Thursday, April 30, 2009

Product of a Lean, Mean, Broke Down Credit Machine


Here's a quick review and closer look at a bangin' against resistance NASDAQ Composite Index whose component companies apparently don't need a functional, infinitely expanding, wildcat financial system. (All other major indexes with toxic asset-laden component companies still remain over 10% away from their respective 200-day moving averages, whereas COMP is at the door.)


$COMPQ

Judging by the Elliott Wave count labeled above, it looks like there will be just a few days more cheering hope for a new bull market before the fat lady sings. It is no strange coincidence upside volume on NASDAQ peaked during the formation of third waves within each of the Elliott impulse waves (i.e. waves 1, 3 and 5) that have unfolded off March '09 bottom.


$NAAD

The Advance-Decline differential on NASDAQ confirms the lift off March '09 bottom is losing steam.

As usual there is nothing set in stone about this view suggesting a top is at hand. Honestly ... losing steam is one thing ... yet derivative technical measures remaining buoyant (indicating continued underlying strength) is quite another.

This condition concerns me a bit. All the more because a consensus is developing that, there's nothing promising in business made leaner by dramatically contracting economic activity ... such as automatically indicates that better times are near. Therefore, according to this consensus view, reason to drive stock prices higher appears absent.

But what of financial burdens loosed by bankruptcy? Today it was Chrysler. Soon, General Motors likely will join the fray.

What further burden might be shed post- stress test?

And what of all of this is being rigged by masters of today's financial universe?

Time bought (if that's what bankruptcy offers) may not make for a new bull market. But a let's play make believe things will be better soon melt up? Or how about a short squeeze for the ages? We should not discount these possibilities.

Now, I don't think either likelihood is imminent (as in sometime this month). However, my suspicion drifts back to the week Lehman Brothers took a dirt nap. Thoughts entertain the possibility of similar action, upcoming ... but in reverse.


$COMPQ

Keeping with NASDAQ (it doesn't matter which index you look at; they all performed similarly over the period following Lehman's collapse on 9.15.08) ... draw your attention first to completion of the move down from mid-August ending intra-day, September 18, 2008. We're just about there right now (but in reverse).

Next was one wicked reaction to the 50-day moving average. That's what might be due up ... er uh, I mean down ... because we're looking in reverse.

And then came the meltdown. So, in reverse might COMP similarly melt up, following a rapid sinking to its 50-day moving average?

Prior to meltdown, look how RSI behaved ... all the while remaining on the sell-side of its range (i.e. below 50). Might we expect something similar during NASDAQ's prospective reaction to its 50-day moving average (with RSI remaining on the buy-side ... above 50)?

Look, too, how MACD was firmly positioned on the sell-side of its respective range (i.e. below 0) throughout the highlighted period. Alas, it now is firmly positioned on the buy-side of its range.

Oddly enough, this thought would be mere, idle speculation were it not indeed highlighting a view I have been elaborating here for some time now. It's the one that has NASDAQ recovering to the vicinity of 2200.

So, once again I am putting forward a scenario that has the market rapidly recovering in a fashion fitting its extremely volatile setback last year. Just last Friday I was scoffing at the prospect of persisting with this particular perspective. However, consensus doubters have me thinking trading could become quite wild over the next few months. Watch Word on the Street below and judge for yourself...


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Wednesday, April 29, 2009

How to Press a Button in Under 100 Days


There was so much lipstick applied to the GDP and Fed pigs today that even Revlon was up 8%. (Masterful management, Mr. Icahn ... NOT!)

Not that any wide reaching interest was buying it. Rather, there simply was no great interest selling into it. At least not today. However, tomorrow is another day...

Then comes May and "stress test" revelation the original two banks needing to raise capital ... which today was bumped to at least six ... might settle at an even dozen (out of a lowly nineteen financial institutions currently being scrutinized). That's my guess.

So, first piece of advice tonight is, if you can't already hear pigs squealing, better get your ears checked.


$NYA

Once again the volume of shares exchanged on the Big Board tells all. M.I.A. are animal spirits necessary to keep the market levitated. This would be revealed by an expanding bid. Instead we see an interest willing to play chicken. Today this group did not sell. Instead, they held.

You would think by now most everyone would know where needed capital for the banking system will come from, because it's the same place where it came from last year. You're looking at it.

Do not for one second think Washington is on the case either. This from President Obama when asked during tonight's press conference what he found most humbling during his first 100 days in office:
"There are a lot of different power centers. I can't just press a button and suddenly have the bankers do exactly what I want."
This is a man who, before he was inaugurated, indicated during a 60 Minutes interview he was reading "The Defining Moment: FDR's Hundred Days and the Triumph of Hope" by Jonathan Alter.

The President must be a slow reader, because during FDR's first full day in office he declared a bank holiday, an act which gave the administration and Congress time to push the Emergency Banking Act through the legislative chain in only a matter of days. This paved the path for evaluating bank balance sheets, allowing solvent banks to quickly resume business.

About a week after taking office FDR delivered his First Fireside Chat. In it he confided with the American people that...
We have had a bad banking situation. Some of our bankers had shown themselves either incompetent or dishonest in their handling of the people’s funds. They had used the money entrusted to them in speculations and unwise loans. This was, of course, not true in the vast majority of our banks, but it was true in enough of them to shock the people of the United States, for a time, into a sense of insecurity and to put them into a frame of mind where they did not differentiate, but seemed to assume that the acts of a comparative few had tainted them all. And so it became the Government’s job to straighten out this situation and do it as quickly as possible. And that job is being performed.

Sounds like a man who not only knew how to push buttons, but had the courage to do so.

Far be it for me to pass harsh judgment on President Obama. Still there is a matter of patriotic duty one might wisely exercise in light of this contrast...


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Tuesday, April 28, 2009

A Look Around the Gaming Battlefront


The stock market presently appears it could do any number of things ... save one. And that is explode higher in some fashion bringing me to regret my current cash position.

Judging by the subtle contrast in the recent performance of the market's generals versus the broad army of listed companies, the charge forward is stalling.


OEX 5-min

Last Monday's cashing of chips at El Swindle Grande may in fact mark the peak in the S&P 100 Index. Yet despite that day's wounding of large-cap heavyweights whose financial components attract vast sums of money like a casino craps pit, there apparently has been enough excitement built up in the house to keep promise alive at the more numerous blackjack tables...


NYSE 5-min

Funny how decided selling came to the Big Board during the final ten minutes of trading on Friday (4.24.09) just as the NYSE Composite approached the very area where it began last week. Interesting, too, is how selling continued during the opening minutes of this week's trading ... both yesterday and today.

Is this possibly a test of strength of animal spirits? Just how hungry for shares are those who picked Monsieur Market off the mat following last Monday's throttling ... subsequently carrying the NYSE Composite to full recovery by week's end?


$NYA

Judging by volume, yesterday and today, the answer is not very hungry at all. That can't be good.

Oh, and I forgot to mention something yesterday. Following the thud lower starting this week's trading and then the subsequent morning recovery bringing the NYSE Composite nearly even on the day, there still were two stocks declining on the Big Board for every stock advancing. In other words, recovery was affected by a narrow group of stocks. Another strike against animal spirits whose interest must exist for this market to be driven decidedly higher.


NASDAQ 5-min

Ah, but over at the slot machines affectionately known as the Pump and Dump, hope waxes eternal. (Go figure.)

So, then, we see how broad retreat appears an option being resisted. Thus, any move back to respective index 50-day moving averages might be some days off ... say, sometime near May options expiration (5.15.09).

Everything technical ... although weakening ... continues holding up quite well. If nothing else, this would seem to support the likelihood March '09 lows will not soon be tested. Likewise, it might also suggest the worst of any expected weakness over the next few months could pass sooner, rather than later. Subsequently, then, technical strength might build in support of a final charge higher sometime a few months from now.


$COMPQ

This view of NASDAQ has been presented a couple times before. Ever so slowly approaching overhead resistance in the vicinity its 200-day moving average, COMP looks to fall back to its 50-day moving average before turning higher again, and possibly launching upward to 2200 later this year. Again, this probably is the most optimistic prospect we might have to look forward to before the lug nuts completely fall off the global financial system, leaving a bunch of Monetarist Monkeys and other assorted misfits in disgrace.

Here and now, depending how further evidence of impending weakness develops, I am giving some thought to a trade. No rush. It certainly does not appear the market is in any hurry to pull back, so there's no harm in verifying its present levitation is losing steam. This could take a few days.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Monday, April 27, 2009

Keeping It Real


It's possible the stock market's upcoming bout of weakness might not be as bad as I have been fearing. Specifically, March '09 bottom might not be challenged as convincingly and as soon as was suggested in the chart of the NASDAQ Composite Index presented here last week. If so, then get ready for several weeks of directionless, sideways trading.

There's really no compelling reason why this possibility suddenly deserves consideration. Indeed, it was on the radar before a more dour outlook took center stage over the past couple weeks. This is the view putting NASDAQ 2200 in the cross hairs sometime later this year. The move up to this objective would largely unfold following an upcoming period of sideways trading.

Here's the deal. If one is to believe nothing is set in stone, then one better remain open to all reasonable possibilities. A sideways trending market over coming weeks certainly qualifies.

Right now, it is well enough to see an upcoming period of selling pressure is likely. Just where this might lead only time will tell.

Likewise, should the market trade sideways over the next 5-13 weeks, the range in which indexes fall and rise is more or less an open book. It could be fairly narrow. Or it might be so wide as to even challenge the March '09 bottom.

All uncertainty aside I am comfortable for the time being remaining in cash.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Saturday, April 25, 2009

When Investing, Fearing Loss Always Trumps Losing Fear


A quarter century's investment experience says the stock market's rout over the past year-and-a-half might not be finished.

How I wish this were not so. Believe me, I do. I wish perceived risk that recently swept over the world of finance like a dark, ominous cloud were, indeed, irrational. However I fear it is not.

Of course, I do not know with certainty what lies ahead. No one can. Still, I am in position to make a reasonable, educated guess. And my better sense says expect more trouble.

When investing, power to isolate near-term possibilities based on the recent past (as well as all of history) does not lie hidden in mystery. There are objective ways to assess whether moneyed interests in the stock market are likely poising to exploit relatively safe investment opportunity, or whether they are, in fact, fearing greater loss.

And right now I suspect it is the latter.

Don't get me wrong. Since last November my 401(k) investment capital has been positioned in the stock market believing some substantial portion of prior months' losses might be recovered. I thought a low-risk opportunity might develop, even if only this were to bring some respectable, relatively short-term, gain. Now, however, I believe even this prospect might prove premature.

I fear losing here. I wanted to tell you this because when it comes to risk-averse investing, fear is the driving emotion bringing you the best chance at making a bundle over the duration of your lifetime. Avoiding loss like the plague is a virtue because then you might better know when to put aside fear and confidently seize opportunity.

This is a skill that never grows old because risk and opportunity in the stock market simply know no age.

Opportunity typically follows bad times in the stock market ... and yet constantly needs assessing with fear as your arbiter. Right now, it simply appears there could be more trouble ahead. There's little evidence stocks are being accumulated with conviction. Rather, speculation rules. It's a traders' market. Likewise, the trend that's your friend has indexes trading below their respective 200-day moving averages, which themselves continue to fall.


$INDU

Forget about it. I am zeroing my 401(k)'s stock market exposure, and putting the proceeds in a safe money-market alternative.

The market's decline at the start of the New Year was a lot worse than originally thought likely. Still, its subsequent recovery has revealed the essence of what I thought possible when in November I switched 401(k) investment capital to a diversified position in the U.S. stock market. However I am not so optimistic the market's move to the positive will continue much longer.

The recovery opportunity for those whose 401(k)s got clobbered last year has proven less helpful than was hoped. Surely, a more promising moment will again become present. In the meantime one's 401(k) capital is best preserved in a money market fund.

If by chance your 401(k) has been safely positioned out of stocks since last May, then congratulations. You are way ahead of the game because you are avoiding deep losses like the plague.

If, however, you were not so fortunate, then stay tuned. You will find low-risk opportunity to recover your losses. Right now is not one such moment.

* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Friday, April 24, 2009

Crap Pit Boss Lights Fire for a Pig Roast


How much (or, more aptly, how little) further the market might rise from here suddenly this afternoon became of little consequence when appearing on CNBC's Street Signs (hosted by a fair imitation of Bob Dole; hint: the pen-is in her hand ... LIMP! Sorry), the mighty Shemp served notice to all who rightly have their sights on the bottomless pit called the global financial system that, competent macro analysis will always take second seat on CNBC when there are sheep to be sheared...





Who does he think he's kidding? The "stress test" is meant to be all talk and no action? Banks will just go on with business as usual and, not only is this a good thing, it is brilliant policy?

Wait a minute!

Is this the same ranting orangutan whose "people in the business" were drowning in securities that could no longer be traded?





Oh, so now that the hyperinflationary pedal is to the metal all is well? Puhlease!

The only blind eye to be turned is on stability, which, itself, awaits bankruptcy reorganization of the entire global financial system (which, mind you, is not presently on the table).

So, when I heard the pit boss of the low-stakes crap table at El Swindle Grande state his belief that, a wink and a smile from Tiny Tim at Treasury would do the trick and buy much needed time, I feared all the more the fate of the bull turned pig, and saw more clearly just why this pig is slated to be slaughtered.

Besides, an overbought rally whose momentum is turning over is a recipe for disaster in a bear market. This much I alluded to yesterday. So, rather than stick around any longer I closed out my Ultra ETF position (more on this below).


$BPNYA

I will take seriously the present, absolute readings of RSI and MACD on the derivative technical measure called the NYSE Bullish Percent Index. If nothing else, the end of the market's advance from March '09 bottom appears at hand.

Truth is, too, I am growing tired of thinking better might come to the stock market (because so much bad already has passed). This sentiment, principally, has dominated my outlook (one way or another) since the beginning of Risk Averse Alert time. And now recently highlighted, fear-born caution only becomes firmer conviction with Cramer taking to the international airwaves today proclaiming an outlook so shockingly fantastic, you'd practically have to have been in a coma these past two years to believe what he was saying.

How much more evidence do we need the market is in no mood for a "pass?" Indeed, today's circumstance seems well-beyond any issue of mood. The stock market has crumbled out of very need. A highly-leveraged Ponzi scheme (structured finance) is, in fact, collapsing.


$NYA

Well, the first five of ten days starting Monday, April 20th have passed much as anticipated ... starting with a little pressure (or for more dramatic effect "Just Another Day at El Swindle Grande Casino") ... followed by a bid the remainder of the week whose effect had less positive impact on indexes than was the case during the ten days that ended on options expiration day, Friday, April 17th.

Judging by the markup drawn above you see why the market might be strained to rise much further over the next five days. So, might this provide good reason to move to the Ultra Short ETF side of the trade?


NYSE weekly

Since the market's present state might be likened to that which existed late 2001, maybe it is too early to take on an Ultra Short ETF position. Maybe it is better to allow some further confirmation that a top, indeed, is at hand.

Granted, technical conditions suggest the market is likely to experience some measure of selling pressure over the next several weeks. Yet given the power of baboons to whip up animal spirits, why destroy the potential to offload bloated inventories of shares, particularly considering the realistic possibility present levels might be about the best major indexes see for another five years or more? Why not use this moment when the lender of last resort is "all in" to feed belief better days are ahead? After all, government rescue of the financial system could not possibly fail, right?

The late-2001, early-2002 period becomes all the more curious, then.

Yet time and again we see how technical conditions appearing similar to some past moment generally do not result in the exact same outcome. So, given Tuesday's view (presented via the NASDAQ Composite Index) suggesting a retest of March '09 bottom might be in store over coming weeks/months, it seems wise to cut losses on my Ultra ETF position rather than hope for a trade similar to the late-2001, early-2002 period.

Although my loss is less than 10%, a loss still is a loss. The only way to sugarcoat this is reasserting that, when the position was initiated (1.9.09) there was good reason to believe the market would not fall apart in a fashion rivaling the September - October '08 period. Granted, going into March '09 bottom the validity of this view proved debatable. Subsequently, however, it has been confirmed (albeit not precisely in the manner I originally anticipated).

Unfortunately, I put too much faith in an assumption that, November '08 lows would not be taken out. Still, at March '09 bottom, there was plenty of evidence suggesting a strong recovery was likely to unfold, possibly resulting in my Ultra ETF position turning positive. Indeed, had the past few weeks unfolded with upside power comparable to the initial launch off March '09 bottom, then my position might have fully recovered. Instead, the market's recovery this month turned choppy and its technical condition has begun to falter. So, I am out.

As soon as some sustained trend appears imminent (up or down; likely the latter), I will initiate a new ETF position. In the meantime I believe cash is king.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Thursday, April 23, 2009

A Generational Low in Sound Reason Only


Anyone noticing CNBC straining these days to put lipstick on their darling bull turned pig? There is such an overwhelming deluge of bad news it is becoming impossible to paint an optimistic picture that credibly characterizes the current investment climate. Very telling, I believe.

In my humble opinion the network had better soon figure out the status quo sustaining their programming for the past twenty years is as dead as Elvis, because when it comes time for the "save the mother ship" fire sale, they might find themselves competing with Hummer for a low-ball bid. Yes, you heard it here first. The times they are a changing.

Now, don't get me wrong. I certainly recognize this is precisely the sort of climate one typically finds at bottom. However, those who claim we have reached a generational low in the market should by no means be getting any airtime if, in fact, we have. This I am rather sure of.

So the status quo at CNBC lives on. Add this, then, to the bearish bucket I have been filling of late...


$SPX

I is gettin' real concerned, boss, hours is all the time tha's left before top. I might agree with those who are impressed by how the market has been holding up this week, but the manner in which momentum is fading is a growing concern. This shepherd of long ETFs thinks it might be time to get the flock out of here...


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Wednesday, April 22, 2009

Setting Up Sheep for Shearing


Here's a technical read confirming my near-term market outlook. It is seen through the cumulative advance-decline line of all issues traded on both the NYSE and NASDAQ.


$NYAD cumulative

Two things are revealed:
  1. Why the market's counter-trend rally off March '09 bottom probably is nearing its end, and
  2. Why any subsequent decline likely will result in only a retest of March '09 bottom, rather than a market collapse.
Per the first point, consider the NYSE cumulative advance-decline line divergence relative to the NYSE Composite, now versus the start of the year. What we see here reveals NYSE-traded issues are not being bid higher at the same velocity they were being sold lower from early-January through early-March '09.

How do we know NYSE-traded stocks are not being bid higher at the same velocity? Simple. The NYSE Composite is lagging its cumulative advance-decline line.

This dovetails perfectly with the second point. When the market was selling off at the start of the year NYSE-traded issues were not being bid lower at the same velocity as occurred during the September - October '08 period. Whereas the NYSE Composite decidedly registered new bear market lows going into March '09 bottom, the cumulative advance-decline line barely confirmed the move.

But confirm it did. And this is a warning, because at true bottom the cumulative advance-decline line can be expected to diverge from the NYSE Composite ... much as it did at the top in October '07.

Still, the cumulative advance-decline line at March '09 bottom does present something of a first-sign that, a supportive bid is entering the market and taking advantage of a growing number of perceived bargains. Thus, we have evidence any decline following the current counter-trend rally likely will result in a retest of March '09 bottom, rather than an accelerated collapse.

Need more evidence the market is nearing the end of its current counter-trend rally?

Consider how the cumulative advance-decline line at the start of the year was higher than where it stood on Election Day '08 (early November). Once again, though, the NYSE Composite had not been bid up (post-11.21.08 bottom) at the same velocity it was throttled after our taller, tanner Herbert Hoover was swept into office. Once again, too, the NYSE Composite at the start of the year was lower than where it stood on election day. As a result of this divergence the market came undone.

And why do we expect the same outcome this time around?

(Three guesses, and the first two don't count.)

That's right, because the trend is your friend.


$NAAD cumulative

Rather than identify the above chart as the cumulative advance-decline line on the NASDAQ Composite, I am tempted to call this the picture of death warmed over. There's absolutely nothing suggesting selling pressure dominating NASDAQ-traded issues is abating. Thus, intermediate-term, expect the path of least resistance to lead the NASDAQ Composite lower.

Duly note, too, NASDAQ's cumulative advance-decline line presently is diverging from COMP (which, right now, trades higher than where it stood at the start of the year). This likewise suggests the end of the market's current counter-trend rally is near.

Per the cumulative advance-decline line's relatively stronger acceleration higher off March '09 bottom ... this, too, suggests COMP likely will but retest its bear market low, rather than collapse. There apparently is an interested bid under NASDAQ. However, not so much to claim a "new bull market." How do we know this? Simply by the lack of any divergence suggesting the bid could be serious.

Yet here again ... with the relatively strong recovery of NASDAQ's cumulative advance-decline line ... we see evidence that, following a retest of March '09 bottom, the market could move right back up and more or less trade within a sideways range for several months thereafter. During this time expect El Swindle Grande to be working overtime sharpening its shears for a trimming of a herd of sucker sheep who forget that, even in the dead of winter a thaw can appear.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Tuesday, April 21, 2009

Bear Stearns Redux


Continuing with the view that, (a) the market currently is tracing a counter-trend rally off March '09 bottom (rather than embarking on a "new bull market") ... and (b), this advance is nearing its end ... let's take a closer look at what prospectively lies ahead.

For whatever reason the NASDAQ Composite is providing a greater measure of clarity allowing more certain analytical discernment of finite Elliott Wave possibilities...


$COMPQ

As usual, nothing is set in stone. I won't go into the various Elliott Wave-related considerations making this prospective wave count attractive. Suffice it here that everything about the market's underlying technical condition supports the possibility presented above.

In keeping with what conditions continue indicating ... this wave count leaves room for further extension of the market's current counter-trend rally. It's possible, too, the ultimate top might not be reached until sometime well after the May 4th "stress test" fireworks. Judging by what was leaked today a cruel joke is about to be played on the more responsible lenders in the banking community, all for the benefit of the creative geniuses whose structured finance built El Swindle Grande.

Most interesting is what all this might be leading to...


$COMPQ

Consider how the five waves forming the yet completed wave (1) might unfold similarly to the five waves forming wave 1. As you can see, March '09 bottom might be retested sooner than most presently imagine.

Do you remember what happened during the formation of wave v of 1 last March (2008)?

Why yes! It was the Bear Stearns take down.

So, the question naturally becomes whose goose is about to be cooked?

There's no such thing as a sure thing, but come May 4th odds are high some institution with a long and storied history might be sacrificed to the gods of reckless, wildcat, securities-based finance.

Being that El Swindle Grande [obviously] is built on an active volcano, the hope remains that, by throwing good money after bad, a catastrophic eruption might be delayed.

But entirely avoided? Not while President Obama continues regaling us with his best Herbert Hoover imitation.

Add the pending dismantling of the auto industry and one wonders why anyone with his head on straight would anticipate anything other than a pending tectonic shift in the financial/economic geology supporting the stock market.

All technical reasons for heightened concern recently raised here appear to be meeting rude fundamental facts exposing a truly unstable investment landscape. Again, I do not anticipate imminent collapse. Nevertheless, favorable near-term trade opportunities appear to be in store. Foremost, better days for exiting long ETF positions are clearly on the radar...




Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Monday, April 20, 2009

Just Another Day at El Swindle Grande Casino


Contrary to Cramer's belief that, today's pullback is setting up the next leg in a new bull market, I rather believe it paves the way for the final leg in the current bear market bounce. So, in answer to Cramer's presumption that, "all those bears" could not possibly be right...


Investors Intelligence

Well, they were last year ... and the trend is your friend, pal.

What we have here are the fruits of a market quite dominated by investment banks. Our tax dollars put to use in a game of cut throat at El Swindle Grande Casino.

"Winner banks," Shemp? A couple good trades does not make a winner. Particularly when what bets are on the books more dramatically slant toward losing propositions with each passing day. Your darling JP Morgan/Chase and its monstrous derivatives book is only the most glaring case in point.


SPX 5-min

Just like that ... long positions which had become increasingly well-hedged up until last Friday's options expiration (OEX Put open interest, finally, had been closing the gap on Call open interest) ... suddenly were not so well-hedged once April options went off the board (with May now the front month there are 1.5 Call contracts open for every Put contract, meaning long equity position hedges were not rolled forward) ... and so, today, the winning players at El Swindle Grande quickly cashed out.

If ever you needed conclusive evidence confirming my recent, more apprehensive outlook ... markedly wary of further upside prospects ... the dynamic you just read should do the trick. Look at it this way. If the market had a lot more upside remaining, long equity position hedges would have been rolled forward to the May contract and today's straight line down likely would not have developed.

Anyone who knows anything about casinos understands the house always wins. Apparently, however, the ideologically blinded just don't get it...




Ah, Mr. Albertson! This claim there was no need for TARP ... is this how El Swindle Grande earned its name? Or is your testimony meant to placate a nearby herd of wary sheep the house wishes to shear?


$SPX

Duly note the ten day period prior to today likewise began on a sour note. Furthermore, RSI and MACD remain constructively positioned on the buy-side of their respective ranges. Only but first-signs of deteriorating momentum are presented by each. Still to come it appears ... is another belated visit from Santa Claus.

Believe it or not, there really were no disconcerting cracks in any underlying technical measure resulting from today's banking of Q2 '09 earnings at major investment houses and financial holding companies. Yet strictly from the perspective of price action (and the failure of so-called "scared sideline money" to reveal its fear of missing the so-called "new bull market" ... brother, where art thou? ... just a figment in the imagination of the Hallelujah Bernanke crowd?), we might conclude leading up to bank stress-test day (May 4th) ... when Washington is slated to demonstrate all it has learned from Wall Street about winking and smiling ... any subsequent recovery could be even more strained than was the market's advance over the ten day period prior to today.

Just an educated guess anyway...

(p.s. When is Cramer going to rant about the one-day delay in reporting open interest? It is antiquated and reeks of swine. Don't tell me the CBOE hasn't been raking in enough dough to replace their abacuses with that newfangled thing-a-ma-bob called a computer.)




Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Friday, April 17, 2009

Technical Tea Leaves v. Serious Economists


For the record the current trend that's your friend is no fair weather chum...


$NYA

Tell me, what do you see first? The advance off March '09 bottom? Or a diving 200-day moving average?

It better be the latter because this is the trend. Plain as day, too. No need for confusion over noise cheering on recovery. The trend clearly remains down.

This adequately settles, then, the "new bull market" versus "bear market bounce" debate surrounding the advance off March '09 bottom. One only wonders how the Hallelujah Bernanke crowd will defend its position once the trend reasserts itself (which I believe is rather likely, sooner or later, over the next year or so).


$COMPQ

So, how about another ten days like the last ten? If so, there's not much upside remaining.

When does the big stress test day arrive? I think it's Monday, May 4th. Might be a good "sell the news" moment to remember.


$VIX

If you go back to the same chart presented in The Cramer Bull Trap, you see VIX RSI proceeding as expected. There's reason to believe this derivative measure (RSI) of a derivative (VIX) might register its most overbought reading in a year before volatility picks up again. Beyond this, though, there is every reason to be on the lookout for trouble ahead.


$CPC

Derivative measures on the CBOE Put/Call Ratio still remain similarly positioned to recent periods when the market was advancing. Thus, further gains appear in store. Again, though, judging by relatively low Put/Call Ratio readings of late, an inflection point — a reversal of fortunes — could be nearing.


$NYHL

Just how close the market might be to turning over is revealed by another derivative measure (MACD) of a derivative (the NYSE High-Low Differential). Might another two weeks an upwardly biased market be a stretch? Yes, maybe.

Whatever the case my eyes are wide open. Which is more than one can say about so-called "serious economists" Barton Biggs sites...




Yes sir, it still is all about greed and fear.

(Always was. Always will be.)


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!