An Exciting Top Sighting! ~ The Risk Averse Alert

Tuesday, October 20, 2009

An Exciting Top Sighting!

Because reaching the stock market's anticipated top in its advance off March '09 bottom has been somewhat prolonged (yet entirely accounted for all along the way) it has been natural to suspect this course extending time levitating might continue in a way that stretches to the max the Elliott Wave form presently unfolding. The thinking has been a rising wedge might be forming — either off early-July's bottom or off early-September's.

Indeed, this might still be the case. However, there is a simpler view of developments since early-July suggesting top could be but hours away (if not already registered)...


Key to this view remaining viable is wave v of 5 not exceeding the length of wave iii of 5. As you can see it is getting close. By rule (put forward in the Elliott Wave Principle) a third wave is never the shortest "impulse wave" in a 5-wave Elliott Wave sequence.

Confirming the prospective view presented above is the fact that, in forming wave 5 of C [of (B)] wave iv of 5 displayed typical RSI and MACD deterioration relative to wave ii of 5.

Well, far be it for me to pound the table on calling top ... but truth be told I am rather excited by the imminent prospect this view presents.

Funny thing is I had mentioned back in August how the historically difficult months of September and October might find the stock market holding up, and in so doing out of the woodwork would crawl those claiming, because the worst historical period in the stock market had passed, the trend was destined to lead up, up and away. It is in this vein Fast Money's Joe Teranova recently has been beating the "money managers chasing performance" rationale, suggesting the market is likely to finish out the year on a positive note.

I am not the least bit persuaded. Much as was suspected a couple months ago, the market has survived its most difficult historical period only all the more technically weakened and primed for a thud.

Rick Bonsignor, Chief Market Technician at Execution LLC, appearing today on Bloomberg TV offers anecdotal evidence that, money managers flush with cash is a myth. And Stephanie Pomboy, Founder and President of MacroMavens, offers a cogent historical contrast in economic performance strongly suggesting there is an unprecedented, fundamental disconnect behind the stock market's drive higher.

Truth is, though, neither of these two offer any more evidence than is plainly revealed by the technical tea leaves. Thus, suddenly, the suspicious performance of both the NYSE and NASDAQ McClellan Oscillators during this month's advance is viewed alarming.

Certainty to claim top has arrived, indeed, is growing. In fact, top may have been registered but hours ago. If not, then there might be only a few short hours remaining before the precipice finally is reached...

Fast Money
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