Keen to short the shares of Citigroup, as well as those of the casino operators and certain other publicly traded companies hurtling toward certain disaster, we’ve patiently awaited the powerful short-squeeze that would finish off recalcitrant bears who survived January’s 1,100-point Dow rally. But is it possible that all of the squeezing has already been done, and that the last breath of bearish buying power has been wrung from the market? This glum prospect occurred to us yesterday when the Industrial Average failed, for the second time in as many weeks, to convert a promising rally into something more than a one-day wonder.  By our runes, the Indoos should have had little trouble reaching a Hidden Pivot target at 12704, since it lay a mere 150 points above the previous day’s settlement price. What we saw instead was a feeble opening with barely any short-covering, and then a six-hour selling dirge that wiped out Wednesday’s substantial gains. A similar trend failure occurred in late January, when a 1,000-point rally in the Dow over several days begot a relatively lame follow-through that barely went half as far.

(Click on chart to enlarge)

So what gives? From a Hidden Pivot standpoint, it’s no trick determining exactly when we should turn bullish. All it would take is an uncorrected rally past the two labeled peaks shown in the chart. A 358-point thrust would have sufficed from Wednesday’s high, but after yesterday’s relapse the minimum requirement is now 560 points.  Eager as we are to lay out tightly stopped shorts at such heights, we are beginning to doubt the buying power remains to take stocks there.

Only Bears Are Buying

Of course, when we talk about buying power, we don’t mean bullish buying, but rather panicky short-covering. For, that is the only buying being done these days, and it occurs in significant quantities only when there is ostensibly bullish news to drive bears into a short-covering frenzy. Warren Buffett’s proposed bailout of bond insurers served this purpose earlier in the week, but like most of the bullish stories making the rounds these days, it did not stand up to more than a day’s scrutiny. The result is that we keep seeing rallies with little or no follow-through. The fact that we’re in the early stages of a major bear market may have removed most doubts concerning the direction of share prices in the months and years ahead, but it has not made it any easier for us to find great places to get short. In practice, the rallies are not only falling somewhat shy of our targets; quite often, they are doing so on wicked spikes that dare us to initiate shorts in the final minutes of a session.  This will continue to be a challenge, to be sure, but hardly an insurmountable one.

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Ditch Your Guru

When the Hidden Pivot seminar that was held last weekend sold out, I added an additional session on March 8-9. If you’d like to attend, click here  for further details and instructions on how to register. The class will be held on Saturday/Sunday from 9:00 a.m. to 12:30 p.m. Mountain Time.  If you want to learn how to forecast stocks and commodities as confidently and precisely as top pros, this is an opportunity you should not pass up.

Last Call, Australians!

I will also be offering a Hidden Pivot class next week that is tailored to the scheduling needs of students from Australia, New Zealand and Singapore. If you live in Sydney, this seminar will take place on February 21-22 (Thursday and Friday), from 3:30 p.m. to 7 p.m. These hours will also work for early risers in Western Europe.  For further details, click here.  You can also register directly by clicking here, then on the “Upcoming” tab.