The Morning Line

New Record Highs Coming?


Is the stock market on its way to new record highs? The thought would have seemed preposterous just a week ago, when the Dow’s still-presumptive bear rally had yet to exceed even a single peak on the daily chart. But it did so last Wednesday, with a gap-up opening that demonstrated how spectacular daily gains can be engineered by Wall Street’s wizards to require little bullish enthusiasm or even much cash. As detailed here last week, this has been especially true of AAPL, the Titanic of the securities world and a crucial bellwether for investor sentiment. One might have thought it would take hundreds of billions of dollars to float the stock back to the surface following its nearly 30% plunge from a record $183 in January to a Mindanao low of $129 in mid-June. So many investors lost so much money as AAPL plummeted that their eagerness to recoup at least some of it should have turned the stock leaden the entire way up.

Suckers Never Learn

Instead, DaBoyz last week succeeded with little effort in driving AAPL to within a hair of a $172 target I’d disseminated to subscribers more than a month ago. Along the way, no fewer than a dozen times, they employed a trick that has never failed to work, even though the same suckers have been played countless times. The pros simply pulled their bids overnight, letting Apple shares fall sharply enough to dry up sellers. When bears realized at the opening bell that there was little or no supply to cover their shorts, panic buying into ghost offers did the rest. Thus did the resulting price spikes in the early moments of numerous sessions accomplish what merely bullish buying never could – i.e., goosing the stock past imposing peaks and thick layers of supply created by losers on the way down. We note that at Friday’s close, AAPL sat just 7% shy of new record highs, not even breathing hard.

In the meantime, its poor cousins, the once-mighty FAANG stocks, continue to languish near their bear-market lows. Will AAPL’s carny-booth handlers be able to vamp in the ozone for a couple of months until all the other stocks catch up?  This seems unlikely, and it will be interesting to see how they keep their all-time-favorite cash cow chill, since AAPL has been trained to behave on cue like a rabid badger. But how will the other stocks shake off a bear market and levitate to new all-time highs when Americans are mired in the worst crisis of confidence since the early 1970s? The answer is that their mood will improve as shares continue to rise, even if initially for no reason save short-covering.

Sardine-Like Prescience

As we watch the insanity unfold, assuming it does, let me suggest putting aside the widely believed but ridiculous notion that the stock market is able to see six months ahead and predict an economic upswing; for in demonstrable fact, the supposed prescience that drives these moves is non-existent. The market is no more prescient than a tin of sardines, and the collective wisdom often ascribed to it is actually just fear and greed operating at the sub-animal level of the id. Stocks rally for unfathomable cyclical reasons that have nothing to do with earnings or events in the real world. Ultimately, this could revive the epic delusion that the economy is getting ‘healthy’ again, even though it is supported by debt grotesquely larger than we will ever be able to pay down. Thus do bear rallies with no apparent basis in reality eventually win over the masses. As for the supposed ‘wall of worry’ that stocks climb when the headlines are depressing, the idea was popularized by a news media that cannot comprehend the obvious — i.e., that the stock market is a stupid, crazy beast, and that Fed funny-money has made it more insane than ever. But prescient?  Yeah, sure.

The foregoing explains why this permabear’s mind is open to the possibility that a fake rally could ultimately turn into a real one, even as the news headlines wax grimmer than ever. If you need a reason for new all-time highs, consider the prospect of the November election reversing America’s appalling slide into woke darkness, the strangling dictatorship of LGBTQQIP2SAA, and societal divisiveness verging on civil war. Will we be temporarily spared from deflationary ruin by a Republican blowout and a rip-roaring bull market? Among the nations of the world, America has always been luckiest. That is why we shouldn’t dismiss the possibility of a final, truly insane running of the bulls on Wall Street.

Rick's Picks for Tuesday
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$MBTU22 – Sep Micro BItcoin (Last:21.25)

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$+AAPL – Apple Computer (Last:174.15)

What a shocker. The no-decision monkeys who have lived off AAPL’s autopilot bull market have succeeded in levitating the stock to within a split hair of the 172.78 target I spotlighted here weeks ago. It was trading in the 140s then, and it seemed difficult to believe at the time that the stock could rise that much on punk earnings, a U.S. economy sinking into recession, and Apple Inc. unable to innovate its way out of a Glad bag. But just look at it! Another 6% and it’ll be in record territory. I’ve documented the short-squeeze tactics that were used to goose the world’s biggest-cap stock skyward with hardly any bullish buying or even cash outlays. It was a simple trick: Let the stock drop overnight until sellers are exhausted, then run it up shorts’ wazoos on the opening bell. The rally has been a fraud every inch of the way, but there’s no denying it worked. And now what? Can AAPL wait for the broad averages to catch up? Probably not, since the Nasdaq and even the FAANGs are trading closer to their bombed out lows than to their insane, all-time highs. It should be interesting to watch the DaBoyz try to vamp for a month or two while the U.S. economy continues to sink into the crapper. Stay tuned to this page and the chat room for the technical play-by-play. _____ UPDATE (Aug 15, 7:43 p.m. EDT): A feebler than usual short squeeze topped at 173.40, 0.3% above my target, so I recommended buying the expiring 165/160 put spread 16 times for 0.12. This is a 30-to-1 horse, so don’t get your hopes too high. Offer eight of them to close for 0.25, good through Wednesday and contingent on the stock trading 170.00 or higher. _______ UPDATE (Aug 17, 10:36 p.m.): Our horse is now a 90-to-1 shot, but I hope the $200 you blew on it saved you $$ thousands because you were less tempted to short the E-mini S&P futures instead. _______ UPDATE (Aug 18, 8:52 p.m.): DaBoyz were either inidiiferent or too lazy to try their usual short-squeeze shenanigans today, so the stock’s performance must be viewed as an honest reflection of underlying supply/demand. Since it performed poorly with an ‘inside day’ relative to the previous day’s elongated price bar, we should expect the stock to start roll down as the week ends, presumably setting a bearish tone for Sunday evening. We’ll book a $200 loss on the spread nonetheless.

$ESU22 – Sep E-Mini S&P (Last:4281.25)

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$CLU22 – September Crude (Last:90.73)

Crude would trigger a ‘mechanical’ short if it touches the green line x=96.15. However, because the impulse leg was such an agonizing slog, I can recommend this trade only to subscribers who know how to cut the implied theoretical entry risk of $23,000 on four contracts to perhaps a tenth of that. It would require close attention to ‘camouflage’ opportunities on the sub-15-minute charts, aka ‘camouflage. Merely spectating will have its rewards, since the next leg down should help snuff inflation at the pump as well as the unchecked greed of Big Oil. _______ UPDATE (Aug 15, 7:54 p.m.):  Use the 81.79 target shown here as a minimum downside projection for the near term. If this Hidden Pivot support fails, the next step down would be to 78.93, calculated using A=111.14 from June 29.  _______ UPDATE (Aug 18, 9:27): The failure of bears to reach p2=84.66 of the pattern shown in the thumbnail inset suggests it is on its way up to at least to the green line (x=96.11). It would trigger a ‘mechanical;’ short there, stop 101.85, but I am not recommending the trade because of the weakly erratic nature of the A-B impulse leg.

GCZ22 – December Gold (Last:1778.70)

Gold has been huffing and puffing for two weeks without making much headway. That’s not saying it can’t still pop through p=1840.80 with brio, but we’ll need to see it happen before we get excited. Thereupon, p2=1913.10 would become out minimum upside objective, with a shot at 1985.40 for the bull cycle begun three weeks ago from 1696. As always, a decisive penetration of any of the three Hidden Pivot levels implies a continuation of the trend to the next. The pattern looks likely to produce winning ‘mechanical’ buys if gold hits an air pocket as it seems wont to do whenever bulls get too interested. _______ UPDATE (Aug 17, 11:06 p.m.): Maybe the D=1772.2 downside target shown in this chart will provide a respite for buils, however brief and unsatisfying? ______ UPDATE (Aug 18, 9:32 p.m.): It provide no respite whatsoever when the ‘hidden’ support gave way like wet tissue. But none of us could have been surprised, since gold, in its tedious bottoming process, seems to delight in disappointing bulls about 90% of the time. This may be an even more dismal spell than usual, given the dollar’s bullish breakout (see my DXY update elsewhere  on this page.  

SIZ22 – December Silver (Last:20.84)

December Silver appears on track for  push to the 21.93 ‘D’ target of the pattern shown. The odds were somewhat enhanced when last week’s dip from just above the red line (p=20.78) failed to provide a ‘mechanical’ buying opportunity by reaching the green line as required. Don’t pass up a buying opportunity if it should swoon to x this week, but check the chat room for risk avoidance guidance before you leap. The rally target lies within a thicket of supply deposited on the daily chart last spring, and so a decisive push through D would be more impressive than usual. ______ UPDATE (Aug 17, 11:19 p.m.): My mild enthusiasm for Silver appears to have been  unwarranted, perhaps because I overqualified the impulse leg that seemed to be driving the rally. The last piece of it exceeded no ‘external’ peaks, even though the launch stage got past some small ones near the bottom of the move. Anyway, the December contract appear likely to abort the 21.95 rally target, and I’m not about to sugarcoat what could happen after that.  The disappointing picture is shown in this chart.

$+TLT – Lehman Bond ETF (Last:115.96)

Last week’s steep fall to the green line from just shy of D will provide an interesting test of ‘mechanical’ set-ups, since they are designed to signal buying opportunities when one’s instincts shout ‘Flee for your life!’ Bulls must have been feeling like that on Thursday, when the downdraft reached a perhaps temporary bottom. It should be good enough to propel TLT to at least p=116.90, but I hadn’t recommended buying at x unless you are familiar with ‘camouflage’ set-ups that can pare entry risk by as much as 95%. Please let me know in the chat room if you took the trade and I’ll establish a tracking position if there are at least two of you. ______ UPDATE (Aug 15, 11:05 a.m. ET): The gap-up opening hit 116.75, so you should be out of half the position. I’ll use the current price of 116.17, well off the high, to establish a cost basis of 112.91 for the 200 shares that remain. Tie them to an impulsive stop-loss at 114.83 for now, o-c-o with an offer of 100 shares at 118.50 and another 100 at 119.30. _____ UPDATE (Aug 16, 5:27 p.m.): For those who actually did the trade, the stop would have taken you out today for a $384 gain. We got lucky, since this vehicle has been trading like garbage.

$DXY – NYBOT Dollar Index (Last:107.63)

Groping for a bottom, the Dollar Index has already triggered one false ‘buy’ signal this month. A new signal would be generated by a 106.06 print, but we’ll need to monitor the lesser charts if and when it gets there to determine whether the rally is for real. If so, that would imply minimum upside thereafter to at least 107.46, the midpoint Hidden Pivot resistance of the pattern shown. If the trend pushes easily past it, we could be looking at new highs by mid- to late September. _______ UPDATE (Aug 15, 8:00 p.m.): The decisive pop through 106.06 implies the rally is bound for a minimum p2=107.46.  _______ UPDATE (Aug 18, 9:41 p.m.): And now today’s pop through p=107.46 strongly implies that p2=108.87 will be reached. That will of course set up a test of July 14’s importnnt peak at 109.29. Keep D=110.27 in mind if and when p2 gives way.

$GDXJ – Junior Gold Miner ETF (Last:33.67)

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