No Telling Whether This Time is Different ~ The Risk Averse Alert

Monday, October 26, 2009

No Telling Whether This Time is Different

One easily could come up with reasons why top might not be in. Viewing a number of underlying technical measures one sees their present position being quite similar to recent instances when major stock indexes were bottoming prior to bouncing still higher.

So, could this time be different?


Relatively speaking, October's bounce not only continued the trend of growing, underlying technical weakness. The entire advance lacked any technically noteworthy follow-through to the short squeeze that began it. You see this in the performance of the McClellan Oscillator...

NYSE McClellan

Apparently (and volume confirms this) the crop of suckers willing to bid dead equity higher is thinner than Ghandi. Yet this also was true late-August when the NYSE Composite rallied to new highs, post-March '09 bottom. So, can ongoing restraint in exercising risk averse prudence as would otherwise lead to increased selling continue?

Time will tell.

SPX 5-min

Today's collapse brought the S&P 500 to the lower end of the range recently targeted as a likely objective for the Elliott corrective wave that began Thursday, October 15, 2009 (i.e. the range of "the fourth wave of one lesser degree"). However I question whether my Elliott wave count since October 5th remains valid. Rather than expecting one final move higher, five waves up from October 5th instead might be in place.

If this is correct, then the stock market's counter-trend rally off March '09 bottom has ended and the anticipated turn for the worst has begun (assuming my Elliott wave count is correct).

Yet since other possibilities still are alive — possibilities which might take major indexes not much higher — I will refrain from definitively claiming top is in.

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.

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