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 bullish on one stock in particular that we love to hate, Goldman Sachs (GS), even though the company’s officers were at that very moment getting tarred and feathered on Capitol Hill for deceiving customers. Lo, as U.S. stocks were getting pounded on Tuesday, Goldman’s shares held firm and closed up on the day. When the dust had settled, GS had traded just slightly below a key Hidden Pivot support we’d flagged at $151.  The stock, a crucial bellwether for the banking sector and the stock market as a whole, has since rallied as high as 157.65. As far as we’re concerned, as long as GS remains strong it will keep the broad averages buoyant. And that is why we will continue to monitor GS’s vital signs very closely.

Given our immediate expectations for GS and a recent, 12,471 forecast for the Dow, we were bullish as all get-out on Tuesday. Alas, stocks that day chose to take their nastiest plunge since early February. We felt, not chastised, but amused and flattered to know that Mr. Market evidently had been reading Rick’s Picks.  We saw the selling as a one-day affair, since it was tied directly to news that Greece’s bonds had been downgraded to junk status, and that Portugal’s debt had been taken down a couple of rungs as well.  Long experience has taught us that it usually pays to fade a market that is being moved on headlines. That’s because news is the most potent tool the Smart Money possesses to manipulate shares. If DaBoyz want to buy ‘em, they wait for “bad” news and pull their bids, letting stocks fall to fire-sale levels.

Political Liars

But to infer that one day of manipulated selling is reason to turn bullish on the market overstates our willingness to cheerlead buyers. To repeat: We HATE this market, even if we’ve been able to go with the flow all the way up. Anyone who has followed the  individual forecasts in Rick’s Picks knows we’ve been continuously projecting higher prices since the bear rally began in March 2009, even as we continued to bad-mouth the economy and execrate the shameless political liars who have attempted to soft-peddle the recovery story.  If you think our headlines net out to wishy-washy thinking, try tuning to our daily forecasts. They can be accessed free for seven days by clicking here. You’ll  have all of our services and features at your command, including a chat room that is live 24/7.

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