-- Posted Wednesday, 10 August 2011 | | Disqus

Rick’s Picks

Wednesday, August 10, 2011

“Phenomenally accurate forecasts”

Twenty-nine months into the Mother of All Bear Rallies, it was unlikely that mere mortals would have been able to predict the precise start of the stock market's collapse, inevitable and long overdue though it may have seemed.  However, no one should be surprised by the selloff’s ferocity, nor by the prospect that the first wave down may have run its course in mere days. Traders who have been waiting for the Big One for years undoubtedly are re-discovering how hard it can be to reap a windfall even when you are right about the trend. We think shares still have a long, long way to fall ourselves, although we harbor no illusions that the Mother of All Bear Markets will be easy pickings. That much should have been obvious yesterday, for not even bears with brass cahones could have endured the spectacular short-squeeze rally, which saw the Dow trampoline from lows around mid-morning to a final-bell peak 600 points above. Fully 500 of those points came in the final hour alone. The proximal cause of this wilding spree was a Fed announcement that short-term rates would be held near zero through mid-2013.  Although no one, not even Paul Krugman, could believe at this point that more easy credit will have a positive effect on the economy, traders bought the news anyway. As we have explained here many times before, they did so not because the news was bullish, but because they expected others traders to react as though it were.

Bears would have found it no easier to catch a ride south when the onslaught of selling began Monday a week ago.  Three days earlier, as the week drew to a close, a strong rally trapped bulls and wrung out bears. But the hook was set Sunday night when news of a debt-limit deal sent index futures into a second short-covering spasm equivalent to a 200-point rally in the Dow. Could any bear have stayed short? Probably not – at least none we know.  Would any bull have had the good sense to take profits Sunday night? Possibly, although most would have held out for a jackpot on Monday.  Needless to say, it never came. Instead, stocks began to plummet in the middle of New York's night, screwing bulls and bears alike out of the opportunity to make easy money.

A Simple Trick

Fortunately, whatever happens from this point forward, we needn't speculate. Using Hidden Pivot Analysis, predicting the markets should require little more than reading bullish and bearish impulse legs on charts of various time frames. (Click here if you’re skeptical that it could be so easy.) Moreover, the techniques we used to trade the market during the Mother of All Bear Rallies will continue to apply.  We should mention that nailing the market’s swing highs and lows was never easier than during the dot-com boom. The more violent the stock market's price swings, the more predictable they tended to be. Even so, it will take nimble reflexes and iron guts to trade the swings and swoons. We’re looking forward to it -- to helping subscribers stay a step ahead of the mob. That said, we remain seriously concerned about what the stock market's collapse may portend for the economy. We see very hard times ahead, and with them, quite possibly, radical political change. Interesting times, for sure.

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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 indication 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 © 2011, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Wednesday, 10 August 2011 | Digg This Article | Source: GoldSeek.com

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