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-- Posted Tuesday, 5 August 2008 | Digg This Article | Source: GoldSeek.com
Rick’s Picks Tuesday, August 5, 2008 “Phenomenally accurate forecasts” With recession coming on full-bore, bank failures starting to snowball, and no end in sight for falling home prices, why is it that we expect the Dow Industrials to be trading somewhat higher come November? For starters, you have to realize that Wall Street and the stock market exist in a warp totally apart from perceived reality. If any proof of this were needed, try tuning to CNBC, where guests who deny we’re even in a recession are treated respectfully. But even more persuasive evidence that the Dow is in no hurry to plummet from a current 11300, and that it may in fact be about to turn moderately buoyant into year’s end, can be found in the chart below.
Notice how the most recent decline failed to exceed two small lows near 10700 that were recorded two summer’s ago. The lows comprise what we refer to as a “look-to-the-left” support, and although they may not look like much in visual terms, they are quite significant from a Hidden Pivot perspective, since they contained the steep selloff from mid-May’s high. In our view, if papa bear were about to go on another rampage, he would have signaled it by breaching the look-to-the-left lows before the selling climaxed. Instead, sellers have retreated from just above the 2006 bottom by way of a weak bounce, and it looks like it could mutate into a bullish drift in the months ahead, lifting the Dow to as high as 12000.
Oil’s Plunge Bullish
This scenario meshes with our forecast of a collapse in the price of crude to below $70 a barrel. Lower oil prices would be a plus for the U.S. economy as a whole, and even though the respite would only be a death rattle for output and consumption, it would not be unusual for the stock market to take leave of its senses to an even greater degree than usual as Wall Street awaits the results of the November election.
Concerning oil’s impending fall, evidence continues to accumulate that the so-far 20% selloff from early-July highs near $148 is just the beginning of a major bear market. We note with some cynicism that oil has become almost un-shortable lately – nearly always a clue that shorting is the correct strategy to pursue. September Crude effectively said “Short me if you dare!” by ending last week on a $6 rally spike. No trader in his right mind would have gone home short over the weekend, given the hurricane threat to Gulf oil supplies and geopolitical threats emanating from the Mideast. And yet, getting short on Friday was the best strategy to have followed, since yesterday’s $4+ collapse came from highs well below Friday’s. Merely “knowing” that oil prices are bound much lower is no assurance that one can short the stuff and make profits without much sweat. Indeed, we expect the ride down to $60/barrel to be hellish for any trader who tries to get aboard, and that’s why we have been making relatively few trading recommendations for oil in the touts section of Rick’s Picks.
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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 © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 5 August 2008 | Digg This Article | Source: GoldSeek.com
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