-- Posted Wednesday, 15 September 2004 | Digg This Article
Rick’s Picks
Wednesday, September 15, 2004
For investors who’d rather be smart than lucky
A little give-and-take with a subscriber who thinks the Dow’s got a thousand-point rally in it between now and Election Day sent me to the weekly charts for a disinterested look. Disinterest is not something that comes easily or naturally to me on this subject right now, since I believe that a 3,000-point plunge in the Industrial Average would be just about right for the remainder of 2004. What with the U.S. economy going to hell at warp speed, a mini-bear dive would feel right as rain, in a Hurricane Ivan sort-of-way.
My correspondent wrote initially to predict that the Industrial Average and – here’s something you’ll like – gold(!) are about to soar in tandem. His note was cc’d to someone at the Washington Post, as well as to several celebrated colleagues of mine, so I guess you could say he’s putting it all on the line for this prediction. His initial message was just a subject header: “Both the stock market and the gold are about to go up -- together!!! Best, xxxxx”. Ever skeptical of the bullish mind but nonetheless open to the possibility of being persuaded, I responded as follows: “Stock market higher? How high?”
Fed Wants Bush
His reply: Perhaps about 1,000 points into the election -- on the high side to ensure a Bush win. You are right that there are major problems which SHOULD make it go the OTHER way. But the "Fed/Feds" still have the electronic printing press and are using it to the hilt. Have you read the organic act that ‘authorizes’ them to massively counterfeit? It is the Monetary Control Act of 1980---David Rockefeller's bill. We lobbied hard against it at the time on Capitol Hill. Fed Governors lied to our faces that it would NOT be used to ‘monetize the debt,’ which we said they wanted this bill for. So here they are---doing just that, of course. SO -- gold and stocks go UP together, at least for a while. Best, John. PS: The technicals even now support this scenario.
So, to the question of “how high,” we now have a betting man’s answer: to DJIA 11318 at least, based on yesterday’s close.
Sounds kind of nutty, I know. But after looking at the Indoos’ weekly chart I’m forced to concede there is no compelling technical reason why it couldn’t happen. In fact, if I were to apply my hidden-pivot rules strictly by-the-book, I’d say the burden of proof is on the bears, not the bulls. The reason is not complicated, either. Let me show you what I’m talking about:
Looking at the chart, we see that when the Dow last February pushed above the 10673 high recorded nearly two years earlier, it created a major bullish impulse leg on the weekly chart. To qualify as an impulse leg – i.e., the beginning of a new trend – I require an unbroken trend-leg to surpass two prior highs or lows. In this instance the bull went me one better, blowing past three previous highs (labeled 1, 2 & 3) in one manic surge, which I have indicated with a the thick red line. What it implies is that if the Dow can close for two consecutive days above a somewhat daunting hidden-pivot resistance at 10367 – that’s just 4 points higher than the so-far top of the rally cycle begun August 13 from 9783.91 – it would become no worse than an even-odds bet to continue up to at least to 10952, a more important hidden pivot.
“Hey, Sailor!”
Granted, that’s not quite the thousand-point rally our correspondent has predicted. But it’s still a hell of a lot higher than I’ve been expecting – about 4600 points higher if you use the bottom of my intuitively predicted 3000-point crash as the starting point. So what’s a bear’s bear supposed to do when the charts are saying, “Hey, sailor!” Here’s what: Throw out the damned book and listen to your gut. A new bull market!? Get REAL! This is no baby bull, but rather the Mother of all Bears -- the most devious, pernicious and prolonged topping pattern in the history of the U.S. stock market. So I say, let’s short it till our head caves in. But just to be, um, safe, we’ll set a stop at Dow 10368. Okay?
When can permabears break out the cold duck and Ritz crackers? – about all they can afford these days, having squandered their ammo on put options that have mostly expired worthless for the last two years. Well, hidden pivot-wise, I’d say the Fat Lady will be warming up her tonsils if and when the Industrials slip beneath the relatively innocuous looking low I’ve highlighted on the chart at 9497.70. The bearish impulse leg that would create would be a relatively minor one, to be sure, but we should keep in mind that every earthquake begins with a tremor that only birds can feel.
Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2004, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 15 September 2004 | Digg This Article
