Why No Blowup is Needed for Market to Reverse Course ~ The Risk Averse Alert

Wednesday, November 18, 2009

Why No Blowup is Needed for Market to Reverse Course

34 Therefore do not worry about tomorrow, for tomorrow will worry about its own things. Sufficient for the day is its own trouble.
Matthew 6:34

Probably one of the biggest quandaries in the eyes of any bear is grasping what impetus might reverse the stock market's present counter-trend rally and drive equity prices lower. The prevailing sense it seems simply assumes something must blow up.

Now, even though any number of shocks could rock the financial world virtually overnight — lord knows vulnerabilities abound in ill-positioned leverage still light years from being unwound — by no means is an earth shattering event necessary to kick off the stock market's next leg lower. In fact, odds of an imminent blowup probably are as slight as ever. You read that right, and despite it running contrary to what I have been suggesting here lately, all the evidence indicating trouble lies ahead for the stock market still remains very much intact and extraordinarily relevant.

You need but ably consider the following Wall Street adage...
"Prices can fall of their own weight, but it takes buying to put them up."

Everything presented you here for many months now has gone toward quantifying this buying putting stocks up. And the inescapable conclusion reached — confirmed to this very day — is that stocks have been, and continue to be, distributed from strong hands to weak.

Obviously "it takes buying to put [stocks] up." You might think this goes without saying! Yet this point of fact is stated for a reason. Indeed, I have given you simple means to objectively analyze the very substance of this buying. Thus, you are only all too well aware of the incredible weight the stock market is under these days.

If you need more convincing, look long and hard at the extraordinary volume of shares exchanged going into March '09 bottom, as well as immediately thereafter. The simple fact of the matter is some interest was a buyer then. Anyone with knowledge of late-1920s history might reasonably suppose a well-heeled consortium representing a "plunge protection team" stepped in, attempting to save the world in which they and their own do business. Just imagine the pressure they're under right now! Feel the weight of their burden.

Sufficient for the day is its own trouble. Indeed, this bear market's detonator already has blown! The fat lady has sung. It is all over, but for the shouting. The ICU patient on life support in truth already is dead...

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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