Month: April 2022

Let’s Examine $FB and Speculate About a Target

Dereck's Trades

My last post on $FB was here. In that post, I suggested that a correction of cycle (yellow) degree may be completing. A further revisiting of the range identified in that last post has produced a strong rally, and the structure counts well as complete.

So long as it stays above the orange box beneath us, we may assume that it has entered its third wave of cycle degree. That wave targets the orange box above, roughly $700. The move from here to there should proceed in a 5-wave advance, and we would expect it to take several years.

I will update this from time to time with shorter term structural developments as the emerge.

FB

Let’s Revisit $COST

Dereck's Trades

My last post on $COST was here. In that post, I identified a near textbook bearish wedge that had developed. And unfortunately, that wedge never broke down and the stock rallied to new highs.

That new piece of information is telling: why didn’t the bearish structure break down?

Answer: the market may not be as bearish as we were expecting here. Given the potential for the markets as a whole to break up sharply here, we can reinterpret the structure on this stock as a large inverse, with the right shoulder probably complete.

Should this break up sharply, the target for this is over $700. We would like to see this “right shoulder” stay close to or above the “left shoulder.” Falling below the 12/2 low will begin to cast doubt on the interpretation.

COST

A Brief Look at the German $DAX

Dereck's Trades

After the utter carnage the German $DAX endured after Russia’s invasion and the resulting effects this had on energy policy in Europe, let’s see how it looks now.

And in fact, there may some room for optimism. Though the selloff was sharp, and though it remains below a down trend line, the rally from the lows has been impressive and it now sits well above all of the prior highs from 2018-2020.

Furthermore, nice, sharp selloffs with sharp rebounds lay the potential for inverses, which I have depicted below. As absurd as it is for me to point these out here given the news flow, not doing so is a mistake I won’t repeat again after 2020 (I saw many, but I refused to believe them given the pandemic and lockdowns). This time, let’s at least acknowledge their presence.

If it rallies again, it may go at least 23% from here, if not even further.

DAX

Next Major Targets for the S&P 500 and the Psychology I Think Will Accompany Them

Dereck's Trades1 Comment

This article is long and perhaps even tedious. Forgive me for that. There’s a lot I want to cover.

I know things look like hell in a hand basket at the moment, but I think things are proceeding according to my expectations. I also know that it’s been frustrating the last few days as the market capitulated, but I have not been interested in that because—to my mind—that is chasing into a low, and much like chasing into a high presents us with great danger, so does, I believe, trying to catch every inch of this move down we’ve had. I think we’re bottoming, and that can reverse sharply at any moment, and I’m in no mood to be caught in that.

I could also be wrong here, and I will be the first to own that if I turn out to be. But, looking at things as a whole, it seems to me as if half the people who are freaking out about their belief that the Fed has no options here have never actually lived through a rate hike cycle before.

The chorus identifying today with the likes of 2008 seems to me to have not actually lived through that as an adult. This is literally nothing like that. By 2008, people were defaulting on their mortgages in droves and the banks were already starting to crack. Literally the biggest financial giants in the world were crumbling. It was a literal catastrophe. Nothing like that is happening here. At worst, so far, the rate of change of growth has slowed. But we’re literally still growing. And the banks are flush with cash. No stress there whatsoever. And while prices may be a bit high by some measures here, they may not be that high (see my section on prices in this article).

So, if the Fed has to hike quickly to combat inflation, it may eventually have an impact. But keep in mind, in 2008, the Fed was already two years into a hiking cycle. We’ve hardly even had a hike at this point (I covered the timing of hiking cycles and market tops in the second section of this article). Based on that, and the shocking sentiment readings we’re getting here, I think we may have years before we top.

In addition to the points made about sentiment here, where 2 of the worst 23 “bull percent” readings were discussed, we now have 3 of the worst 24 “bull percent” readings, and even better now, the “bear percent” reading this week was the 5th highest ever.

We are right now experiencing a total sentiment washout.

If we were having this price action this year, and everybody interpreted it as a nice, healthy correction, eagerly anticipating new highs, with sentiment surveys bursting with joy and excitement, it’s time to be bearish. But right now, same price action (“every rally fails for months”) and people are calling for Armageddon. In my opinion—and I may be proved wrong about this—I believe this is setting us up for an opportunity that only comes to us a few times in a lifetime. Mid-nineties sort of rally material is possible to us here.

I know we’re all enjoying making fun of David Hunter and his ad nauseam melt-up call, but he is effectively right. Bear in mind, the man has been in the markets for decades, and he is basically right regarding sentiment. We’re nowhere near a euphoric high. He’s right about that, I think, and yes, it is funny that his wanting to make the big call keeps getting stuffed in his face. That actually serves his call well now, as now that he’s become a meme, people will laugh at his next melt-up call, and I bet that’s when we get it.

The other day, I referred to a structure on Apple and I want to discuss it at greater length here.

This channel, despite moving “up,” is still effectively “consolidation,” because of its choppy nature:

AAPL

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