Was the Market Collapse Detonator Ignited Today? ~ The Risk Averse Alert

Monday, August 17, 2009

Was the Market Collapse Detonator Ignited Today?

Has the market topped or not? I am, in fact, inclined to think the latter. And yet...


Quite the gap lower today in the trend leader. And look at that volume! No fear? That's interesting. What was that you say, Chip Diller? Thank you, sir, what?

Hmmm. The decided trend lower in momentum (MACD) appears to have a lot of downside room remaining. So, it certainly looks like Chip could get what he's asking for.


Q: What do NASDAQ and my garden's tomato plants have in common?

A: Both are burgeoning with fruit ripe for harvest.

NASDAQ McClellan

Oh, the underlying weakness hinted by McClellan Oscillator and Summation Index divergences!

Yet before the fruit falls from the vine an Oscillator bounce from current, decidedly sell-side momentum to a more balanced position probably is in order here. After all, money manager lemmings have been, in fact, diligently hedging long equity positions with Put options over the past two weeks as the market traded sideways. So, with one week until August expiration the question is whether there are players willing to press their bets, rolling forward position insurance to September?

And if two weeks insured proved fruitless (which today's trade did), then what's another week when a fool and his money has a hankering for chasing dead equity in a dream that sees de-leveraging as being good for stocks?

Revisiting an old post

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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