Systemic Risk Is Anything BUT Off The Table ~ The Risk Averse Alert

Thursday, June 18, 2009

Systemic Risk Is Anything BUT Off The Table

One more day remains for June options contract writers to protect their fee-based revenue stream liabilities, then it might be about time for a good old fashioned throttling.

Now, whether this possibility is more or less likely is difficult to say. Not many observers are expecting anything other than "correction" of gains made since March bottom. Yet growing underlying technical weakness might be setting the stage for selling that's a good bit steeper than most everyone, it seems, presently fears.

NYSE 5-min

Any further bounce off Wednesday's bottom should be fairly limited. Still, another couple percent of upside is possible, so be careful not to let the deep sea of monetarist monkeys sell you their rotten bananas, claiming "systemic risk is off the table." It's just one earthquake away. Ask anyone from California.

Likewise, prospects for financial tribute courtesy of health care "reform" are taking a turn for the worse. Don't let financial media gloating over this on account of the "unacceptable cost" cloud your thinking. CNBC did not broadcast President Obama's hour-long speech before the American Medical Association on Monday without commercial interruption because Wall Street hopes the "reform" effort will fail. Quite the contrary. That the Senate Finance Committee can't even get a bill marked up is a setback to capital-starved financial interests. And soon enough, the hunger of those firms still leveraged to the teeth is likely to turn voracious. So, guess what will be served for dinner? That's right, leftovers from the same French dish as last year: Monsieur Market.

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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