We’d been looking to short Goldman Sachs (GS) and the Mini-S&P futures, among others, but both plummeted yesterday from highs just a tad shy of their respective rally targets.  In Goldman, our price objective was 228.40, a Hidden Pivot where a potentially important top seemed like an enticing prospect. However, as you can see in the chart below, the stock never got any higher than 226.61, and the May 220 GS puts we’d been bidding 1.60 for traded no lower than 2.25. 

Shorting the Mini-S&Ps proved just as elusive. While we’d been looking since last week for at top at exactly 1406.75, the futures never made it above 1405.00 (yesterday’s intraday peak).

Fortunately, we held some QQQ May 47 puts from earlier, and they came in like gangbusters on Monday after stocks reversed the respectable gains they’d racked up in the first few hours of the session. This caused out-of-the-money QQQ puts to get pretty pumped up, so we shorted some of them against the May 47 puts already held. By day’s end, we’d legged into the May 47 – May 45 vertical put spread for a 0.20 debit. This means that although we can lose no more than $20 plus commissions come May expiration, we have a shot at making a profit of as much as $200/spread if the underlying issue closes 45 or lower. (The Cubes settled on Monday at 45.90, down 0.67.)

We also held a short position in Citi by way of some May 52.50 puts purchased earlier. We originally paid 0.70 for them, but profit-taking along the way has reduced our cost basis for the puts we still hold to 0.40. Our goal now is to short some May 50 puts against them for 0.50, which would give us the May 52.50-50 vertical (bear) put spread for a net CREDIT of 0.10. That means that if Citi is weak between now and May expiration, we could make as much as $200 per spread. But even if we are dead wrong and the stock flies, we would still make $10 per spread before commissions.

A Bearish Sign

From a technical standpoint, the fact that some key stocks have turned lower without quite having reached their Hidden Pivot rally targets is bearish at least for the near-term.  While we cannot claim to be unconcerned about how things play out, we have tried to position ourselves so that we are likely to make a little money if stocks rebound or do nothing, but to make significantly more if they fall. 

We frequently position ourselves this way, since we do not expect Mr. Market to let us buy puts after a bear market has begun. In practice, this entails reducing our risk by taking partial profits on short positions whenever they are available. We do so cognizant of the fact that, in the past 30 years, put buyers have not been able to string together even four straight days during which they might have felt something approaching exhilaration.  We note that although the DJIA has just risen on 18 out of 20 days, it’s extremely unlikely that bears will ever experience such felicity as bulls have just enjoyed.  “Take the money and run” should be every permabear’s motto, as it always has been ours. 

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“While perusing some of your posts chronologically from months back, I'm truly struck by the remarkable prescience of many of your fearless calls. The results are uncannily accurate. Thanks again for this opportunity to profit from your usually directionally correct analyses. The subscription is worth every penny - and then some.”

-- Colin L. MacVeagh, a subscriber

Aloha Rick.  I just want to thank you personally for all of your posts in Comex Gold and Silver.  I have traded gold/silver futures for a decade and there is NO ONE who has identified prices as accurately as you do. FACT:  Your New Year's Eve call of a high at 643.10 call was dead-on (even if floor traders ran it up a few days later to flush the momentum traders.) But your subsequent forecast of a pullback low at 603.00 was mind boggling! I Sold my longs at 643.10 and covered my shorts at  603.00 -- the exact bottom.

   -- Mark Johnson, Hawaiian subscriber

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Want to learn exactly how I do it? Then click here for details concerning next month’s online Hidden Pivot Seminar on May 19-20 (Saturday/Sunday morning). Sign up now while there are still a few seats left. The goal of this course is nothing less than to teach traders and investors of all levels of experience how to forecast stocks and commodities at least as accurately and confidently as those who do it successfully for a living.

With just a cursory understanding of the material taught in the course, and a little bit of follow-up, you will never again have to ask an “expert” what he thinks about a particular stock or “the market.” That’s because you will be better equipped yourself to answer the question simply by looking at a few charts.

The course is not about technical analysis in the conventional sense, with its tired and overly scrutinized trendlines, its familiar oscillators, channels, volume indicators, and all the rest, Rather, it is a way of looking at charts with a fresh eye – to see charts as “art,” with emphasis on visual elements of harmony, symmetry, and, indeed, beauty. My annotated charts do not look even remotely like those of other technicians, and that is why the “buy” and “sell” signals that come from them rarely coincide with those favored and used by the herd.

Don’t Rely on ‘Experts’

The online class will be a particularly good opportunity for those who were unable to attend my classes last year in New York, Sydney, Vancouver, San Francisco and Denver. If you’ve visited the Rick’s Picks chat room and marveled at the forecasting skill of seminar grads, this course is designed to quickly bring you up to their level. While I cannot guarantee that the course will turn you into a fabulously rich trader,  I can promise, as implied above, that with a little diligence and practice, your ability to precisely predict price reversals in stocks, indexes, options and commodities will be at least as good as anyone whose forecasts you have ever paid for.

Although the on-site course was offered for as much as $2,000, I am offering it online for $960, since many of the expenses incurred in holding “live” seminars – including hotel and travel costs, and the rental of conference facilities -- are not a factor. If you are seriously interested in attending, click here for more information, or go directly to the registration page by clicking here, then clicking the “UPCOMING” tab.