If the week ends with yet one more timid rally, bulls will be under serious pressure to deliver on Monday. Yesterday, it almost looked as though Da Boyz had shorts on the ropes when the Dow Industrials halved a 200-point opening loss in mere minutes. Alas, the remainder of the day was spent in a wallow, and by the final bell the Indoos had not exceeded a single peak recorded the previous day, even on the lowly 5-minute bar chart.  In the meantime, the lower lows occurring each day are adding power to a bearish impulse leg whose demeanor ultimately will determine whether the long-term bull is dead or merely pausing for breath.

(Click on chart to enlarge)

In Hidden Pivot terms, an impulse leg is signaled when a trend leg exceeds at least two previous highs or lows. In this case, the collapse of the Industrial Average has already breached four prior lows without a correction, suggesting that a very powerful reversal has occurred. What constitutes a “correction”?  Very simply, and according to the Hidden Pivot method, a countertrend comprises at least two bars making successively higher highs or lower lows. When this occurs, the AB “impulse leg” will be seen to have broken into an incipient ABCD pattern. This is illustrated in the chart above, where I have drawn a dotted line extending yesterday’s price high hypothetically. If the actual high had followed the dotted line, exceeding the previous day’s high by even a hair, it would have ended the AB impulse leg and started a correction that ultimately would describe an ABCD pattern.

Any Rally a Short

Notice as well that the Indoos will have a chance to further stretch the downtrend today so that it surpasses a fifth prior low without a correction. This would occur on a downdraft exceeding the 11965 low recorded in early November. Regardless, the bearish impulse leg is already sufficiently powerful to imply that any rally from these levels will be an enticing short.  If this assumption is correct, we should expect to see it corroborated immediately and repeatedly by price action of a kind we have not witnessed in years –- i.e., rallies in all time frames that consistently fail to reach their ‘D’ targets. Further evidence of the bear’s dominance would come in the form of down-patterns that exceed their ‘D’ targets.

Applying these criteria rigorously, there should be no mystery concerning whether we have actually entered a long-term bear market. Indeed, the clues are already starting to accumulate on the lesser charts. Yesterday, for instance, although the E-mini S&P “should have” been able to reach a Hidden Pivot rally target at exactly 1412.50, it did not. We waited there patiently to get short, but the futures never traded higher than 1411.75.  The implied three-tick shortfall might not seem significant, but from a Hidden Pivot perspective it makes all the difference in the world. A few more such trend failures in the coming days will only increase our confidence that the The Bear’s time has finally arrived.

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Want to Forecast Like a Pro?

Plans for the first online Hidden Pivot seminar are nearly complete. The two-day event will be held via Webex in late March or early April, most probably on successive weekend mornings. There will also be at least one lengthy Q&A session to follow, just as there has been on Sunday afternoons to conclude the on-site course.

This will be an excellent opportunity for those of you who were unable to attend the classes I gave last year in New York, Sydney, Vancouver, San Francisco and Denver. If you’ve visited the chat room and marveled at the forecasting skill of some of the seminar grads, this will be a great chance to learn exactly how they do it. While I cannot guarantee that the course will turn you into a fabulously rich trader,  I can assure you that with a little diligence and practice, your ability to forecast will be at least as good as anyone's whose forecasts you have ever paid for.

I will be able to offer this course for under  $1,000, since many of the expenses that I've incurred in holding a “live” seminar – including hotel and travel costs, and the rental of a conference facility -- will not be a factor. If you are seriously interested in attending, click here to get on the mailing list.