The Calm After the Storm ~ The Risk Averse Alert

Wednesday, January 14, 2009

The Calm After the Storm

Let's contrast recent trading on the two major U.S. stock exchanges...


Again, we have seen precisely what I thought possible when I published, "Ready for a Pre-Melt-Up Mini-Meltdown?"

Pay particular attention to where the NYSE Composite presently is trading in relation to its fluctuations over the past couple months. Contrast this to the NASDAQ Composite...


You see the NASDAQ Composite holding up relatively better. Its leadership ... reversing last year's swoon, forming a base ... evidently is being established. Speculative animal spirits ... willing to believe a trade-able bottom is in place ... appear intact.

Now, could NASDAQ leadership evaporate, much like happened in September '08? Of course. This possibility notwithstanding, though, reality this moment is NASDAQ's leadership appears present.

To be sure, this view of things gains meaning only within the context of Elliott Wave possibilities. These I establish assessing various underlying technical measures.

The case for a pending melt-up has been seen as both reasonable and credible, in and of itself, from an Elliott Wave perspective. Furthermore, this outlook has been well-supported by markedly improving underlying technical conditions. Even now, positive technical evidence remains.

When I laid out the possibility of a mini-meltdown preceding a market melt-up, the suggested manner in which this might unfold was no "lucky guess." Rather, it was my "best guess" originating in knowledge of reasonable possibilities established by the Elliott Wave Principle.

The question here is simple. Have underlying technical conditions confirmed characteristics specific to the Elliott Wave form I projected possible on January 2nd?

Quite simply, they have to a tee. That's why I can't get excited about today's decline ... following that of the last several days.

Thus, too, I have confidence to ask: when you have a dollar's worth of change in your pocket and somehow lose a nickel, do you generally get excited?

Well, now you know how I feel about my long ETF positions...

NYSE 5-min
NASDAQ 5-min

I'm not sure the market's decline of the past several days has completed. The issue of RSI improving upon last Thursday's reading remains on the radar. This would provide evidence increasing buying interest — enticed by falling prices — is becoming present.

Bear in mind, this particular technical circumstance is not prerequisite for confirming bottom. However, RSI typically provides the sign buying interest is increasing, so its improving condition is something one should look for.

If bottom is not yet in (and I suspect it is not), I am confident that, both in terms of further price declines and elapsed time remaining, bottom is quite near, indeed.

Need fundamental reassurance? Get it here.

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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