The Risk Averse Alert

Well, what do you know. The July OEX contract goes off the board and once again call open interest dwarfs put open interest.

So, the question is whether there's still time to [ever more slowly (see volume)] offload more bloated, overpriced equity inventory ... or do the likes of CIT expose how huge is the hole left by the implosion of structured finance?

In other words, is it about time for capital to be raised by those who have become trapped?

Shemp says put your blinders on and buy, buy, buy! Lest we forget, though, Cramer was singing "Happy Days are Here Again" right around this time last year, too. One wonders how many were mercilessly trimmed before "rigor" finally in September '08 found reason to sell?




As far as I am concerned the volume behind the market's most recent advance ... in conjunction with a typical RSI pattern coincident with a 5-wave advance ... along with momentum that's still fading (MACD) ... spells trouble.

The channel whose upper parallel connects to wave 1 is curious. Considering the NYSE Composite presently is bumping up against a line that first acted as resistance, then became support, and then resistance once again ... this when some measures presently shout "overbought" (McClellan 5% and 10% indexes) while others read "bearish divergence" (McClellan Oscillator and Summation Index) ... one wonders whether a 5th wave failure is in order here.

Indeed, such an outcome would be fitting the manner in which "denial" has been in evidence on the NYSE (detailed last Thursday in "Proof of Pending Doom"), because we see much the same once again coincident with NYA's recent advance...




Good lord. The breadth of participation continues to badly outpace the Composite's performance. Thus, denial apparently remains in full bloom.

Of course, this conclusion is by no means assured. However there's a brick wall that's simultaneously being hit over at the Pump and Dump...




It's probably a safe bet that NASDAQ's relative strength rocket ride on similarly subdued volume will meet its match as some among the legions of sleepy dreamers who got caught with their pants down last October cash out somewhere in the ballpark of even, which is where a handful of tech issues have recovered to.

And it is just a handful. You will be wise to recall NASDAQ's markedly muted participation since March bottom. Nothing changed over the course of this past week. In fact, underlying weakness is only all the more glaring...




Do keep these facts in mind as you hear misguided claims that, tech is leading the market higher. The truth is quite the contrary! Tech continues leading the market lower. It is only a matter of time.




© 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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