BY 2013, IF 2/3 OF OUR PORTFOLIOS AREN’T PREPARED TO PROSPER IN A BEAR MARKET, MANY OF US WILL BE LOOKING FOR A DIFFERENT KIND OF WORK!

This morning, I said on the radio that the rally, yesterday, looked good if you just looked at the prices. Very much like looking at a really shiny car and assuming that it has a powerful engine. Sometimes you just have to look under the hood to make sure.

For my market x-ray, that's exactly what I do. I'll tell you exactly what I saw, as I did this morning on The MoneyMan Report. I saw impressive price gains in the indices and in many of the stocks that have been hit the hardest recently, such as developing market stocks, material stocks, and those companies that are connected to future global growth. Those are the stocks that are going to make us the most money over time and they are also the ones that have been hit the hardest in this fear-based sell off we've been going through. Well, those are the ones that had the best performance in that apparent one day wonder on Monday.

Beneath the surface – or under the hood, as it were – I saw a whole different picture. After weeks of falling prices, even in the face of an unusually oversold stock market, on this apparently exciting bounce, we only had about 70% of the companies advancing, and only about 70% of the volume as up volume. That is pretty anemic for a market as over stretched to the downside as this one has been.

What does it mean? Contrary to what many buy and hold stockholders wish, it tells me that this was just a garden-variety technical, meaningless bounce. The fed driven, election year bull market is really nowhere to be seen so far. In fact I see no evidence of the fed being particularly helpful or accommodative, and I see no sign of any particular strength or buying power. Demand is anemic and falling. Supply – people who want to sell their stocks – seems to actually be on the rise for the first time in the current cycle.

I said this morning that the only hope for this little rally to last more than a few days if that, would be to add a lot of follow-through strength, with the volume rising, demand picking up, and supply vanishing. Well, here we are getting toward the end of the day, and what we have had is anything but that. The stock market was strong for couple of hours, ran out of gas at 11 AM and has been holding on for dear life since.

This would indicate to me that the odds favor a continuation to the downside – and soon. Investors continue to adjust the value of stocks downward.

That's what the experienced big-time investors see, and now I will quickly tell you what they are doing about it. The big boys know that in the final stages of a bull market, if we still have even that left to go, there isn't time to pick areas of weakness that are cheap and a good deal, and invest in them waiting for them to gain strength again. The best metaphor I can think of is Paul Desmond's, in which he likens the final stages of this bull market to the coming winter frost. Once something gets right that is turning brown, you'd better pick it or it will be dead soon. Consider a disappointing stock to be like a leaf turning brown and ready to fall off the tree. Winter is coming soon, and there is no time to nurse them back to health.

The smart money is forgetting what they were thinking a month ago, forgetting their bull market plans, and preparing for winter. Today, I can promise you, the great investors are going through their portfolios, looking at the stocks that are falling while the market is still up a little, and pruning them out of their portfolio. If they are doing worse than the S&P 500, they are being pruned.

The experienced investor right now, is thinking through how much of his portfolio he is willing to risk, holding onto stocks that will someday make a fortune, but will be hurt badly during a bull market. They will turn out to be worth holding onto, but only your situation can tell you how much of that you can afford to do. Your financial situation and your mental situation, because many people cannot stand to sit around losing money for years, if you're going to lose confidence in the middle, face it and don't get involved in that kind of a situation now. You may wish to be in denial a little longer, but this is more than half a century of experience talking to you. I've made all these mistakes, and maybe I can help you avoid some of them. Then again maybe not.

We’ve just come through one of the most one-sided weeks I've seen in years. I'm not a confirmed technician, but price levels are important and the stock market this week went below all the lines I drew for myself as a guide.

Investors that are going to be successful have to deal, right now, with the reality that the most certain profit makers for the next several years are the very stocks that have been sold the most aggressively during this pullback. I don't ever want to lose sight of the fact that the biggest thing happening in this decade is a move by more than 1 billion people from the country to the city. They're joining the middle class, just as we did in the United States in the 50s. They are moving from houses with dirt floors and chickens walking in or out, to decent homes with air-conditioning, floors, windows and in many cases a car parked in the driveway.

Their children are going to eat well and grow 6 inches or a foot taller than their parents. The demand for grain to feed animals for food will be beyond anything the world has ever experienced. With limited land and unlimited demand for better food, the only answer will be fertilizers, and yet, fertilizer stocks are among the stocks being sold most aggressively. Instead of seeing this as a frustration, I see it as an opportunity. And this is why I've been focused on how to hedge a good solid portfolio. I don't want the immediate fears in today's stock market to affect my long-term strategy, but I don't want to have to sit through years of being underwater either.

Right now, we will have a bounce. It could last an hour, a day, a month or a new leg up in the bull market. The fact that the markets bounce doesn’t tell you much. But this is where the smart money will find out how to take the money from everyone else.

This rally that starts this morning could fizzle  today or tomorrow. And it also could go all the way up to the high point for the S&P 500 1390 or 1400. The strength of that move up and the amount of enthusiasm and intensity that accompanies it is going to tell me a lot.

I also know in advance, this bounce is going to be accompanied by positive news of some sort. At this moment, don’t know what that is going to be but the reporters will come up with some. Of that I am certain. Manufacturing, houses, jobs. We’ll see what develops but good news is on the way. We’re ready for it. The test is how long it lasts, and when does it run out of gas.

This is going to feel like a coiled spring. The stock market went below the level of support it’s been holding for months.

It’s going to bounce back, and that tells you very little.

The how it bounces is everything to the experienced investor who doesn’t want to lose money.

Here is where the opportunity is.

The quality of any rebound that might develop over the near term is the most important thing to monitor.

Here is one word to the wise. Don't be fooled by the way the markets open today, and don't necessarily expect the pattern of the last month to continue.

Here is the pattern which has to change, because it is too obvious and all players see it

We open lower, rally midday and then sell off into the bell. The pattern is so obvious now that perhaps the computers are even programmed to trade it that way now… or it goes the opposite. Sell off, then rally into the close and close down a little. Either way, everyone sees it. The traders will keep trading the pattern until it doesn’t work.

Understand, we are hundreds of years into the markets and there is no enduring pattern. The patterns change all the time and the one we've been living through this month won't last either. Generally the time for change is when everybody recognizes which is now.

Look, it’s come to this!

Here’s why I can no longer be silent and just do my own show every day. I can’t stay quiet anymore. There are some myths and lies out there that are absolutely crippling the people who have made my life so beautiful. I’m 66 years old and I have more fun, more resources, more everything than a poor kid from the lower east side could ever have expected. Nobody in my family ever had this kind of situation, and nobody ever expected it for me. I just can’t sit by and watch the people who have made my life so beautiful, being fleeced on a daily, weekly, yearly basis. Ok, I was given a gift. By happy coincidence I found myself with a certain amount of native intelligence and for some reason, the ability to see where the money is in a deal. Not always, but enough for me to make an important contribution on Wall Street.

And because I could see what to do with money, and more important, where the mistakes and lies were, I’ve gotten to spend a lot of time around some of the most successful people anywhere. This good fortune is continuing. So I can’t and won’t be quiet about it anymore. I’m in the process of devoting the rest of my life on my mission, and thankfully I’ve been joined by a lot of terrific people who are just as committed as I am. I’m spending the rest of my life to making sense out of the world of money, and carrying that message to as many people as I can. I’m bringing in the very best, smartest, most successful money makers on the planet - traders, stock investors, businessmen, private equity guys, and global successes like sports champion and movie stars. People who are famous, rich and influential because they’re not only good at what they do, they’re some of the best alive. Some are among the best that have ever lived.

What are some of the myths, disinformation and outright lies that are costing you money, keeping you from sharing in the economy even when you put in a lot of time and risk?

Click here to read the rest.

Adam Silberstein opens the show and reviews his thoughts on dealing with emotions in a tumultuous market as well as an overview of current market conditions; Dan Frishberg talks about the sellers and lack of buyers in this market as well as hedging your portfolio; Top Tier guest caller Victor Trillo reviews his bearish trading strategy and the specifics of how to search for stocks in this type of market downtrend; guest Morris Vahnish explains his current real estate investment and the mechanics of his deal.

The Money Man: June 1, 2012 Play Now
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