Are bears about to get a breather? It certainly looks that way, since two trading vehicles that we track and trade daily reversed sharply yesterday without reaching their respective Hidden Pivot rally targets. We were looking for Goldman Sachs to hit a minimum $144.19 to signal the end of the massive short-squeeze begun in November; the stock only reached $141.56 in the opening minutes of the session, however, and then it was downhill for the rest of the day. When the dust settled, the stock had fallen nearly $10, recouping some of those losses late in the day to finish at 136.50, down nearly $3. Meanwhile, another issue that we keep on top of, the E-Mini S&P, similarly climaxed minutes after the opening, hitting a high at 929.50 that fell four points shy of a rally target at 933.50 that we’d told subscribers about earlier in the week.

Ordinarily, we would regard such price action as disappointing but not necessarily fatal. In this case, however, there are aggravating factors that suggest the reversal from early-morning highs could be signaling serious trouble ahead.  For one, it was the second day in a row that buyers got sucker-punched on the opening bell. Stocks had opened on a gap on Wednesday as well, and most issues never traded above those highs for the rest of the day. Yesterday’s short-squeeze opening was even nastier, since stocks fell steadily for the next six hours after gapping sharply above the previous day’s highs on the opening bell. Short-sellers are unlikely to be fooled a third time, and that’s why we’ll be looking for a soft opening Friday morning. But don’t expect much of a rally thereafter, since short-covering has been the only buying we’ve seen since early March with the power to lift the broad averages to headline gains.

Impulsively Bearish

It should also be noted that Goldman stock and the E-Mini S&Ps went on to create bearish “impulse legs” on the hourly chart after their failed leaps on the opening. This is worse than merely missing their targets, for it suggests that sellers are now on the attack and that shorts cannot be so easily stampeded.  Bulls may be able to fight them to a draw as the week comes to an end, but we’ll resist the temptation to go home long for the weekend if the broad averages finish slightly to moderately higher. That would suggest that DaBoyz had used their last ounce of strength to prop up stocks on a weak-volume day.

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Rick's Picks publishes a daily trading newsletter for gold, stock, commodity, and mini-index traders 240 times per year. 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 © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Friday, 8 May 2009 | Digg This Article