The Risk Averse Alert

It seems probable a number of days will pass before the mini-collapse I am forecasting will commence. In fact, I think it's a safe bet the fireworks will not begin until sometime after May options expiration (05.16.08). Trust me, patience pays.




Given the buoyancy we've seen over the past few weeks, don't be surprised if over the next few days the S&P 100 advances toward the upper line of the rising wedge drawn on the chart above before declining to the lower line. Following this return to the lower end of the the rising wedge, we would look for one final advance to the precipice. That's when the $500 to $100K show will begin.

Is this [specific] prospective scenario set in stone?

Of course not. My view here is nothing more than an educated guess. The details supporting it simply are unimportant.

The critical matter is whether the March 17, 2008 low will be taken out by a mini-collapse. I believe there is a 70% probability this will happen.

Again, it might take some days before the ultimate top we're looking for is reached. This top is not far above last Friday's (05.02.08) intra-day high, however.




Might the S&P 100 instead decline to the lower end of its rising wedge (in the vicinity of 635) immediately ... say, before the end of the week?

It most certainly could. In fact, I consider this the more likely possibility.

In this case, then, we might be looking for the stock market's final advance (i.e. to the precipice) to complete as soon as next week ... probably sometime around the May options contract expiration next Friday.

So, get ready. It will be show time before you know it...




© 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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