The Risk Averse Alert

So, tell me. How'd it feel to be on the right side of the trade? Seriously, I'd like to know. We really caught a break today. Although I knew today's smack down was possible, I thought yesterday's advance might more likely follow through instead. So, this bit of redemption was really sweet. Not just for the fact I was able to bail out of my June OEX Put with a double, but also because expectations leading to the collapse I am anticipating continue being met.

These are relatively rare moments in my experience. Most every turn is proceeding as expected. More critically, though, is how each step along the way is confirming my outlook for a meltdown.

All the right ingredients making for low-risk, stock index options play are substantiating my certainty. This is the real rarity.

Obviously, stock market collapses don't happen every day. But from time to time they do. Such is the natural reality of the game. This much is true and one need not be a doom and gloomer to think this way. So, deal with it, Kudlow.

Now, about this pending meltdown ... I want to give you an estimation of how I suspect it will go down.

Should it unfold sometime over the next couple weeks ... I believe it will be fast and furious ... lasting only a matter of days ... and quite possibly display some very apparent, outward signs of panic.

Now, almost unbelievably, this likelihood continues appearing quite probable (this by way the market's underlying technical tenor remains harmonious with what the Elliott Wave suggests is possible at this juncture in the stock market's multi-month consolidation).

I might say we got a taste of this today, but you know what? Today's trading was rather well-contained. Except for maybe the first half hour, it was never really a freak show.

This is not likely to be the case during the coming collapse. Furthermore, once it comes to pass, serious selling pressure will more or less evaporate.

Sure, there will be a subsequent basing period for some weeks following ... and all kinds of squawk and fear of pending doom ... but that's to be expected. By then, though, all the real pressure will have been largely dissipated by the preceding meltdown whose defining, underlying characteristic should demonstrate conclusively the tenor of a capitulation.

This basing period, of course, will set up for a spectacular stock market melt-up. I'll talk more about this when the time comes.

Anyway, that's about all I really want to say tonight.

Do me a favor, though. Let me know how it felt today being on the right side of the trade. Leave a comment. Just a sentence or two will do (but if you feel like writing a novel, knock yourself out).

Tell me what was going through your head as expectations were being met today. Let me know how you will feel during the market's pending meltdown ... when the tiny sum we just doubled turns into a handsome fortune. Think about whether you might wish to further multiply this much more conservatively during the coming melt-up, too.

Thanks! I really look forward to hearing from you.

I'll let you know over the weekend what I see ahead. There's probably going to be an opportunity to nicely bump up our risk capital sometime next week. We might increase our stake to a decent 4-figure sum. Most of this we'll risk during the coming meltdown. However, we might be wise to take our initial $500 stake off the table ... for posterity's sake ... and to exercise sound discipline.

At any rate I am happy to share with you the lessons of my experience and hope we all enjoy something profoundly enriching over the next few weeks and beyond...


© 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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