S&P 500

A few consecutive days of hard selling does not a bear market make, but it’s heartening to see that stocks are still capable of deferring to reality – in this case, weakening corporate earnings. For what it’s worth, the sharp decline has produced the first bearish “impulse leg” that we’ve seen on the S&P 500’s daily chart since last November. This triggered a negative warning according to our proprietary Hidden Pivot Method of analysis. Although the weakness does not necessarily portend the onset of a major bear market, odds of this will increase if, for one, the E-Mini S&Ps smash the key low at 1332.50 recorded on March 6. This is shown in the chart below. So why the selloff?  The headline on a commentary featured here earlier this week may explain it: Pumped Stocks Have Yet to Glimpse a GDP Slowdown.  Perhaps now they have, and investors with the foresight to have trimmed their sails should be feeling good about it.  Our own portfolio, such as it is, contains a short position in the QQQs – specifically, May 68 puts that were recommended for purchase a couple of weeks ago before the underlying index topped pennies from a 68.65 Hidden Pivot target. We used a conservative basis of 1.56 for the puts after subscribers confirmed having bought them for as little as 1.48. But with yesterday’s nasty selloff the options fetched as much as 2.80 apiece, allowing us to take a partial profit that reduced the cost basis of the puts we still hold to nothing.  Incidentally, that’s the goal of nearly all options plays recommended in Rick’s Picks – to work into a position that has no risk but upside potential sufficient to at least cover the cost of a year's subscription to the service. Win a $106

We’re not keen on market alerts, dear readers, because you probably have far too many of them to sift through already, each with a different and sometimes deliberately outrageous point of view. Even so, we should like to caution you that recent, coincident tops in Comex Gold and the S&P 500 are best not ignored. Although we remain bullish on both of these vehicles, you can infer that the yellow flag is out. This means that bullion and the broad indexes will be receiving more scrutiny than usual in the days and weeks ahead, so that Rick’s Picks subscribers will be better prepared to dodge the avalanche that is increasingly a possibility. Our specific predictions, disseminated to subscribers in the form of daily “Trading Touts,” had called for a shortable top at 1316.75 in the E-Mini S&P, and at 1681.50 in Comex March Gold. In the actual event, the recent high in Gold occurred at 1681.80, three ticks from our target; and in the E-Mini at 1318.25, six ticks from our target. These targets were derived from our proprietary Hidden Pivot Method, and although they are intended for traders, they can also be quite useful for purposes of forecasting. In this case, if the E-Mini S&P were to rip through the recent high within the next day or two, it would imply that bulls have the power to drive stocks significantly higher. Any sign of this would shift our attention toward a 13085 Hidden Pivot target identified earlier for the Dow Industrials. That’s 409 points above current levels – a good week on Wall Street, although it could take a bit longer, or even abort, if Europe’s financial problems return to prominence in the news. Why "Abort"? Why "abort"? For starters, euroheadlines such as yesterday’s – that Greece and its

[With unemployment above 9% and productive capacity heavily underutilized, the U.S. economy is slipping back into official recession. In a letter to clients, our friend and financial advisor Doug Behnfield has predicted that deflation is about to return with a vengeance -- presumably with bullish implications for high-quality bonds and, get this… municipal bonds. For Doug’s take on the stock market, fixed-income securities and a Baby Boomer cohort that is ill-prepared financially for retirement, read on. RA] Over the last few weeks, stock, bond and commodity markets appear to have played "catch up" to fundamental economic changes that began early in the first quarter. In early February, 30-Year Treasury Bond yields peaked at 4.8% and started down sharply as bond prices rose. The municipal bond market did the same. The S&P 500 hit 1300 and essentially stopped rising, creating a volatile topping process that lasted until late July. Since then, the bottom has been dropping out of both stock prices and bond yields. The Fed has promised to keep very short term interest rates at 0% for at least the next two years. The economy now appears to have rolled over early in the year. Employment and housing prices peaked in the first quarter and GDP growth was revised down to 0.4%. At year end 2010, Q1 2011 GDP growth was widely expected to exceed 3.5%. State and local governments began aggressively tightening their budgets and it seems clear that the federal government will be doing the same. Standard & Poor's (and the other rating agencies to a lesser degree) have put congress and the administration on notice that the debt bomb must be defused immediately and the vast majority of voters seem to agree. The fiscal drag could be enormous. Or we become a Banana Republic. The median age of

We’ve featured both bullish and bearish headlines here in recent weeks, so it’s time to clarify the outlook lest readers become confused. In brief, we are looking for an approximately 1400-point rally in the Dow Industrials this summer, but we’re prepared to turn bearish if a change in stock market’s technical condition warrants it (see chart below).  So far, we’re giving the bulls the benefit of the doubt based on a purely mechanical reading of the charts. But we also believe that Europe’s financial crisis is starting to spin out of control, much as America’s banking crisis did when Lehman Brothers went under. In Europe there is fear now, and even rioting in Greece, because no bailout measure tried so far has put deep anxieties to rest. Panic seems unavoidable at some point, and it could come in a day, a week, or a month, but probably sooner rather than later. Regarding our bullish call on the stock market, let us say up front that it goes sharply against our instincts and every shred of logic that we possess. Permabears do not come easily to the notion that stocks could rally so powerfully amidst a patently fraudulent economic recovery – a recovery that has touched almost no one we know and which, even at a very low level, cannot conceivably be sustained. Even so, putting our opinions and instincts aside, we’ve learned to simply trust the charts whenever there are doubts. Goldman Resists Tide This we have done, at least for the moment. As the week began, our technical runes told us it might not be a bad time to venture out on the limb with an especially bullish prediction. Thus, the headline “So Bullish on Stocks That We Feel Guilty”.  The commentary went on to explain why we were