Check this out...
Pay particular attention to $SPX and coincident RSI behavior following last Thursday's completion of wave 1 [down].
Now compare this to $SPX/RSI behavior off November 2008 bottom. Interesting.
Bear in mind, the greater curiosity here is similar RSI behavior during formation of a "c" wave, irrespective of time-related dimensions under consideration in this particular instance. A "c" wave is a "c" wave — a third wave: typically the most dynamic of all Elliott waves — in the framework of the Elliott Wave Principle.
Per possible price form similarities, we will just have to see what develops. Straight ahead, a retreat back to the green line drawn on the 5-minute chart seems likely before the next (final?) leg higher unfolds in forming wave c of 2.
Now, if a greater measure of dynamism is revealed during wave c or 2's formation (much as was evidenced during wave C of (B) off March '09 bottom) it really should come as little surprise that, prospectively, much of what was lost during the initial move down from mid-January's top might be recovered. In fact, according to the Elliott Wave Principle, second waves typically retrace a significant portion of preceding first waves.
So, per near-term anticipation for a third wave down from top (i.e. wave 3 [prospectively of wave (1) of (C)]) whose unfolding I suggested yesterday is likely to result in major indexes falling well below respective 200-day moving averages, we have a bit of valuable analytical refinement for which to raise confidence in a low-risk options trade upcoming.
You'll be the first to know when I pull the trigger on this, if you are receiving trade notification.
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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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