Word on Friday of the first U.S. payroll contraction in more than four years barely slowed the stock market’s bullish rampage. Despite the grim news, which makes fools of those who still profess to see no recession, the Dow Industrials rose nearly a hundred points. We’d expected as much, since this is no ordinary rally, but rather a dead-cat bounce driven almost entirely by maniacal short-covering. In this respect, the buyers are as disconnected from the events of the real world as a lug nut, as rational in their thinking as a rabid dog.

Not that they could have been unaware of the news -- that the work force had shriveled by 17,000 jobs last month. Of course they were. But it was a prayerful, desperate kind of awareness that asked, oh please, Lord, to punish any investor so stupid as to still be in stocks, even as the U.S. economy sinks into a 1930s-style deflation. Unfortunately for the bears, the heavens did not open up on Friday, nor did the trumpets sound, when the payroll news hit the tape. Instead, stocks merely sold off moderately, demonstrating once again the brain-dead solidarity of its institutional sponsors.

Righteous Plunge

Indeed, anyone looking for the Dow Industrials to plummet a righteous 3,000 points in the space of a few days must first explain why portfolio managers would dive out of equities simply because U.S. job rolls had contracted. Remember,  for all intents and purposes these guys are Kudlow clones. Which is to say they probably view the payroll numbers as bullish -- evidence that employers are become leaner and therefore more profitable.

Under the circumstances, it shouldn’t be too difficult to predict how the stock market will react to more bad news in the coming days; for we need only ask ourselves: “How would Larry Kudlow respond?  Would he bail out of stocks?”  Of course not. Kudlow will continue to bloviate about the “Cinderella Market” until the day the Emergency Broadcast System pre-empts him and all of his fellow Wall Street shills on CNBC with something other than a test pattern. 

Bring Us Your Bids!

To give Kudlow his due, at this particular moment he is technically closer to being right than bears who insist the sky is falling. For in fact, at Friday’s close the Dow Industrials lay within 10 percent of all-time highs. In this respect the blue chip average is like a 110-story skyscraper that has come through a major earthquake seemingly unscathed. A closer inspection reveals the foundation to have been damaged beyond repair. But don’t expect the pundits to notice as long as the Dow Industrials are capable of being squeezed for an 1,100-point gain in the space of two weeks, as has just occurred.

We see it as a great opportunity to short Citigroup and other stocks whose future looks bottomless. To those who disagree, and who see the rally as evidence of an imminent economic rebound, we say “Bring it on!” We will be most grateful for your bids.

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Become a Pivoteer!

The Hidden Pivot seminar scheduled for February is full, so I’ve 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.

Oz-Hours Class

I will also be offering a class in February 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.