Putting aside all of the burble and breathless speculation in the Rick’s Picks chat room, there is no reason to get worked up about what is likely to come next. Keep in mind that a simple Hidden Pivot pattern got January’s 271-point plunge very right, including a bottom at 1804 that lay  just 13 points from where we’d anticipated. Granted, that’s not as close as we are used to, since we often nail the swing highs and lows of big moves within a point or two. However, the fact that the plunge overshot the 1817 support does not mean the pivot didn’t ‘work’; rather, it told us that the selling is even more powerful than we might otherwise have surmised, and that the bounce is not destined to get very far even if it manages to terrorize bears.

The overshoot also tells us that this rally will ripen into an excellent shorting opportunity, particularly if it goes on for long enough to convince permabulls that new all-time highs are coming. How high, then?  The numbers that I flagged when the bounce began still look compelling. The lower of the two at 1939.75, just six points above the peak of Friday’s quite vicious short-squeeze, warrants close watching. An easy move through it on Monday or Tuesday would imply more upside to at least 1971.75, which would complete a 0.618 retracement of January’s plunge. For purposes of getting short from either level, however, I’d suggest using camouflage — i.e., a downtrending abc pattern on the 5-minute chart or less. Why employ camouflage instead of simply shorting at the levels themselves with tight stops?  My concern is that these particular retracement benchmarks, both of them all-too-obvious, will be overused by amateurs and the algos, and that they are therefore unlikely to provide the kind of precise stopping power we need to initiate trades advantageously.  One more thing to keep in mind as the rally runs its course: Its purpose is not merely to gut, disembowel and dismember shorts, but to get bulls and the dorkwads at CNBC revved up to the point of certitude that new record highs are coming, and soon. _______ UPDATE (11:35 p.m.):  The 1939.75 target advertised above caught the intraday high within a single tick before giving way to a 20-point selloff. It would have produced a gain of as much as $1000 per contract to anyone who got short at the top.  In the chat room, numerous subscribers reported having done just that, while others reported exiting long positions initiated from as low as 1914. Nice work, ladies and gentlemen!