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May 21, 2023 | Did the Bear Rally Top on Friday?

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.


Yeah, right. A headline here just two weeks ago implied that stocks were about to go bananas: Why a Permabear Is Certain We’re Going Much Higher.  Hubris aside, this was based on the very bullish chart of just one stock, Chipotle (CMG). It had just crossed the $2,000 threshold and appeared — still appears — bound for a rendezvous with a Hidden Pivot target at $2,739 that lies $600 above Friday’s close. Some might question the logic of using a projection for a single stock to make a prediction about the stock market as a whole. I would argue that my method, more intuitive than factual, will prove itself in comparison to the benighted, self-serving blather emanating from the likes of Jim Cramer, various talking heads on the financial news shows, and from Wall Street shills who get paid by the word to tell us why we should be bullish.

These mongers of gladness will always try to connect the stock market’s performance with supposedly objective facts concerning the economy and corporate earnings. Unfortunately, and has been demonstrated time and again, this is like trying to predict the behavior of a sea snake by analyzing the contents of the ocean. And in case you haven’t noticed, the “facts” that the talking heads cite unrelentingly are used almost solely for one purpose: to justify buying stocks at any price, no matter how grim the economic outlook. (And it is indeed grim, with little doubt that a collapse in commercial real estate is imminent, accompanied by a potentially catastrophic wave of bank failures.)

Vaporous ‘Wealth’

None of which argues that stocks cannot continue to climb heedlessly. It’s not as though it takes bullish buying or even real money to make this happen. To the contrary, most of the big rallies occur on short-covering gaps in which little or no stock changes hands. When Chipotle gapped $267 points higher on April 26, it added more than $7 billion of vaporous ‘wealth’ to the ‘economy’. AAPL’s biggest gaps have sometimes added ten times as much — in just a few hours., with little actual buying taking place.

So how do I square the bullish certitude of my headline from two weeks ago with today’s downgrade to “maybe”? The reason is simple: AAPL hit a 176.39 high on Friday that fell just pennies shy of a rally target I began to drum-roll months ago. If the stock is about to resume the bear market begun from 182.94 as seems possible, then Chipotle is not going to hit $2739. This is an instinctual and very simple way of looking at how things might turn out, with two key stocks acting as checks against each other.  I trust my charts and methods far more than I do narcotic ideas hatched by Wall Street’s quack team of analysts.

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May 21st, 2023

Posted In: Rick's Picks

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