It’s tempting to think last week’s high at 2866.00 (click on inset) will mark the final gasp of an exceptionally powerful bear rally.  If so, it will have occurred in a place where we might have expected Mr. Market to spring a nasty trap on bulls and bears alike. The latter would have thrown in the towel and covered short positions when the S&Ps broke out over the last two weeks above three descending peaks recorded last autumn.  As for bulls, they are probably still drooling at the prospect of new all-time highs, since the 2866 peak that preceded Friday’s selloff came within 3% of that threshold.

Both could be proven wrong, although it might take a few more weeks before we know for sure. Friday’s cascade on Wall Street felt particularly scary because it came amidst an onslaught of downbeat news concerning the dramatic slowdown in the global economy.  Growth in Europe and China seems ready to plummet and take the U.S. economy with it.  There was also an unsettling development in the financial sector as borrowing rates on 90-day T-bills exceeded those on the Ten-Year Note. The last time the yield curve inverted was in 2007, just before the financial system and stock market crashed. A rate inversion has preceded every recession since 1975. A further concern was that yields on German bonds swung negative, begging the question of whether it’s too late in the game for so urgent and desperate an attempt at stimulus to work.

AAPL a Dead Duck

Even if the global economy were to miraculously rebound, U.S. stocks still look like an insane bet at these levels. The geniuses who are paid absurd sums to throw Other People’s Money at a small handful of stocks must be thinking the same thing — that the game is finally over. So do I. But it is with a caveat borne of long-time trading experience. Because “everyone” is correctly bearish at the moment, I am wary of one more rally. Perhaps it will be to marginal new record highs if that’s what it takes to disembowel the last bear and give bulls a final, reckless moment of certitude.  This seems technically plausible  because rally targets in two key bellwethers, AMZN and AAPL, remain to be achieved. (The latter, by the way, begs to be shorted for reasons that I’ve written about several times. Mainly, it’s a matter of iPhone, which accounts for most of Apple’s revenues, being a dead duck when global recession hits. Facebook is another stock you can hate, because the company’s growing reputation for dishonesty could kill it almost overnight.)

In the meantime, I have outstanding rally targets at 2924.50 and 3005.63 for this vehicle, which settled on Friday at 2807, down 55 points.  Although it’s possible that last Thursday’s top at the 2866 target was the start of The Big One, a glance at the chart reveals that the day’s heavy losses were small when viewed against the steep, relentless rally begun in the final days of 2018. We will treat last week’s top with respect and caution in any event, but we should remain alert to the possibility of one more upthrust that would set up bulls and bears for the haymaker.

Rick’s Picks trading ‘touts’ are for educational purposes only. Past performance is no guarantee of future performance. (See full disclaimer at

Feed news

Latest Forex Analysis

Editors’ Picks

EUR/USD: Double bottom breakout fails ahead of the Fed

The bullish case for EUR/USD has weakened ahead of the FOMC (Federal Open Market Committee) rate decision due this Wednesday. The currency pair closed well below 1.1263 on Friday, invalidating the double bottom breakout confirmed on June 6.


GBP/USD consolidates the downside near 1.2600, UK politics in spotlight

Although looming Brexit uncertainty dents investment by firms, the GBP/USD pair manages to take advantage of the recent US Dollar (USD) pullback heading into the London open on Monday.


USD/JPY wavers in range near 108.60 amid risk-on

USD/JPY failed to sustain at higher levels once again and returned to the familiar range around 108.60 amid mixed Asian stocks while higher US equity futures and Treasury yields help keep the minor bids intact ahead of Fed.  


Trade War With India Starts: How Trump is Winning the Global War in 10 Tweets

After a year of talks on U.S. barriers to Indian steel and aluminum, India retaliates against Trump. The Hindu reports India to Impose Retaliatory Tariffs on 29 U.S. Goods Starting June 16. 

Read more

Gold: 100-month MA is a level to beat for the bulls

Gold (XAU/USD) is struggling to cut through key technical line which proved a tough nut to crack in 2018. The yellow metal rose to $1,358 on Friday, but the break above the 100-month MA.

Gold News