The similarity between the topping pattern traced out in 2007 and the one taking shape now is hard to miss, as the chart shows. The main difference is that the earlier pattern was more massive. This time we are projecting a rally to at least 10886  on the Dow, exactly 118 points above yesterday’s high. But based on the way the stocks have been acting in recent days, we would expect more than a mere 118-pointer. For in fact, the rally has been shredding its way past Hidden Pivot targets in mere hours when those targets should have contained the move for at least a few days.  Yesterday, for instance, we told subscribers to short a “hidden resistance” at 1161.00, using a stop-loss at 1162.25 that left us exposed in theory to $37.50 of risk. By day’s end, however, the futures had traded as high as 1165.50, implying that buyers were not even breathing hard after sprinting almost without a break since February 25.

So here we are again, bearish as ever on the economy, but quite bullish on the stock market. Still, we haven’t forgotten how very bullish we were just before the market collapsed in October of 2007.  With that lesson in mind, we’ll be looking for the very subtlest signs of fatigue if the Dow should head higher as expected. Let the run-up give way to just one microscopic, corrective abcd downtrend on the one-minute bar chart, however, and we’ll be ready to switch sides, joining the most zealous bears, in a New York minute.

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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. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  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 Thursday, 18 March 2010 | Digg This Article