Is Papa Bear Back?

29 comments

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 Subscription!

Speaking of paying for your subscription, if you are reading this, click here to be automatically entered in a drawing to win three months’ access (worth $106) to all Rick’s Picks features and services. A winner will be selected every Friday through May 4. You’ll not only get commentaries like this one delivered to your email box each day for free, if you win you’ll also gain entrée to two 24/7 chat rooms that draw traders and investors from around the world. You’ll also be able to call up daily trading “touts” that are updated by Rick ‘round the clock and which give precise forecasts and detailed trading guidance for putting on positions like the one in the QQQs described above. As mentioned, we occasionally try to put out relatively simple trades to help pay the $350 annual cost of an annual subscription. Although many of the trades are geared toward those who are familiar with our proprietary Hidden Pivot Method, occasional recommendations are intended to be easy enough for even novices to execute.  Here, for example, is the QQQ recommendation exactly as it went out to subscribers on March 19:  “A Hidden Pivot target at 68.65 is roughly equivalent (though hardly equal) to the rally target in the June E-Mini S&P that I’ve suggested shorting. Let’s try it in this vehicle by buying four May 68 puts if and when DaCubes get within 0.07 points of the target.”  At the same time, we also flagged a potentially important target in the E-Mini S&P that, like the QQQ forecast, came within an inch of topping precisely at our number.

Odds Are Against ‘The Top’

Will the recent highs turn out to have been the elusive Mother of All Tops? Odds are against it, since the uptrend has been running pretty steady for more than three years. However, and as always, our strategy is to get short at each and every top with the potential to become an important one.  This we have done, diligently taking partial profits whenever things moved our way initially. This approach made it possible to record winning trades even when Papa Bear went back into hibernation, as he invariably did. We invite you to come into the Rick’s Picks chat room to verify this with subscribers who actually made money on bear trades. You can do so by clicking here for a risk-free seven-day trial to the service, or by clicking on the link above to enter in the drawing for a three-month subscription.

  • Rich April 11, 2012, 9:52 pm

    List of our US Senate Primary Opponent Contributions from Lobbyists.

    (We keep no contributions from identified Lobbyists):

    http://richardcharles.blogspot.com/

  • Rich April 11, 2012, 9:39 pm

    Just took a nice profit on SPY Apr 138 calls
    and bought SPY Apr 137 puts…

  • Terry S April 11, 2012, 8:32 pm

    Hello Rich, Mario, et al
    I ask Mrs. S what she guessed Medicare would pay on a $30k hernia operation. She said $12K. I asked why. She replied that they usually pay less than half so she guessed the twelve.

    I had kidney transplant surgery in Jan. 2005. The hospital costs were over $200K and that wasn’t all of it. I had both private insurance and Medicare; but at the time Medicare was primary, I think. After contacting the hospital, Pacificare (my private insurer) – just for curiosity sake – to find out who paid for it, I was told different answers at different times. So ultimately I never knew for sure who paid and how much. But it did enlighten me about the ‘shell game’ that is played, in part I think, to keep the patient/consumer in the dark.

  • Robert April 11, 2012, 6:25 pm

    What to make about yesterday’s 200 pt drop in the Dow offset by a decent rise in Gold (and Outside reversal, in fact)…?

    Miners also side-stepped the general smackdown in the broader indices…

    Doesn’t really matter I guess- I’ve got all my money in 10-years, Munis and Euros… you know, where it’s safe.

  • John Jay April 11, 2012, 5:45 pm

    Robert,
    Well, maybe we are starting to turn this tub around.
    Firefighters in Fairfield CT have just had their sick days reduced to 12 a year from 28 a year!
    Must be hard on them!

  • gary leibowitz April 11, 2012, 5:26 pm

    The current push higher might have more to do with the notion that the ECB will step in and buy Spains bonds.

    Clarity on the US market trend will be seen within 3 weeks’ time, barring any special event.

    • Robert April 11, 2012, 5:35 pm

      Well, naturally the ECB buying Spain’s bonds is perfectly fine…

      I mean, when a Central Bank creates the currency units to buy a government’s debt, isn’t that the process of creating the miracle of wealth?

      Monetizing debt- the new path to government mandated prosperity.

    • gary leibowitz April 11, 2012, 6:23 pm

      Not as rosy as you make out. The pain is real for the EU countries in trouble. Greece is already in a deep recession/depression. There will be no escaping the restructure. Germany is in total control. The financial empire will dictate the payment terms. Strikes and violent demonstrations will get worse in those countries held hostage by the German restructure.

      If you want to blame soneone, blame the people that elected these politicians. Everyone wanted a piece of the pie that no one acknowledges was made of mostly air. Politicians obliged. We saw this coming for well over 30 years.

      Human nature won out.

      &&&&&&

      Germany is in fact slipping into recession, possibly dooming hopes of making the “next restructure” appear credible. With all of Europe in a wallow, folks are going to start wondering where all that bailout money is coming from. Keep in mind that, these days, even trillion dollar packages are buying no more than a month’s time for the fraudsters to pretend everything is working out according to plan.
      RA

    • Robert April 11, 2012, 6:33 pm

      “If you want to blame soneone, blame the people that elected these politicians. ”

      The EU Parliment is abosultely the worst of the worst- a government of politicians ELECTED by politicians.

      I can’t beleive that hasn’t worked out fantastically, quite frankly. 🙂

  • Terry S April 11, 2012, 5:14 pm

    Hi Rich – What part of the $30K did Medicare actually pay? Mario &I would like to know . Thx

    • Rich April 11, 2012, 8:14 pm

      Medicare paid about 60.9% historically according to AHRQ MEPS internet search.

      Every case is different.

      Mine was inguinal hernia, which according to wiki answers on internet, cost about $1000 in India and for horses.

      I pay for Medicare Part B and D also.

      The surgery was at a teaching hospital receiving Medicare Funding for Medical School, so it covered much more than others, about 90% in this case, still leaving a significant co-pay…

  • Rich April 11, 2012, 3:24 pm

    FB = Facebook IPO May 17, cher Mario.

    Thus, after a green day today with possible down days to Friday the 13th, market bias may be up until that date.

    Out of 27 S&P500 Q1 earnings reports so far, 22 were beats, with Q1 estimates lowered from $26.50 to $23.50, so there may be more upside surprises.

    (Of course analysts and CEOs lower estimate guidance for bullish beats.)

    Nota Bene the Point & Figure for INDU just flipped negative to 12,200 to join Big4 short.

    Likewise Gold to 1550, joining Big4 short.

    Fed’s foot off the gas pedal so now Banks have to grow lending and MZM or 0 is a one-termer.

    Big4 barely long SPX and NDX, with SPX P&F Target unbelievable 1850 and NDX already overbot.

    This confirmed the profits of Rick’s QQQ puts with agile money management.

    Mario, my hernia surgery on Medicare was $30,000, a good reason Medicare faces insolvency or death panels. Most hospitals are in trouble with doctors refusing Medicare patients.

    Prices go up wherever government spends money…

    • Robert April 11, 2012, 5:32 pm

      “Prices go up wherever government spends money…”

      NO…. Say it isn’t so!

      Government debases currency – calls it “distributing wealth”, issues debt, prints money, spends money, and thus prices (the relationship between real cost and quantity of money) go higher?

      I guess the old addage that you can’t multiply wealth by dividing it is true after all…

    • Rich April 11, 2012, 7:58 pm

      LOL Robert.
      Love yer blog.

      And the corollary is:
      (hope you’re sitting down)
      Prices go down wherever government prevents or takes money with debt, red tape and taxes…

  • John Jay April 11, 2012, 2:27 pm

    Mario,
    I think that here in the USA we have now merged all the worst features of the old USSR on the one hand, along with the worst features of the old Robber Baron US economy on the other. And the more you look, the more you see everyone essentially working for government at some level, especially when you add in student loans, pension obligations, and a heavily subsidized real estate sector. Oh, and speaking of pensions, it appears we are on the hook for pensions for some government contractors such as Blackwater mercenaries. Splendid!

  • Mark Uzick April 11, 2012, 9:28 am

    Mario: Even big retailers and internet distribution is destroying community, the lives of people and contribute to the socialist dependency lifestyle; no more mom and pop communities, no more mom and pop shops, you have to go down to the local warehouse type store to buy what you need, or even just order it from the internet, including food.

    We recently had a big debate about direct sales killing the big box stores.

    http://www.rickackerman.com/2012/04/blighted-retail-sector-contradicts-%e2%80%98recovery%e2%80%99/

    One of my contentions was that Internet sales are, to a large extent, the resurgence of the competitiveness of the Mom & Pop retailers against the mega-retailers.

    The govt in collusion with insurance/pharma/medical is the biggest money sucking scam in the world. Prices are for the insurance companies, not the patient. So a doctor knows that, and so then they raise the prices! We were billed $1000 for a ten minute doctor’s visit at a California hospital! That’s insane, and worse, when we called the billing line, they actually think we are obligated to pay it! Worse, IN FACT we ARE obligated to pay it (even though I won’t)! And if we don’t, our credit record is ruined! How’s that for screwed by the system?

    NO! Mario, you’ve no legal obligation to pay that bill, but you should probably pay them something reasonable so as not to be a freeloader. For a real eye-opener read this:

    “How to Survive Hospital Costs Without Insurance”

    http://www.lawfulpath.com/ref/shc_rev2-0eval.pdf

    • mario cavolo April 12, 2012, 7:32 am

      ahh yes…great point Mark….the internet is allowing online mom and pop shops to flourish. Here in China , its taobao.com that’s leading the market… the problem is alot of uncontrolled fraud so its always caveat emptor, but otherwise, it is a great trend for entrepreneurship.

      Read the hospital pdf…fabulous info….Cheers, Mario

  • Terry S April 11, 2012, 7:54 am

    Hello Mario – Hospitals have several different ‘costs’ for the same services/procedures. The thousand bucks is for you, the uninsured. Separate “contract rates” exists for various private insurance companies, and again another (lower yet) for government plans, eg, medicare etc. Under one of these, the your grand may net the hospital 10%. Then, the hospital can write-off as much of the remaining 90% as possible. My wife the RN has explained this to me many times. Cheers, Terry
    ps. I no longer invest in stocks, ETF’s. Am I a fool to be considering FB in May? Or should I simply go away!

    • mario cavolo April 11, 2012, 9:56 am

      …thanks for the inside info Terry! ……..by the way, ‘scuse my thick head sometimes, what’s FB stand for?

  • mario cavolo April 11, 2012, 5:35 am

    My vote is that this is just another nasty short correction to a reversal pivot low in the mid 1300’s in the manner of the new normal. We’ll see if we breach it.

    And if we do breach it….?…ahh that’s the question!…no problem! They will do more QE when the market hits 10,000.

    Now here’s an interesting coming scenario…

    If the stock market slides, that means the USD will be heading up. While that sickens many of you, its reality.

    So the USD will hit 85-90 or even higher while the Euro/USD hits par. That will be good temporarily for Europe as the cheap Euro will help them recover.

    Then? Hah, that’s not acceptable because it makes U.S. exports too expensive and second, the market decline will be met with the next rounds of QE magic…

    And then? The USD will PLUNGE all the way back down to the 70’s, right back to where it is now!! Ta Da!!! Magic trick performed!

    My questions are: Where will gold be in this scenario? Where will inflation rear up? Where will oil be?

    As someone else mentioned, it is interesting to note declining oil prices now. I absolutely do agree that this illustrates the very high level of conspiratorial self-serving manipulation of asset prices happening in the market today. You can not tell me that oil’s price is based on monthly supply and demand; it should have just had a rally up to $109 on Iran fears?…followed by a convenient decline for the holiday season gas prices to further appease the sheeples. While in some ways it does make sense that oil could shoot much higher, my bet says it simply will not because generally a slowing recessionary global economy is our future, an environment that can not and will not be able to bear high oil prices.

    Cheers, Mario

    • Mark Uzick April 11, 2012, 9:52 am

      Other than making hawkish threats of war or dovish conciliatory gestures of peace and releasing strategic oil reserves or threatening to do so, I don’t think there’s any practical way to manipulate oil prices. I think the market is too big to do it by buying or selling contracts, although I sure that politically connected insiders get advanced information on these activities on both sides of the pushing match between the US and Iran, which may make it look like straight forward buying/selling type of manipulation.

      BTW: I gave you a link that explains why you are not legally obligated to pay that hospital bill and how to handle it without hurting your credit. It’s being held back for moderation. (Probably because of the links.) So look for it.

    • mario cavolo April 11, 2012, 9:54 am

      Hi Mark, thanks kindly ….if you would take a moment go to my website and click on the Contact Us link send it to me there. I’d rather not type out my email address in a public spot for spammers to grab it! thanks again! Mario

    • Mark Uzick April 11, 2012, 11:42 am

      Mario, I sent you the comment: you and anyone else reading this who doesn’t want to wait until my comment gets moderated can also get the link by searching:

      lawfulpath.com how to survive hospital costs without insurance

      &&&&&&

      The moderating is almost purely mechanical, since I rarely censor. Posts with several links are the most likely to be auto-delayed, and sometimes I’m not at my desk to notice it. RA

    • gary leibowitz April 11, 2012, 3:14 pm

      Mario, no conspiracy on oil prices. The good friends in Saudia Arabia are helping out. They announced over a month ago that they will be sending over 40 oil tankers to our shores. The problem is not enough oil, it is the capacity of our refineries. I also believe there is a big shift going on from commodies to consumer staples. Both energy and financials had a very big run. If the domestic economy is strengthening than it makes sense to shift money into the consumer sector. The only possible problem I see going forward is agricultural supply. Very bad weather has decimated some crops. If it happens 2 years in a row than a huge spike in food will be a very big problem. The other problem we could face is the possibility of a sharp drop in the EU. If these austerity programs kick in all at once, it will impact our earnings. SPX receives about 40 percent of their earnings from overseas.

      On the market, this so far, looks like a normal much overdue correction. It is correcting right before quarterly earnings. If corporate earnings disappoint it could push this correction to a new bear trend. If the results are positive to mixed than we should find a bottom soon and start the climb. I will be watching the high-flyers like energy and banks to see how poorly they do. I will also see how the street adjusts future earnings based on the results from this quarter. On the domestic front I would be surprised if the next employment report doesn’t show over 250,000 new jobs with a 50,000 plus revision for this month.

    • Mario cavolo April 11, 2012, 5:55 pm

      ….hey Mark, Gary, thx for the oil points to understand M

    • mikeck April 11, 2012, 8:44 pm

      I heard recently that gasoline demand had declined so much that some refineries have closed down due to lack of demand for their products.

      That can’t be why prices are at $4 per.

      &&&&&&

      Commodity speculation is obviously a big factor, since consumption is WAY down. A recent news story said teens aren’t driving nearly as much as they used to — don’t even want cars or driver’s licenses — because of high gas prices, poor employment prospects, and because they think mass transit is a good alternative. RA

  • John Jay April 11, 2012, 5:25 am

    May Natural Gas futures are sitting at $2.03 right now.
    Might break $2 overnight, and Congress is talking about export restrictions on NG to keep prices here low.
    Speaking of the Government, I just learned that the number of people in the USA employed by all levels of government is much higher than I believed.
    Prof. Paul Light of New York University as quoted by Gary North:
    “Here is his estimate for the Federal government: 11 million, broken down as follows: 1.8 million civil servants, 870,000 postal workers, 1.4 million military personnel, 4.4 million contractors, and 2.5 million grantees. These figures are from 2006.
    Yet the federal government isn’t all. Despite its huge budgets, state and local governments dwarf Washington in direct employment. According to the U.S. Census Bureau, there are 3.8 million full-time and 1.5 million part-time employees on state payrolls. Local governments add a further 11 million full-time and 3.2 million part-time personnel. This means that state and local governments combined employ 19.5 million Americans.
    When we add up the true size of the federal workforce – civil servants, postal workers, military personnel, contractors, grantees, and bailed-out businesses – and add in state- and local-government employees – civil servants, teachers, firefighters, and police officers – we reach the astonishing figure of nearly 40 million Americans employed in some way by government. That means that about 17 percent of the American labor pool – one in every six workers – owes its living to the taxpayer.”
    Throw in MIC workers and Tax preparers for good measure. Truly awesome numbers.
    Sounds bullish for an Obama 2nd term, sad to say.

    • mario cavolo April 11, 2012, 5:50 am

      Your point leads to many…pardon me. We are indeed heading more and more into socialist govt, a country run by and for the govt not the people.

      Even big retailers and internet distribution is destroying community, the lives of people and contribute to the socialist dependency lifestyle; no more mom and pop communities, no more mom and pop shops, you have to go down to the local warehouse type store to buy what you need, or even just order it from the internet, including food.

      It just popped into my head that this free govt handout stuff is crazy. If the govt is going to give you food stamps or welfare money, now 50 million people, why don’t they make you work for it!!!? Heaven forbid that’s a reasonable request!

      The govt in collusion with insurance/pharma/medical is the biggest money sucking scam in the world. Prices are for the insurance companies, not the patient. So a doctor knows that, and so then they raise the prices! We were billed $1000 for a ten minute doctor’s visit at a California hospital! That’s insane, and worse, when we called the billing line, they actually think we are obligated to pay it! Worse, IN FACT we ARE obligated to pay it (even though I won’t)! And if we don’t, our credit record is ruined! How’s that for screwed by the system? In the U.S. health care system, an individual without health insurance should be able to say “Excuse me, this bill is not for me, it isn’t priced for me, and its not my obligation. You have priced this for big insurance companies. I should be responsible for your system and I should need to pay you $50 for a plastic cup to pee in or $10 for a bandaid or $30 for saline solution, all of which costs pennies. I’m a victim of your system and all of you are swimming in billions of dollars in this system you created. Good for you, but I’m not obligated to be involved nor pay this money to you as an individual person who works hard to earn money to support my family.”

      The more I think about it, the more royally screwed the U.S. lower/middle class is, its going to get much worse too. Sorry for the rant, I know these points have been well versed better than myself by many others here.

      Cheers, Mario

  • TKO April 11, 2012, 4:47 am

    I went 100% long in August, under the theory that stocks were the only winning game in town. I was a little early. Then I got spooked by that 200 point drop out of nowhere three weeks ago, and bailed out. I was a little early. I looked around and saw Bernanke coy about Q3, resumption of foreclosure activity and concurrent housing price declines, higher unemployment, slowing China, vague problems in the etf world, unstable and deteriorating geopolitics, the European mess, etc etc and fear overpowered greed. Will the three year “Let’s pretend game” resume? Instructive is the performance of gold during the stock sell-off, rocketing 35 plus very quickly. Indicative of real fear in the air and suggests the possibility of a rapid stock sell-off. I will be on the sidelines—maybe a deep out of the money stock put or a long gold call just for fun, if the opportunity presents.


FREE Impulse Leg Toolkit

Use this simple tool to spot major trend changes the instant they begin.

No, I'm not Interested