Too Much Rigor for a Bullish Monetarist Monkey ~ The Risk Averse Alert

Tuesday, June 02, 2009

Too Much Rigor for a Bullish Monetarist Monkey

Bull Run (more affectionately known as "Shemp" in these parts) tonight implored his flock they use "rigor" in their analysis. Well, here, rigor will be found in the observation that, indisputable indications are this is a bear market, and anyone calling it otherwise might be better seen as the very soul of coming capitulation.

Oh, I know nothing is set in stone. However the trend is your friend, and mine is 200 days old and sinking like Titanic. No, Molly, you don't see that every day...

OEX 5-min

There's a June OEX 400 Put expecting failure of yesterday's breakout any moment now...

Do you suppose a few money managers [finally] sitting on a positive quarter might create an avalanche of profit taking should failure occur?

Me too.


Well, there's a picture saying odds are fail yesterday's breakout will.

The volume trend since March '09 bottom remains bearish. You see, the market climbs a wall of worry. The wall is revealed by increasing volume. Let's face it. Worried people sell. And when they do, this adds to volume. If stock prices continue rising in a climate such as this, it is very bullish.

Precisely the opposite is what we are seeing right now. This is just like the market's counter-trend rally March - May 2008 ... and we all know how that ended.

As indexes have risen off March '09 bottom stock owners increasingly are holding onto their shares, rather than offering them up for sale. Their mistake (or so it appears anyway). Relative strength and momentum are fading, suggesting the market's path of least resistance points lower.

Of course, there's more suggesting trouble ahead...


Would I really be "risk averse alert" ignoring the present similarity to times past when the NYSE Bullish Percent Index was peaking and losing relative strength and momentum?

In my best Russian... Nyet.


Same message, market-wide.

In my humble opinion it would be a miracle if yesterday's breakout is extended. However, despite considerable doubt in the likelihood, one still must respect the possibility (and stop loss).

If as expected, though, yesterday's breakout fails, I will add to my UltraShort ETF position. The near-term case for a sharp turn lower remains strong...

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.

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