Buy in June, After the Swoon? ~ The Risk Averse Alert

Wednesday, May 27, 2009

Buy in June, After the Swoon?

Continuing the theme of this week's well-scripted action (it's a treat when this happens)...

OEX 5-min

If similarity of the whole to the first part continues (i.e. "like from like"), it's possible correction of the S&P 100's initial decline (5.20 - 5.21) completed today ... and the greater bulk of selling I have been anticipating is imminent.

In fact, this view suggests the S&P 100, right now, trades well north of the mid-point of what is projected to be its larger, 5-wave decline from May 20th. If these larger five waves unfold similarly to the initial five waves down (5.20 - 5.21), then the next couple days could get quite interesting.

The red center line drawn through the S&P 100's first wave down (5.20 - 5.21) simply is curious. It's the Helix gone OEX. Its formation was determined by the initial move lower and subsequent reaction on 5.20. The entire 5.20 - 5.21 decline more or less rotated around it.

So, I propose a new center line might find the OEX rotating around it all the way down to a prospective target in the 360 - 370 range. This new center line's formation was determined much like the first: from the initial decline (5.20 - 5.21) and subsequent reaction (through today). See the similarity? Curious.

As you can see, the prospective mid-point of this new center line is just south of OEX 400. Oddly enough, the S&P 100's 50-day moving average happens to be in the same neighborhood.


So, hey, the next couple days just might validate "Sell in May and go away" ... then lead straight to "Buy in June, after the swoon."

Everything technically supports the possibility of a sudden snap here. One thing upon another has been falling into place (and remaining there). The shape of things supports a view that, the stock market could be one tremor away from an avalanche.

Mr. June OEX 400 Put sees its reasonable possibility ... recognizing, of course, nothing is set in stone ... and believing there is time to react should something different develop.

In the quest for scripted action, however, what else is there to say? So far, so good...

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!