I’ve quickened the drumbeat over the last few weeks to warn that a bear market that will have been nearly 12 years in coming may finally have arrived.  You should be holding put options, including some butterfly spreads, in any of numerous trading vehicles that recently topped very precisely at targets predicted here as long as two months ago. Two nearly perfect hits occurred, respectively, in IWM and the E-Mini Nasdaq.  Concurrently, the E-mini S&Ps, the Dow Industrials and bellwether AAPL, have turned down sharply from midway between p2 and D. I did not view this seeming anomaly as putting them out of sync with the lunatic-powered indexes favored by portfolio managers (aka “the chimps”), since it is not unusual for long-term trends, even bull markets, to fall shy of ‘D’ targets.

The Hidden Pivot Method cannot tell us with certainty when a bear market has begun; however, it has been quite impressive at nailing tops of lesser degree and at producing robust profits trading occasionally against the granddaddy of all bull markets. And now? A key rule of Hidden Pivot analysis is that if the dominant trend has shifted from bullish to bearish, stocks, ETFs, indexes and futures should begin to exceed their ‘D’ targets to the downside. Correspondingly, and with equal consistency in charts of all time frames, corrective abcd-type rallies should start to sputter out shy of their ‘d’ targets — typically at p, the midpoint Hidden Pivot support.

What to Look For

These factors should be foremost in our minds as the E-Mini S&Ps (see chart inset) approach their first D target on the hourly chart since the selloff began last Tuesday. My expectation is that D=3664.75 will give way easily, but that even if not, the futures will close beneath it. If a bear market has in fact begun, we can look forward to exploiting the unique ability of ‘mechanical’ and ‘counterintuitive’ trade set-ups to handle violent swings with confidence rather than fear. Hidden Pivots produced remarkably accurate forecasts during the dot-com boom and bust, and we should expect no less of them this time around.

This bear market is certain to hold some unusual surprises, if for no other reason than that everyone — other than imbeciles, that is — has been expecting it. Another reason this bear will be different is that short interest, along with all of the buying power it creates, is about to fall precipitously because of the Gamestop thing. (See my commentary about this, above.) There is a chance that the bear market will be so severe and devastating to the economy that trading as it exists today, on electronic platforms, will be curtailed or even cease. There are things to consider as we face The Great Reckoning that has been so long overdue. _______ UPDATE (Feb 1, 8:56 p.m. EST): The rally is a suspected fraud, but we’ll give it the benefit of the doubt for now as it climbs against a moderately strong impulse leg on the daily chart. A short that I recommended just off the intraday high at 3777.00 produced a quick profit of as much as $650 per contract. Check my posts in the Trading Room beginning at 12:37 p.m. for the time-stamped details.  Numerous subscribers reported doing the trade, some interpolating it using equity-based vehicles. _______ UPDATE (Feb 2, 5:47 p.m.): Sometimes frauds succeed. This one, perpetrated by the Fed, has a big cheering section, that’s for for sure.  [Wednesday bulletin:  Zzzzzzzzzzzzzzz.]  _______ UPDATE (Feb 4, 9:05 a.m.):  Time to get our minds right for 3938.25, a bull-market target I introduced on Jan 10. Archived touts leave no doubt about its provenance or viability. It has no clear NQ analog.  I don’t want to discourage anyone from thinking the stock market could not at any time suffer the massive coronary it so desperately needs to return to reality. At the moment, however, the fund managers are wallowing in cash, and the companies themselves seem to have unlimited borrowing power for stock buy-backs. The only thing I can think of that might tighten the flow of cash is the higher real rates that are coming eventually, and a correspondingly dearer dollar.