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DJIA Winning Streak Just a Warm-Up?

By Rick Ackerman Posted on August 28, 2009, 12:18 am EDT Last Updated August 28, 2009, 4:19 pm EDT

It’s been more than two years since we’ve seen the Dow Industrials rally for eight consecutive days, but it happened yesterday with a little help from Boeing, which gapped almost $4 higher on the opening bell. If you’re wondering how the Dow’s winning streak in April of 2007 fared, it turned out to have been just the beginning of a spectacular run-up that carried the blue chip average to its all-time high six months later, in October. The rally stalled along the way and went into a nasty dive in July, but the recovery was nearly as steep and eventually carried the Indoos up to 14198, the highest peak ever recorded.

dow-need-only-rally-small

Could we be witnessing the start of a similar mania? In fact, the rally from March’s lows already qualifies as a mania, since the Dow has gained 49% in just five months. If stocks are about to move into an even steeper trajectory, that would imply a blowoff to who-knows-how-high.  The round number 10000 would seem like a logical one to use, but getting there would only take a relative hiccup from the current level of around 9580. Meanwhile, the Industrial Average need only exceed 9654, equal to a peak made last November, to demonstrate that it’s got the moxie to at least remain buoyant for the rest of the year.

Nailing the Little Porker…

From a tactical point of view, we’ll be trying to short this market every time it pokes its scruffy little snout above the old recovery high. Using Hidden Pivot targets, we’ve minimized the risk of doing this, and we’ve actually made some winning trades with stocks going against us. Earlier in the week, for instance, Rick’s Picks recommended shorting the E-Mini S&P at 1034.00 with a very tight stop-loss of 1.25 points. The actual top occurred at 1035.00, and when the futures dove thereafter to 1018.25, subscribers were told to cover most of the short position for a theoretical gain of between $400 and $837 per contract. The E-Mini rallied ferociously the next day, but we had anticipated this with a stop-loss at 1030.00 for whatever short contracts remained.

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  • Rich August 28, 2009, 10:11 pm

    Back from limiting out on Mackinaws for 60th birthday, including 22 incher.
    Had one for lunch by Antonio at Captain Johns – absolutely delicious.

    Came back to see market turned down and insider sells at record high, higher than May 2008. Big 4 still long dollar and short S&P…

    Regards all.

    PS Big 4 also very short gold, platinum, silver…

    email JubileeProsperity@gmail.com for fish pix…

  • Edward August 28, 2009, 5:03 pm

    This bear market rally has to get through a zone of prices between 1037 and 1077 before I will believe it is anything more than a retrace. One look at the leadership shares in this rally should act as a massive red flag to bulls. Sentiment should be another huge warning, and last but not least, the ever deteriorating economy which will play havoc with bull tarts sooner rather than later. There has been no recovery just a slowing in the rate of deterioration, and this is a great pump and dump in process.

  • Peter Orgain August 28, 2009, 12:20 pm

    Please spell check, Rick. There are three typos in the last paragraph:

    Nailing the Little Porker… ( I added spaces around the typos)

    From a tactical point of view, we’ll be trying to short this market every time it pokes its scruffy little snout above the old recovery high. Using Hidden Pivot targets, the risk of doing this has been minimized, and we’ve actually made some winning trades with stocks going against us. Earlier in the week, for instance, Rick’s Picks recommended shorting the E-Mini S&P at 1034.00 with a very tight stop-loss of 1.25 points. The actual top occurred at 1935.00 , and when the futures dove thereafter to 1018.25, subscribers were told to cover most of the short position for a theoretical gain of between $400 and $837 per contract. The E-Mini rallied ferociously he next day, but we had anticipated this with a stop-loss at 1030.00 for whatever shot contracts remained.

    &&&&&&

    Thanks, Peter. My copy editing skills are not too shabby — I did work for a while on the rim of a fair-sized daily newspaper –but as you are probably aware, it is very nearly impossible to edit one’s own copy until one wakes up the next day and takes a second look. Then, errors such as the ones you’ve noted leap off the page. Unfortunately, the WordPress publishing tool that I use has a spell-checker that seems to have been designed by a chimpanzee. It only intermittently finds errors, which is worse than not working at all. RA

  • watcher7 August 28, 2009, 9:03 am

    The Central Bankers intervention of December 2007 suggested at the time that the American economy was going to get though the crisis and the stockmarket was going to come back strongly.

    History suggested that the Dow was going to come back a minium of seventy percent, from its low, and, as an outlier, that it could pass the October 2007 high.

    History also suggests that the economic expansion could span a maximum of 3.8 years – but will be determined by inflation prevention.

    So it will interesting see how the Dow goes over the next two years.

  • JR August 28, 2009, 5:27 am

    I truly believe this bear rally has legs and will astound many before it’s over. I agree that it’s irrational but it’s the irrationality that can make it go higher than what most expect. Don’t count 12-14 K out. That should leave most of the bears fatally bleeding in the streets. I’ve been patiently waiting to short and will continue to wait. Rick, keep us informed when this market signals a strong sell. So far you’ve done great by being cautious on the way up.


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