I warned here a month ago, when stocks were in a vicious short squeeze following the August 24 low, that bears shouldn’t try to play hero. Judging from the steep pitch of Thursday’s rally, however, more than a few pessimists have been unable to resist the juicy temptation of trying to pick THE top. And that’s what has been driving the broad averages higher in recent weeks: short-covering by bears who, like rubes on the carnival midway, don’t know when to walk away from a rigged gamed.

My suggestion to those of you who have had enough pain already is to change your style slightly and turn that pain into profit. Instead of shorting, covering, then re-shorting this vehicle every time it ratchets higher, pick a promising rally target and stay long until it’s reached. Any profits thereof would provide an extra cushion when you establish a stop-loss for a short position initiated at the target. If you are good at picking targets, as quite a few Pivoteers who frequent the Rick’s Picks chat room are, you should be able to make money with this strategy even when you are wrong.  That’s because a well-chosen target is likely to produce a tradable pullback even if the target fails to nail a major top.  Cover half of your short position on the pullback for a small profit and you’ve effectively raised the danger-and-pain threshold for what remains.

The accompanying chart (see inset) can serve to illustrate. The 2026.25 target is, as far as I’m concerned, a lock-up.  Traders, including permabears, could have been long and enjoying the ride as early as 1993.50 (the green line). But even if one had no stomach for joining the mindless herd, there was no excuse for resisting it once the futures blew through the midpoint Hidden Pivot at 2004.38. That was another great chance to get long, but if you passed up the opportunity, you should now be waiting eagerly as the futures close on the 2026.25 target. Try shorting there with a tight stop, by all means. But understand how much easier this would be, and how you could widen the stop generously, if you’d been long and profiting from x, or p, or even p2. _______ UPDATE (4:25 p.m.): The futures made their intraday high at 2026.00, but it took an all-day slog to get there. Either of two mechanical entry opportunities at p2=2015.50 (see my chat room posts at 9:19 and 9:22) would have worked, producing gains of as much as $500 per contract. _______ UPDATE: (Sunday evening):  No more rally targets in this vehicle for a while, since they seem prone to getting misused.