The Stock Market is Anything BUT Problematic ~ The Risk Averse Alert

Monday, March 10, 2008

The Stock Market is Anything BUT Problematic

The NYSE Composite Index

Although the PPO (a price oscillator) might be viewed as something of a concern, indicating a strengthening of selling pressure over time in the NYSE index, one cannot ignore the fact this indicator has reached a negative extreme. This suggests the NYSE probably is near bottom.

Looking at the index's performance relative to the S&P 500 (lower panel) one has to conclude the broad stock market (as represented by the NYSE index) continues to behave quite well in comparison to the industry's benchmark index (the S&P 500).

Cumulative NYSE Advances - Declines

$NYAD cumulative
The chart of cumulative NYSE advances minus declines is included here to demonstrate how the thousands of stocks (and ETFs) underlying the NYSE are performing. This presents a look "under the hood" of the index itself.

As you can see, there is no wholesale abandonment of stocks being indicated by recent negative action. What is most evidently not happening is a handful of advancing stocks are holding up a large swath of declining stocks (much as was the case in the 1999-2000 period). This is a positive development indicating continued [professional] interest in owning and holding stocks and suggesting the NYSE will advance to further new-high ground.

CBOE Put/Call Ratio

The CBOE Put/Call ratio is included here only to provide further evidence the stock market probably is near a turning point.

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© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

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