Google, up 9 points on Monday, is within striking distance of a potentially important hidden-pivot target at 418.58. The stock shredded its way higher after faking out bulls with a gap-down opening. It took about 20 minutes for this hoax to play out, coaxing shares from panicky sellers two points below the previous day’s close before trampolining into the wild blue yonder. There are no guarantees that GOOG will plummet after it kisses 418.58, but the pivot looks promising enough that we should try to get short there. I’ve detailed a conservative strategy for doing so in today’s Touts, but we’re not going to stand in the stock’s way if it looks like it wants to go still higher.

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Above is a chart of SanDisk that shows what can happen when a red-hot stock finally reverses course. A subscriber notes that SNDK jumped about 12 points on earnings news about a month ago, when Google, too, was going bonkers. When SanDisk was making it’s all-time high just above 60 in early November, you could have bought a ton of December 50 puts (SWFXJ) with 43 days left on them for just 0.45 apiece. Yesterday they traded as high as 5.60. We won’t find any puts nearly that cheap on Google, which sells for seven times as much as SanDisk, but there is a way to short it without putting ourselves in danger’s way. Check out the strategy in Tuesday’s Inside Edition.

I should also mention that we bought some puts yesterday in D.R. Horton, the homebuilder. Our entry caught the low of the day, which was 60 cents below the price at which they opened. The puts could always go lower, of course, but probably not so effortlessly as they did yesterday before we took a stand. If you are nonetheless queasy about being short a stock that has excelled at bear-baiting, I’ve reprinted some hard analysis below from our friend Bob Bronson at Bronson Capital Markets Research that you may find reassuring. Bob writes as follows:

“Ignore the nonsense excuse making from CNBC…that this index is merely a reflection of homebuilder's mood swings. The MAI is a diffusion index constructed similar to ISI's purchasing managers indexes, which are some of the most widely and deeply followed economic indicators by Wall Street and macro economists. Read the explanatory link by clicking here.

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“CNBC's response only reflects their cheerleading agenda and denial of objective quantitative evaluations of what is actually occurring in today's economy and the logical and historical implications thereof. Furthermore, their bullish attitude -- CNBC is a national contrarian mood swing bellwether --  confirms the stock market top.”

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Bear-Watch

Concerning the stock market as a whole, click here for a fine bearish analysis from John Hussman.