Bear Turd ~ The Risk Averse Alert

Friday, July 17, 2009

Bear Turd

Looks like I was right. The other day it finally hit me. OEX options open interest tells the story. Sell calls, jam futures higher, then unload bloated inventory to call buyers who exercise their option.

This is exactly what we've seen during expiration week since March '09 bottom. It is precisely what we have seen this week, with OEX call open interest collapsing, while put open interest continues a modest increase. Only now, with expiration looming, does put open interest finally exceed call open interest, and this for the first time in the life of the July contract. Strong hands, plainly, are selling their positions to players who wouldn't know a bear market from bear turd.

So, what next?

SPX 5-min

Wednesday's extreme buy-side RSI reading offers good reason to believe a top is at hand.

However, the boxes you see drawn above each contain a 5-wave Elliott impulse wave. Only the green box contains a complete, 5-wave sequence. So, before top is in there probably will be a bit more delusional fantasy about "recovery" coming from the up and coming crop of future McDonalds managers who by the dozen, today, enjoy a brief moment of fame on CNBC...

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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