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The Morning Line

Even with Bells Ringing, This Top Will Be Tough to Short

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They don’t ring a bell at the top of bull markets, as the saying goes, but perhaps this time it will be different.  Indeed, every sentient guru and talking head who is not shilling for Wall Street is properly bearish, and even the chimpanzees who make their living rotating Other People’s Money into flavor-of-the-month investment themes were beginning to doubt the stock market’s sanity. If a much-needed 10,000-point drop in the Dow is coming, consider it electroshock therapy.  Unfortunately, it’ll probably take a lot more than that to purge the markets of mental illness as serious as we’ve seen in recent years.

Speaking as a trader and a chartist, I’m looking forward to the violent price swings that likely lie ahead. The Hidden Pivot Method turns out to work best when things get really crazy, as occurred during the dot-com mania and the Great Financial Collapse of 2007-08.  It will be interesting to see whether the Reddit kids have scared off institutional heavies who might otherwise get short up the wazoo over the course of a bear market. My hunch is that they will still short like crazy but avoid doing so in individual stocks that could attract dangerous attention.

Keeping Suckers in the Game

Getting short will not be a piece of cake, since a bear market as long overdue as this one is going to attract many players who are all-too-eager to pick tops. We’ve tried it ourselves recently using Hidden Pivot targets that precisely nailed peaks in several indexes, although not in IWM, a small-cap vehicle that still has a major target outstanding 4% above, at 234.82. Like so many amateurs, we got spooked out of some DIA puts on Wednesday when the Dow rallied nearly 500 points. That’s the way it’s going to be the whole way down, although it could take an occasional 2000-point short squeeze to ward off bears and keep buy-the-dips mouth-breathers and hopeful suckers in the game. Check out the Rick’s Picks Facebook page for a short list of 2x and 3X bear bets you should avoid. You’ll have better odds of growing your nest egg buying scratch-off lotto tickets and betting on 70-to-1 horses.

Rick's Picks for Saturday
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$QQQ – Nasdaq ETF (Last:312.74)

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$ESH21 – March E-Mini S&Ps (Last:3827.00)

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$DIA – Dow Industrials ETF (Last:314.02)

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$IWM – Russell 2000 ETF (Last:218.52 )

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IWM’s recent failure to achieve either of two rally targets I’d drum-rolled is curious, given that it has been the vehicle of choice for portfolio chimps paid to throw other people’s money at superficially appealing ‘themes’. The more important of the targets is 234.82, derived from a pattern that stretches back to the beginning of the bull market in 2009.  The other is the 232.72 target shown in the inset.  It’s possible the chimps, abetted by their unwitting slaves, short-covering bears, will lay waste to the two Hidden Pivot obstacles in the week(s) ahead. For now, though, we can infer only that Big Money has stalled, presumably waiting for bears to provide the kind of boost that mere bullish buying cannot. Given the targeted tops that have occurred recently in the Dow, QQQ and S&Ps, the burden of proof will be on the optimists as the week begins. ______ UPDATE (Feb 24, 7:25 p.m.): The lunatic brigades were back, bolstered by short covering that drove this gas bag to within easy distance of 234.82. Right now, that’s the only place I’m recommending getting short. _______ UPDATE (Feb 25, 6:12 p.m. EST): Our chances of getting short at 234.82 further dimmed today, although IWM’s dive has yet to do any serious damage to the intraday charts. Let’s see what Friday brings. 

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$BRTI – CME Bitcoin Index (Last:48653)

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$GCJ21 – April Gold (Last:1801.40)

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$SIH21 – March Silver (Last:28.00)

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