Get Your Red Hot Stocks! (All Three of Them) ~ The Risk Averse Alert

Thursday, June 11, 2009

Get Your Red Hot Stocks! (All Three of Them)

Awfully meager participation today. This is particularly noteworthy given the fact indexes were not negative for even one second...


Such is the stuff behind much bull market banter. Better get used to it, too, because another month or so more or less going nowhere might bring a heaping helping of sentiment waxing nostalgic for days of old ... increasing the Siren's song despite growing underlying weakness.

Truth is today's hope-filled sentiment must be eviscerated from the investment universe before a new bull market is likely. The consensus outlook should see little hope for economic recovery. Only then might investor confidence be well-advised.

In the meantime erring to the side of healthy skepticism should prove both prudent and profitable.


The present relative strength and momentum divergence — duly noted over recent weeks — persists. This, of course, demonstrates growing underlying weakness in the market's advance since March bottom.

Not yet considered, however, is relative strength confirmation as the NYSE Composite has marked higher lows over the course of its advance. This you see via the green line drawn in the RSI panel. The Elliott Wave count off March bottom gains further substantiation by this ... as does the case anticipating more bull market banter.

Near-term, a trip back down to the present vicinity of the 50-day moving average still remains in store. Just how (and when) we get there is somewhat a mystery, though.

NYSE 5-min

The June 1st melt-up (precipitated with considerable help from the futures market) ... and corresponding buy-side RSI extreme ... resulted in the sort of subsequent performance one would expect. Seen in combination with narrowing participation (advance-decline) ... shrinking volume ... diminishing momentum and relative strength ... there's little prospect of any runaway advance developing from here.

However, continued buoyancy? Well, considering the trend is your friend, you cannot discount this possibility. Expect any further strength, though, to be rather rapidly sold, much as likewise has become something of a trend of late.

Would I be surprised if the anticipated return to the 50-day moving average is delayed until after next week's option's expiration?

Not with "new bull market" banter moving into overdrive and indexes trading near what might prove their best levels over the next several years. This is not a matter of simply maintaining positive perceptions for their own sake. Rather it is about cultivating an environment conducive to distributing shares from strong hands to weak...

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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