We can’t recall the last time we even looked at a trendline, but our friend Peter Eliades mentioned the one below in his latest update, and we just had to see it for ourselves. As it happens, the bullish implications of this graph are somewhat aligned with our own, mechanically bullish, ideas at the moment. We say “mechanically bullish” because, Kudlow & Friends aside, only a deaf, dumb and blind algorithm could be bullish right now, given the parlous state of the economy. So, bullish we are, algorithmically speaking. But not very. In practical terms, this means we think the Dow Industrial Average should be able to grope, claw and stumble its way to at least 13247 before it finally gives up the ghost.  

That’s according to a Hidden Pivot calculation, and the target lies about 2.8% above current levels. It is closely coincident with a bullish target we’ve been using for the E-Mini S&P – against all logic and instinct, we would have to concede.  Logic and instinct, so essential for enabling one to decide where to cast one’s fly, or how to handle a mugger who has demanded to be taken to your ATM, nearly undid us early in our trading career. But that was before that fateful day in 1990 when we stumbled on the coldy mechanical Hidden Pivot system while gigging frogs in the South Jersey marshlands. The system has been a godsend ever since, mainly because our instincts had been wrong about the timing of major price swings at least 116% of the time.

Armageddon Countdown

Now, armed with a mechanical crystal ball, and knowing that at least 355 Dow points remain before Armageddon, we’ve been preparing for the worst, laying in a supply of bottled water, curing venison, putting up canned peaches and pears – and, of course, attempting to short the heck out of stocks that look like good swan-dive candidates.  Citi has always been one of our very favorites in this category, and we are therefore delighted whenever the stock appears to be making headway toward cliff’s edge, much as it seems to be doing right now.  The stock is getting perilously close, and on Friday we missed shorting the nasty little bugger by a hair as it inched toward the day’s highs. We’d planned on buying June 27.50 puts for 2.20. Alas, they traded no lower than 2.21 with the stock at its peak, and so, rigidly disciplined traders that we are, we declined to play.

We are comforted by the knowledge that there will always be other opportunities to get short -- especially if the Dow is about to tack on another 355 points. But if we’re right about this, we might have to bail out of a short position in Apple that was initiated on Thursday via the naked sale of May 170 calls @ $690. That seemed like quite a lot of juice at the time, but it might not be enough to protect us if Apple fever should once again seize the proletarian mind next week. A source of inspiration for this trade was the recent purchase, by our 13-year-old son, of a 20-inch Mac monitor for $300 plus $40 shipping and handling. This was a used monitor, mind you, but nothing could persuade him to pay $100 less for a much larger, brand-new screen from another manufacturer. Superior as Apple products are, we rank the company's monopolistically priced goods with Caribbean cruises on the indispensability scale. We had also noticed that the local Apple emporium is so thick with sales people that a customer is apt to be greeted by no fewer than three of them in the space of a ten-minute visit. All things considered, we’d be very surprised if by January at least half of them were not looking for work, or if Apple shares were not trading well below $100.

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Hidden Pivot Seminar May 21-22

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com