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June 11, 2019 | Buy-the-Dips Revelers Could Romp for a Few More Years

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

Although there are a dozen good reasons why the bull market should flame out, like, tomorrow, there’s nothing in the long-term charts to suggest this is likely. A friend and fellow permabear sent me an Elliott Wave theorist’s prediction that the sensational run-up begun more than ten years ago could continue for another three or four years. This is based on a five-wave Elliott pattern that is currently in its final phase, having corrected the spectacular excesses of Wave 3 via the Great Financial Crash of 2007-08.

Much as I would love to see the market plunge into molten hell so that the global economy, born again, could cycle back to more-honest weights and measures, I am resigned to the likelihood that the bullish charts are simply correct. This is notwithstanding tariff wars, a global economic slowdown, falling commodity prices, falling bond yields and all the rest. Wall Street seems not to care about any of this, and so the buy-the-dips crowd reigns supreme. They will get their comeuppance someday, for sure. But as long as investable cash remains in more or less unlimited supply, stocks will continue to rise.

Placid Stochastics

The weekly S&P chart (click on inset) corroborates the bullish EWT perspective. Notice that a divergence between price tops and stochastic tops accurately foretold the devastating selloff that occurred in Q4 of 2018. Currently there are no such divergences on the weekly chart, and I take this as a sign that the long-term uptrend will continue. That could change if the current rally achieves new record highs without generating a higher stochastic peak. But until such time as this occurs, there are no worrisome signs that I can discern in the chart. For a more detailed explanation of stochastic divergences and their relevance to the current technical picture, click here to view my latest Facebook video.

 

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June 11th, 2019

Posted In: Rick's Picks

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