The Risk Averse Alert

Does anyone know if the profit margins on "Depend" undergarments are wider than "Scott" toilet tissue? Both are made by Kimberly-Clark (NYSE: KMB). I'm just curious because these are non-discretionary, personal hygiene products ... and being most everyone with an interest in the stock market is pooping their pants, I figure this stock might be a screaming buy!

So much for my fun-da-mental analysis...

Today's Fast Money was a stock market fright fest, start to finish. Reaching deep inside my analytical bag of tricks, I find this version of Mary Mary Quite Contrary producing similar images of carnage taunting Fast Money traders and recognize the irony. Much like the nursery rhyme, despite yesterday's victims being buried, fearsome memories sometimes shrink the fact life goes on. As such, then, we find hindsight sometimes is the curse of the living...

According to Dennis Gartman, speaking on the subject of today's trading, "This is a bear market and this is how bear markets act."

Yet he failed to mention that, within a bear market stocks sometimes rally 20-50% or more. I believe this is nearly where we are at.




You see volume diminishing with each successive trip to the vicinity of today's close (all occurring during decidedly down days over the past couple weeks). Although on one hand this suggests selling exhaustion, on the other it demonstrates how the ongoing crisis of confidence continues. The failure of a sustainable bid materializing is resulting in continued downward pressure despite the fact selling is diminishing.

Positive RSI divergences are encouraging, yes ... yet RSI's downward trend remains intact. Likewise, MACD has yet to display anything strongly suggesting a decided reversal higher is imminent. On both counts, though, one day's strong advance could change all that.




You see today's selling had the effect of dragging 5-minute RSI lower than what registered last Thursday (10.16.08) when the S&P 100 declined to what then was thought possibly bottom. This negative price-RSI divergence heightens my more recently expressed doubt toward last week, in fact, being "bottom."

Still, 5-minute RSI today reached sell-side levels typically coinciding with reversals higher. So, assuming the market is in the midst of a bottoming process, it is just as well I conclude today's comments just like yesterday's.

I still tend to think a slow, painful bleed might be in order — something to break the will of the "bottom is in" faithful. Today certainly went some way toward this end. Thus, soon we might more confidently develop a bullish stance metaphorically based on the London Bridge is Falling Down nursery rhyme...




© 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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