Our targets for both the Dow and the QQQs are well above current levels (see the Rick’s Picks archive as well as the “Actionable Advice” list for precise numbers), so we’ll be looking for buying opportunities in the coming days and weeks as we wait for bearish prospects to ripen. Keep in mind that our goal is not to catch the Mother of All Tops, whose onset no one can time, but rather to leverage the short side of a very mature bull market whenever the risk of doing so is lowest.

As we have seen numerous times, it is possible to make money on both sides of a raging bull, even if it is often more difficult to trade with the dominant uptrend.  The reason this is so should be obvious:  Because “everyone” is bullish right now, stocks must move in increasingly vexatious and bedeviling ways to prevent “everyone” from getting rich by simply acting on the obvious fact of a runaway bull market.

(Click on chart to enlarge)

In practice, this means it can often be less challenging to score occasional gains of 10-15 points shorting the S&P futures in an uptrend than to ride them steadfastly higher for the longer-term, 50-point gain.  But if it were easy to get rich simply by employing a buy-and-hold strategy in a bull market, everyone would do so. In reality, the inevitable swings against bulls from time to time are so ferocious as to make it very difficult to stick by one’s guns, even when we “know” the bull is dominant.

Riding the Bull

We’ve all heard tales about some commodity trader who made a fortune riding a bull market in corn, or coffee, soybeans or some other vehicle that went ballistic, as stocks are doing now. But if you were to look at a long-term chart of one of those bull markets you would see that the ride aloft was anything but smooth.  Our eye will discern on the chart a hiccup now and then, and it will look like no more than that in the context of a powerful upthrust.  But the bull trader who has experienced those seeming hiccups in the form of actual trading losses over the course of a few days or weeks, could tell you that they felt ruinous at the time they were occurring.

The most recent such hiccup was the nasty swoon back in February, when the Dow Industrials fell 546 points in a day.  Looking at the chart above, it’s easy for us to see in retrospect that buy-and-hold was the right call, since the subsequent recovery was steeper and more vigorous than any uptrend we’ve witnessed since this major bull phase began nearly five years ago.  However, holding a portfolio of stocks, or index future contracts, throughout that swoon required the kind of guts and conviction that most of us do not possess.

Bold But Foolish

I should also note that for those of us who manage the risk of a trade tightly, riding out that swoon required more than a little bit of foolishness. Why so? Simply because, in managing any trade, from entry to exit, we should be looking to make a profit of at least $2.50 to $3.00 for each dollar placed at risk. This implies that any speculator who weathered the 856-point adverse move in the Dow begun on February 20 (see chart above) would need to reap an eventual gain three times that size – 856 x 3 = 2568 – to justify having held a position during the three-week correction. If we add the 2568 points to the February 20 high whence stocks plummeted, we calculate that the trader will need to see 15363 on the Dow to justify having stood pat during February's steep dive.

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Seminar Geared to Aussies, Kiwis

For Australians, attending past online Hidden Pivot seminars has been made difficult by the 14-hour time difference between Sydney and New York. The Saturday/Sunday morning course usually begins at 11 a.m. Eastern, which translates to 1 a.m. Sunday in Sydney. However, at the end of June I will be offering the six-hour course, as well as a two-hour Q&A follow-up several days later, at hours that are geared to the convenience of students from Australia and New Zealand.

Specifically, the course will be offered on June 30-31, Saturday/Sunday, from 8:30 a.m.-11:30 a.m. Sydney time. If you have been waiting for such an opportunity,  please click here (then click the “Upcoming” tab)  to reserve a place in the classroom, or here for detailed information about the course itself. Since I will not likely be returning Down Under for an on-site seminar any time soon, this will probably be the last chance you will have in a long while to take the online seminar during morning hours.  Incidentally, these hours will work for anyone in the U.S. who would prefer to take the course in the evening. The hours, in Eastern U.S. time, are from 6:30 p.m. to 9:30 Friday and Saturday, June 29-30.