Better a Mild Nuisance Than a Marinated CEO ~ The Risk Averse Alert

Thursday, February 12, 2009

Better a Mild Nuisance Than a Marinated CEO

Admit it. Today, when the market was getting pounded, you were thinking, "Some 'mild nuisance, Tom!'" Well, if it happens again, just remember the outcome.

Why do you think I mention this? Because happen again it could. And I say this despite believing the move to new highs, post-November '08 bottom, likely has begun.

In other words, I am not discounting the possibility some significant portion of gains made from today's low could be given back over the next couple days. As much as I would rather not have to endure the pressure of confirming my continued bullish outlook, I might just have to. Better this, though, than being a Wall Street CEO getting grilled before the Congress!

NYSE 5-min

Two things I conclude from today's strong RSI move to the buy-side (above 50). First, it reveals the market's advance during the last hour of trading likely is not related to its decline from Monday's peak (2.9.09). Thus, that [5-wave] decline is over. Likewise, the absolute level to which RSI rose suggests today's reversal was not merely a pause in a larger decline to come. Rather, it says the market's anticipated move higher likely has begun.

Now, typically, strong, one-sided RSI movement indicates a measure of imbalance that's often exploited by the other side of the trade. We saw this following today's sharp decline at the open (after having seen the same thing many times over the past month). And we just might see it again (in reverse) over the next day or two, as well.

But then again...

Third waves typically are the most dynamic Elliott waves. So, supposing an a-b-c wave up from January 23rd is unfolding ... and waves a and b have completed ... then if today began wave c (a third wave in a corrective Elliott Wave form) ... the strong RSI surge is rather fitting the typical character of the wave higher I am expecting.

Fast Money
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