The Risk Averse Alert

So, when 250 becomes 1250, is that a four-bagger or five? That's what my July OEX 570 PUT bringed.

So, I'll bank my original 500 ... move 750 into the on-deck circle ... and set me sights on some of them 550, 560s ... still long the PUT side. Yeah, with just four days. Do you think I have what it takes to be careful?

About those ten virgin July OEX 520s ... they're on the house!

I don't have to be drunk to enjoy how pretty they are sitting. They're beautiful! Are you kidding me? They're just all over the financial news.

Come ladies. Deliver.




Today was just a bad day for Monsieur Market. I woke up at 7:30 and pre-open futures were jacked to the sky ... probably 50% (or more) better positive than where they stood well after Europe opened. I was up late.

Anyway I saw that and my reaction immediately thought, "Perfect." And I mean that in the most confident sense. I had no doubt. Well, I had some. I mean nothing is set in stone. But chances were this news-less blast of sunshine on the futures was likely to produce red skies in the morning. So, this sailors took warning and went back to bed.

True story.

Sure enough, too, soon after the sun rose, the sell orders began reigning.

Like Monday, January 14, 2008, it was more or less an "inside day." (The S&P 100 more or less traded inside its range of the previous day.)

So, carrying Tuesday, January 15, 2008 forward, tomorrow could see a falling out. However, what if this time the market recovered most of its loss (rather than close on its lows for the day)? This could set up fine for a very bad Wednesday.

There's a possibility today's blatantly weak performance could be leading the way. Ya think?

Hey, check out the NASDAQ McClellan Oscillator. Actually, first just look at the NASDAQ Composite.




It was on the verge of setting a new, post-summer '07 low going into January '08 options expiration week ... just like now.

Okay, now look at the Oscillator. First, it is still negative and trending down ... just like last November '07 and January '08. Furthermore, it is turning lower in the very area where it stood when things went south last November '07 and January '08.

Oh yeah, McGruff the Crime Dog is all over Monsieur Market.




Au revoir.


[12:30 p.m.]
Here's a closer view of what I suspect might still unfold over the hours ahead before things come unglued going into Friday's (7.18.08) expiration. Although this is not necessarily intended to express any hard-and-fast view toward either price form or the time frame over which this might unfold, I just wanted to give you some idea of what might be reasonably expected here ... if only to placate any discouragement you might feel about things not coming unhinged as rapidly as you might otherwise hope.

(See 11:00 a.m. update for a view of the larger picture since the 5.19.08 peak.)





[11:00 a.m.]
For those interested in my S&P 100 Elliott Wave count, here is an alternate view of what has unfolded since the 5.19.08 peak. This supports my present suspicion things are about to turn quite volatile going into Friday's (7.18.08) expiration, and then probably extending into next week.




Upon bottom being reached (i.e. wave B), I am anticipating a spectacular melt-up to get under way (i.e. wave C). This projected move higher should carry the S&P 100 well above highs it reached in 2007. This currently unfolding A-B-C began in October 2002.

For a detailed view of wave B (unfolding since last summer) see "Care for My Mind Numbing S&P 100 Elliott Wave Count" published on June 7, 2008.


© 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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