The Morning Line

Something’s Got to Give

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For nearly a year, I’ve promoted the idea that the post-covid bull rampage would end when Microsoft shares hit $430. They effectively achieved that benchmark on Friday with a pre-dawn print at 428.95 that gave way to a $16 plunge. If this was not THE top, it certainly felt like A top, and a potentially important one. However, before we draw any conclusions, let’s see if the selloff gets legs, since we don’t want to underestimate the power of a market that has been in the grip of mass psychosis since October. If there were any doubt about this, consider how stocks have rallied into the Fed’s decision to stay tight even after investors had deluded themselves into expecting aggressive easing in 2024.

Originally I’d picked Apple as our infallible bellwether, because it is the most valuable company in the world, and because its shares are so heavily owned by institutions. But so are Microsoft’s, with a key difference:  Although iPhone sales are poised to implode in the severe economic downturn that’s coming, Microsoft is unlikely to feel much pain even in the hardest of times. That’s because revenues from Microsoft 365 will continue to flow from more than 60 million subscribers, regardless of the economy’s condition. The company’s earnings are nearly bomb-proof, and that it is why it is arguably the best stock in the world to own, as well as the most important stock to follow. When it is rising strongly, the broad averages cannot fall; if it falls, it will take the broad averages with it.

What If?

However, the technical picture is not complete without considering the very bullish chart of the S&P 500. It says that before the 15-year-old bull market ends, the S&Ps are likely to hit 6118.34, a 20% gain from current levels. How do we reconcile this with signs that MSFT may have peaked? A plausible answer is that both are topping but will resume their respective uptrends after significant corrections. A hard fall seems likely for Microsoft, if not necessarily for the S&Ps, because the software giant’s ABCD uptrend is so clear and compelling. It’s tempting to say there’s no way MSFT will simply blow past $430 without a struggle that features a punitive selloff and then a running start to new all-time highs. If so, the bull-market target would rise to 456.88, a Hidden Pivot derived from extending the pattern’s C-D leg to its maximum theoretical length. That would avoid having to use the bigger pattern’s puny December 2018 low at 93.96 as the starting point for the biggest bull market of them all. We’ll revisit this conundrum if and when MSFT gets second wind following a correction from these levels.

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$ESM24 – June E-Mini S&Ps (Last:5183.25)

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The futures are topping here, since D=5220.00 is too compelling a Hidden Pivot resistance to simply give way.  The fact that the topping process has entered its third, tedious week is evidence not of the bull’s tenacity, but rather of the herd’s discovery of “our” pattern and target. Even with the sketchy filigree that characterizes the A-B leg, the pattern is still far from gnarly, and therefore overexposed.  We can short the futures or use SPY options to leverage the impending plunge, so stay tuned to the chat room and let your interest be known if you care.

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$MSFT – Microsoft (Last:416.42)

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$GCJ24 – April Gold (Last:2161.50)

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$SIK24 – May Silver (Last:25.38)

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$CLJ24 – April Crude (Last:82.93)

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For all its wacky histrionics, crude remains one of the most tradeable vehicles tracked on this list. The pattern shown, with an 82.48 rally target we’ve been using as a lodestar, produced a second ‘mechanical’ buy at x=77.26 last week that went on to rack up significant gains without much fuss or stress.  Paradoxically, most of the trades come from thrusts into ‘discomfort’ zones that are so predictable that they should be called ‘relaxation’ zones. I will continue to provide real-time guidance for this vehicle that is commensurate with the interest subscribers show in the chat room. ______ UPDATE (Mar 18, 10:24 a.m.): I am raising my target to 83.26, since buyers are not having much difficulty surpassing rally targets of lesser degree. The pattern’s point ‘B’ high is more sausage-y than I would prefer, but I’ll use it anyway because the pattern itself looks gnarly enough to evade widespread detection and use. The target will be shortable when reached, but your trading bias should be bullish until then. If you were looking for yet one more negative factor to slow down the psychotic bull market’s rampage, crude’s effortless waft above $80 barrel could be it, since it threatens to raise the price of everything tied to energy prices — i.e., virtually all goods and services sold on this troubled planet. _______ UPDATE (4:03 p.m.):  The rally from the Feb 5 low has gone out of control, killing my enthusiasm for getting short. It looks to be headed for 86.15; however, even on the five-minute chart, there was just one dicey chance to get long today using an rABC trigger.

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$GDXJ – Junior Gold Miner ETF (Last:36.74)

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Although the impulse leg in the conventional pattern shown was not very powerful, it was persistent enough that I’ll give the bearish interpretation of this chart the benefit o the doubt. That means that GDXJ is on a ‘mechanical’-short signal triggered on first contact with the green line.  That implies that GDXJ is more likely to fall to p=33.73 than continue its ascent toward C=39.82. Regardless, I doubt that sellers will be able to push it down to D=27.63.

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$TLT – Lehman Bond ETF (Last:92.94)

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The ‘mechanical’ buy triggered on Thursday when TLT fell to the green line (x=93.40) is looking like hell at the moment, with the steep fall over the last two weeks showing no sign of abating.  However, ‘mechanical’ entries are never supposed to feel warm and fuzzy, since they are designed to exploit the vicious shakeouts that can occur when overly eager buyers get too far ahead of themselves. All we can do now is wait and see whether TLT takes a one-level bounce to the red line without exceeding C=92.01 to the downside.

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$DXY – NYBOT Dollar Index (Last:103.45)

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‘Mechanical’ buying opportunities are not supposed to feel like opportunities, since the buying often occurs with the trading vehicle falling hard to the green line. The Dollar Index got hit three days in a row last week, sending it plummeting to x=102.56, where a ‘mechanical’ buy was signaled. Instead of leaping on the trade I’ll suggest paper trading it, the better to observe how an unappetizing possibility extricates itself from a bog. For the trade to work, DXY would need to rally to the red line without first dipping below C=100.62. _______ UPDATE (Mar 17): So far, so good: DXY has rallied from the green line and reached the midway point between the line and the midpoint Hidden Pivot at 104.50. At that price, taking a theoretical profit on 50% of the position would be in order.

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$BRTI – CME Bitcoin Index (Last:62,835)

I’ve included Bitcoin in this week’s list because the weekly chart is so clear and compelling, and therefore useful. The stall at p=48,015 has confirmed not only that the pattern and its ‘D’ target at 80,547 are ‘correct’, but that the latter will be reached. It should be used as a minimum upside projection, but also as a likely terminus for the bull market begun in 2020. That much is evident, given the ease with which buyers broke free of p’s gravitational pull when BRTI lifted off the launcher two weeks ago. FYI, this symbol provides the best bid/offer, in real time, across a wide swath of bitcoin vehicles and is not directly tradeable.

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