Big Gamble, Different Boat, Same Jack Dawson ~ The Risk Averse Alert

Monday, May 18, 2009

Big Gamble, Different Boat, Same Jack Dawson

Could today's three-and-a-half percent surge on muted volume amidst weakening technical conditions possibly have surprised the man who on Friday said:
"...a bounce lasting a few days more might be in store before the greater bulk of selling gets under way?"

If so, it must have been pleasantly ... because late this afternoon I opened an UltraShort ETF position (DXD, SDS, QID, TWM, MZZ).


Assuming a high-volume transition marking top (5.8.09) ... now but beginning is an opening leg of a turn lower whose end over months ahead could result in a broad, stock market capitulation.

I might suggest today's turn up simply demonstrates how to turn off the selling spigot and cater to those Jack Dawson's who fear missing some boat. Surely there must be plenty of this kind around. Indeed, voices seemingly suggesting "credit crisis solved" have been gaining ground on network TV recently.

However technically more relevant to confirming an Elliott Wave-based assumption top is in...


... today's improved NYSE internal action in the present context should be seen as typical prior to a strong turn down in the stock market. Coinciding with the formation of a second wave of five waves down, it's not surprising that more stocks would advance today than at the May 8, 2009 top. Standard Elliott Wave stuff.

OEX 5-min

Five waves down (ending last Wednesday, 5.13.09) ... and three waves up (just about done it appears) ... that's what I see.

I might suggest it is entirely possible much of this week's trading could unfold in a sideways range. So, beyond there presently not being much upside remaining ... any subsequent decline might bounce off last Friday's low.

Yet I would also suggest that, given today's positive start to the week, if this coming Friday (5.22.09) indexes close below their respective lows last Friday (5.15.09), look out below.

No matter, straight ahead should at least begin a turn back down. An OEX 400 Put is in the cross hairs...

Fast Money
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