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-- Posted Tuesday, 11 September 2007 | Digg This Article | Source: GoldSeek.com

 

Rick’s Picks

“Phenomenally accurate forecasts” 

With a full-blown real estate crash perhaps no more than five or six months away, and the black clouds of recession-or-worse massing on the horizon, you have to wonder what kind of dolt would be buying stocks at these levels. The simple answer is that it is not dolts, but bears covering shorts, who are providing nearly all of the buoyancy these days. For, even the reckless bozos who manage OPM are not so genuinely bullish that they can come up with passable excuses for adding stocks to clients’ portfolios.

The fact that the rallies are 95% short covering, with option-related hedging accounting for the rest, makes the stock market entertaining to watch -- assuming you’re on the right side of it. Visually obvious support and resistance is where most of the rallies begin and end, and the leveraging of these swing points to manipulate shares, usually by "running the stops," has dominated the action for longer and to a greater extent than I can recall in more than 30 years of trading.

Getting Our Wish

However, while it is one thing to know what is causing stocks to behave so mischievously, it is quite another to convert this knowledge into easy profits. Yesterday, for instance, looking to short any rally that poked its foolish little head up, we got what we wished for on the opening. Actually, we got a little more than we’d wished for – enough, as it turned out, to send us scrambling for cover before the session was barely 15 minutes old. Google in particular had our number, gapping nearly $3 on the opening to 522.07 to stop us out of a short we’d got off at 521.80, stop 522.01. The E-Mini S&P showed no mercy either, making its intraday high at 1465.50 on the opening bar, two points above our stop-loss. And the one stock we’d have given our right arm to short, the catastrophe-bound Citigroup, barely budged in the early going, stranding our bearish offer in the clouds.

We will nevertheless continue trying to get short at every promising opportunity, since we can usually do so without taking much risk. Considering how vulnerable the market is to a wholesale collapse -- a possibility that by now may have occurred to every market-watcher on earth except Larry Kudlow -- perhaps it’s time to get serious by widening our stops. No pain, no gain, as the saying goes. We’re not masochists, but the odds are so juicy right now for bears that even the inevitable short-squeeze should not discourage us from trying again and again until we get it right.

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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 © 2007, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Tuesday, 11 September 2007 | Digg This Article | Source: GoldSeek.com

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