I know what I would like to see... Whether I will, though, remains a mystery.
My uncertainty simply is how much higher the stock market will rise before turning sharply lower. The present similarity to the September '07 period simply cannot be ignored.
Yet, the more I look at the March 17, 2008 low, the more certain I am about indications the stock market is near a turning point that will carry indexes still lower. So, when will she blow?
Well, like I said Friday, "[W]e will like seeing further divergences making it really easy to know when to say when." We got no help on this front today. As flat and dull as trading was, all indications suggest a continuing rising trend.
At this point I'd like to believe the 200 day moving average presents something of a barrier. However, if during this week an advance covers the remaining distance, I suspect the S&P 100 will go still higher before the kind of technical divergences I am waiting for will develop.
I mention this because I'd rather not miss the profit opportunity of a strong move higher. And as I have indicated the past couple days, higher is where the stock market looks like it wants to go (though its advance might just continue to be strained, much as it has been).
Did a crack form during today's last hour of trading? RSI certainly diverged as the S&P 100 approached last Thursday's (4.24.08) high, then decidedly fell going into today's close, ending right about at lows reached last week. So, will the S&P 100 once again bounce?
My suspicion is it will not. Last Thursday's (4.24.08) advance to new (post-March 17th) high ground itself registered an RSI divergence relative to the Friday previous (4.18.08). Add to this further RSI divergence Friday (4.25.08) and today, and I am anxious to see what develops from here.
It could be the beginning of the end of the bounce off the March 17, 2008 low, subsequently resulting in the sort of technical divergences signaling the imminence of the sharp decline to new multi-month lows I am forecasting.
Or, it could complete the consolidation of the stock market's most recent advance during April options expiration week (4.14.08 - 4.18.08) and set up the stock market to rise still higher, possibly in a burst of buying.
Or, quite possibly, my present uncertainty about what's going on right now might continue for another day or three...
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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.
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