Like Déjà Vu All Over Again ~ The Risk Averse Alert

Thursday, December 11, 2008

Like Déjà Vu All Over Again

NEW RULE: Men wearing pink shirts have no business squealing, "The stock market is broken!"

How can Cramer say that? The stock market practically is the only thing left still functioning normally ... even if one were to argue its collapse has been rigged as a consequence of the uptick rule's repeal. (Just for grins listen which firms oppose the uptick rule's reinstatement. Do all have huge MBS holes to fill?)

Well, the stock market might not be selling off tomorrow morning on account of half a million jobs lost. But somewhere north of two million jobs threatened by failure of a so-called auto industry bailout bill passing the U.S. Senate? Just what the doctor ordered to turn the clock back exactly one week...

OEX 5-min

Look for a price-RSI divergence tomorrow morning ... much like last Friday's ... then bang, away we go ... on a desperate short squeeze.

Today's sell-side RSI extreme registered in the large-cap S&P 100 index was not quite as deep as that registered in broader market indexes, thereby indicating Nervous Nelly selling drove trading lower and is just about washed out...

NYSE 5-min

Today's ever so slight peak into new, post-11.21.08 high ground in the NYSE Composite virtually assures still higher highs near-term ... long before any perceived threat a retest of lows set on November 21st might soon unfold (itself a low probability, particularly prior to year end).

This conclusion strictly originates from Elliott Wave-related considerations ... and is made all the more likely by positive underlying technical conditions suggesting the path of least resistance, near-term, is higher.

NASDAQ 5-min

Apparently, boiler rooms all across America are hardwired to the same panic button used to fleece traders on "the stock exchange for the next 100 years" (a mantra that has since joined the "1000 year Reich"). Whenever RSI reaches such a deep sell-side extreme ... a bottom is somewhere near at hand. We see it again, and again, and again.

So, about that auto industry bridge loan...

It does not matter what the Senate does. With general agreement the failure of Lehman Brothers precipitated the full brunt of the current crisis ... with a President-elect whose agenda might be more unpredictable than many a fascist financier would care to admit, were a renewed outbreak of unmitigated chaos soon to develop ... Wall Street has but one choice at this point.

Either Bush will yield on the TARP or some other financial arrangement will be made to forestall bankruptcy in the auto industry.

There's no such thing as a "sure thing." However, this one is darn close.

Let me ask you this...

Why do you think the market has remained relatively buoyant over the past couple weeks while auto industry executives were groveling before Congress, admitting their pending ruin?

Why didn't it do the same late-September when Paulson was in the midst of pulling his gigantic swindle, claiming pending financial system insolvency, which message was backed by an orchestrated run?

Why no run this time around? Are you trying to tell me the bankruptcy of the auto industry would not have devastating consequences to the financial system?


This is all part of the game of financial chicken I have written about before. You can bet your bottom dollar Chaos, Part II, will be delayed at all costs. Ready for a melt-up?

This bullish story has grown tiresome.

Do you see my Monetarist Monkey?

Love my monkey! Touch it ... pet it!

Now it is time in the post when we dance...

Fast Money
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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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