumped on a short I detailed explicitly in the E-Mini Nasdaq futures (see chart above). Check out my posts on this beginning at 12:26 p.m. if you want to determine whether you could have pulled the trigger. It occurred 21 points off the intraday high, just ahead of a 147-point plunge worth as much as $588 per contract. By the close, 75% of the initial position had been covered, with one contract remaining for a  swing at the fences. That was the purpose of this gambit, as the headline stated.

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$GCM20 – June Gold (Last:1718.90)

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June Gold trampolined off a 1683.10 Hidden Pivot Wednesday, enabling subscribers to get long in their favorite bullion vehicles at or very near the intraday low. I’d posted a heads-up in the Trading Room as the futures began their turn, noting that the 1683.10 ‘secondary pivot’ of a pattern that has been in progress for six weeks was a ‘logical’ place for a bounce.  The futures rallied $30 from an actual low at 1684.20, and although they are not yet out of the woods, the bounce has turned the hourly chart bullish and breathed new life into targets as high as 1879. ______ UPDATE (May 28, 7:01 p.m. EDT): What would it take to imply the futures are out of the woods? Answer: an upthrust exceeding the 1757.60 peak recorded on May 20. I’ve set a screen alert to wake me when bulls get there.

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$+ESM20 – June E-Mini S&Ps (Last:3034.50)

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$+NQM20 – June E-Mini Nasdaq (Last:9434.25)

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I sometimes joke that virtually every trading vehicle, in every time frame, whether trending up or down, reverses from p2, the secondary pivot, virtually every time. Or so it would seem. I was never really a p2 kind of guy, but my mentor, Ira Tunik, used it so often, and persuaded so many Rick’s Picks subscribers that it was important, that I eventually started to pay attention. That’s when I began to see that it actually does repel trends almost as consistently as my beloved ‘p’ midpoint Hidden Pivot. It has also become clearer recently that some of the most successful traders in the room have been using p2 to set up rABC trades that deliver as consistently as a loose slot machine in a Reno bust-out joint.

All of which is intended to call attention to the chart shown in the inset, a weekly graph of the E-Mini Nasdaq futures. This lunatic-powered vehicle comprises an invincible core of no-decision stocks that institutional holders would never even consider selling. That is why it is spitting fire at the moment, just inches from record highs. Notice as well that Wednesday’s peak, which put a new high on the bounce from March’s Mindanao abyss, occurred almost precisely at p2=9585. I wouldn’t want to put ideas in your head, but there are worse places to attempt getting short.  Just sayin’. We can use puts in $NDX, so stay tuned to the chat room for timely ideas — or make sure you’ve enabled ‘Updates’ on your account page. The caveat here is that buyers shredded the 8600.00 midpoint pivot the first time they encountered it on the way up. This made it likely that D=10,571 will be reached. As you can see, it sits well above the current record high at  9763.00.  I can’t believe I’m actually saying this, since it seems so preposterous. But that’s what the chart implies, and there is no getting around it. A two week close above p2=9585 would all but clinch a move to 10,571 in my estimation. If you’re itching to get short, better to do it here and get it out of your system, since it could be the last good opportunity you’ll have to do so if the futures break out above 10,571. _______ UPDATE (May 28, 7:28 p.m. EDT):  A 12:26 p.m. post in the Trading Room set up a short from near the intraday high that could have produced a profit of as much as $588 per contract. A second post followed at 2:46 p.m. containing detailed risk-management instructions. Here’s the chart.  Since some subscribers reported doing the trade, I’m establishing a tracking position. Those who followed my explicit guidance would have a realized gain so far of about $1000, with a single short contract remaining that has a profited adjusted cost basis of 9534. We”ll give it a generous stop-loss for now at  9503.50, worked o-c-o with a bid to cover at 9307. 

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$AAPL – Apple Computer (Last:318.22)

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$DIA – Dow Industrials ETF (Last:254.40)

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$CMG – Chipotle (Last:995.31)

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Chipotle makes its first appearance here in more than a year. A subscriber had asked about shorting into the stock’s ballistic rally, but there are surely easier ways to make money. CMG’s ascent into hyperspace is right up there with Tulipmania in the annals of mass folly. Ironically, the stock’s bear market from 2015-18 was caused by two incidents where bacterial/viral agents had been detected in their food. Is business now better than ever, as the move into record territory would seem to imply? Hardly. It’s simply benefiting from investors’ desperate, heedless plunge into the shares of a relative handful of companies that can make money and perhaps even turn a profit in a time of pandemic. The weekly chart shows the stock to have topped last week a micron above a clear Hidden pivot target at 972.08. The implication is if it can close above that number for two consecutive weeks, or trade more than $20 above it intraday, D2=1107.76 will be in play. The latter target is calculated by bringing the point ‘A’ low down to the next obvious place. The ABC pattern is too obvious to work as perfectly as we like for purposes of producing a precisely shortable target,  but it should be good enough for government work. That means a pullback to p=760.49, however unlikely, would set up a so-so ‘mechanical’ buy, stop 645.92._____ UPDATE (May 19, 8:44 p.m. EDT): This rabid wolverine began the week with a $20 short-squeeze gap that has tightened the vise on shorts, if such a thing were possible. It may need a couple of days to digest the move,  but you should continue to use 1107.76 as a minimum objective in any event. Above it there is 1169.99 (120-min, A=599.78 on 4/3). More than ever, it would seem, we are a burrito-eating nation. _______ UPDATE (May 26, 9:29 p.m.): The dirtballs who work this stock popped it to p2=1089.47 before trapping bulls with a $75 plunge. (Nice work, guys.) They unwittingly tripped a mechanical buy at 1011.94, stop 960.25, but I’ll suggest spectating this time, the better to develop confidence in mechanical trades, which by their nature are usually going to be pretty hairy. ______ UPDATE (May 28, 10:24 p.m.): The stock looks as if it has been propped up for distribution over the last two days, probably because its handlers are losing confidence they can hold it aloft if the broad averages give way ahead of the weekend. The ‘mechanical’ trade we passed up is looking shakier at the moment, but we’ll remain spectators in any event.

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$GDX – Gold Miners ETF (Last:33.99)

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$DXY – NYBOT Dollar Index (Last:101.95)

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$TNX.X – Ten-Year Note Rate (Last:1.26%)

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I’ve revised downward to 0.26% my forecast for interest rates on the Ten-Year Note.  A 0.30% target given here earlier was based on an erroneously drawn pattern discovered by a subscriber. But could the so-far low at 0.39% have been the bottom, especially considering the power of the subsequent rally to 0.98%? It’s possible, but I doubt it. The pattern itself is sufficiently clear and compelling to suggest that the Hidden Pivot target will not merely be closely approached, but actually touched. This revised forecast will have no bearing on my forecast for a drop to 0.73% on the 30-Year Treasury Bond. It  traded down to a record 0.84% last week but has since rebounded as high as 1.63%. The T-Bond sellers who drove rates back up to that height were useful idiots who were simply fulfilling the inviolable law that no trend ever goes sup or down in a straight line without correcting. ______ UPDATE (Mar 18, 9:15 p.m.): This is quite a rally we are witnessing — probably the steepest climb ever recorded for yields on the Ten-Year Note. So, was the dip to 0.39% the finale for the long-term cycle? I doubt it, but I am not going to get in the way of this rally.

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