Keeping It Real ~ The Risk Averse Alert

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
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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.

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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