As Fine a Day as Any for a Top ~ The Risk Averse Alert

Thursday, September 17, 2009

As Fine a Day as Any for a Top

A thought adding to yesterday's NEoWave discussion...

It is entirely within the realm of possibility that over the next 6-9 months (or even longer) major indexes could trade within respective ranges established thus far this year. As such, then, the spirit of Glenn Neely's outlook might appear coming to fruition. Yet, no matter, collapse at some point following in all probability will continue being a threat.

This view, of course, is Elliott Wave-based and assumes the accelerating breakdown of the global physical economy will proceed more or less unchecked. Still, just how this breakdown progresses and leads to the point of precipitating a financial panic is impossible to say. So, just how prospective, upcoming, range-bound trading might be labeled using the framework set forth in the Elliott Wave Principle is uncertain, and may not be reasonably known until well after March '09 low has been violated.


Confirmation of spectacular collapse pending awaits some similar form of momentum deterioration such as was evidenced last year, July versus January (see MACD). Again, this development could happen before the end of the year.

Per the prerequisite need for a top to the current counter-trend rally, nothing in my collection of technical mumbo jumbo suggests top could not possibly be at hand. Quite the contrary. Yet how many months already has this been true?(!) Still, nothing is challenging the viability of a technically-based conclusion suggesting a turn for the worst might be imminent. Nothing.

Fast Money
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Anonymous said...

Perhaps "Things I Believe" (along the left hand side of your blog) is tongue and cheek, but rule #7 says: "the trend is your friend". If this is in fact the case, why the persistent and almost manic desire to call a top? I understand this is the Risk Averse Alert, and not the "trend following alert" but why p*ss into the wind hoping that the market crashes?

To Whit:
8/10 - First Signs of a technical breakdown
8/12 - Awaiting Technical Weakness
8/18 - Was the Market Collapse Detonator Ignited Today
8/22 - Stock Market Top Appears Nigh
9/3 - Vixing a Top
9/4 - Channeling More Bearish Evidence
9/5 - Better Debbie Downer than hope-filled Lemming

And it goes on and on... (both before and after those posts i listed). No one wants to be a lemming, to be sure, but why the persistent desire to fight the trend. After all, in investing, being early is the same thing as being wrong.

TC said...

Point well taken. However the trend that's your friend presently is the one that began October 2007. Now is the time when everyone with an interest in enduring to the end, wishing to be saved, is looking forward to the day when they are like the characters played by Eddie Murphy and Dan Akyroyd in the movie "Trading Places," when after the blizzard of sell orders following a bearish FCOJ report, they stood flush with cash and in no great hurry to pick up the pieces.

The way I see it, the biggest bull trap in history presently could be building. One fine sunny day we might awaken to news that instantly drives the bid 20% lower. And even if that day does not imminently come, the same effect (down 20% and then some), soon enough is so likely to develop why should I worry? So what if, rather than some unexpected shock, a tiny segment of the hedge fund community presently loaded with financials decides to begin trimming its exposure, and in the process draws in others to do the same? Who but they has been willing to own these things anyway? (Which is another way of saying that, once they start trimming, there's a threat of an avalanche.)

The point is that we are in a bear market and it threatens to be much, much bigger than most presently imagine. Besides, I am not trying to call a top. Rather, I am going through the exercise of confirming a very negative forecast. And as I have been documenting, this is being done without any challenge. All praises the Elliott Wave Principle and technical analysis...