Wednesday, June 30, 2010

Fool Me Twice Shame on Me


This is unlike any "feels bad" moment I ever have experienced. Thick are negative sentiments exposing generational problems of an historic sort. Grave concerns heard from sound minds in particular is nothing short of extraordinary.

Yet in the grand scheme easily is seen such complacency, too, even among bearish folks, as might weep one day about how much more fearful they would have been better being right now.

Recall back in '08. Sentiment among investment advisors that summer and early fall was extraordinarily bearish. Turns out, not bearish enough, though. I should know. I was one.

In considering today's negative sentiments, then, think like a bear: the consensus of naysayers does not fear nearly enough. According to my calculations the levels at which major indexes stand today might not be seen again for a decade or longer. The worst of it could bring scarcely imagined abuse. Hope slipping incredibly fast, leaving a weaker pulse ... again and again ... in fact, endlessly it might seem for some months and years. The NASDAQ bug, everywhere.

Welcome to the start of the "Revulsion" phase of our modern day stock market craze. Some years forward we should all be the ones to show boundless love when the rest of the world hates anything to do with the stock market. The first giant step toward this day might be just around the corner.


$OEX

Today's question is am I yet again not as fearful as I should be, as was true in 2008, too? Well, now at least I have enough good sense to ask this question! I was not so inclined in August 2008. Still negative then, yes. Still, not negative enough. This possibly is true here, too.

So, I wonder, what are odds wave 3 of (3) of (C) upcoming might take out March '09 lows? Well, honestly, they appear rather good. In fact, I would not be surprised if the above depiction of what might lie ahead proves much too optimistic.

As you can see I have taken to supposing again that, wave (2) [of five waves down projected to form wave (C)] might have completed on "Yuan a be a sucker" Monday, June 21st. Take this view with a grain of salt. Yesterday's perspective suggesting wave (b) of (2) forming a 5-3-5 "zig-zag" down from June 21st equally is valid. Indeed, all the more so(!) if wave 3 of (3) of (C) were thought likely to take out March '09 lows.

What's interesting is the position in which momentum (MACD) finds itself here. Note similarities to the August 2008 period. Then, too, a second wave of five waves down forming a "C" wave was unfolding (i.e. wave 2 of C ... of (A)), just like is thought the case now (i.e. wave (2) of (C)).

Funny how the smell in the air these day is of a Lehman-like bank failure in Europe. Oddly enough, too, it was failure of a European bank in 1930 credited for precipitating the worst of stock market selling in the era of the Great Depression. Seems likely that, a catastrophic eruption along these lines might make March '09 lows another failed Maginot line.


Fast Money
* * * * *

© 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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Tuesday, June 29, 2010

Bouncing Into Big Trouble


About that Citigroup trade at around 1:00 p.m. triggering the newly installed circuit-breakers on individual stocks ... apparently an "erroneous OTC trade" was behind it. Call me a cynic, but one wonders why Citigroup was today's victim and not some other conglomerate whose business combines a deep deposit base with a bottomless pit of derivatives exposure.


OEX 5-min

What you see above via the OEX index — the object of my $50 Mega Score proposition — is depiction of that sense I wrote about earlier today in a letter sent to those who have a stake in this proposition, as well as those who receive Trade Notification from me. To wit, this indicates how wave b of (b) of (2) might yet to have completed. Were today's unraveling but part of wave b of (b) of (2), then wave c of (b) of (2) is likely to carry major indexes considerably below late-May lows, rather than just nominally lower, as was previously supposed.

In other words, wave c of (b) of (2) is not thought to have ended today. The fact that what would be labeled wave b of (b) of (2) proved so narrow and brief discourages belief today brought the greater bulk of wave c of (b) of (2).

No doubt, today produced an Elliott third wave of some sort. Yet whether this likely third wave is fitting even the above view is questionable. Instead, it's possible that, the first, second and third waves of wave a of (b) of (2) have unfolded since last Monday's "Yuan a be a sucker" peak. So, what lies ahead might develop along following lines...


$OEX

Evidenced today via volume was the measure of selling exhaustion mentioned yesterday thought likely upon a retest of late-May bottom. So, combine this with improving momentum and you have the ingredients for a bounce, or so it seems.

Yet just how impactful any bounce might prove is tonight's wonder. Simply given what appears building vulnerabilities on several fronts whose threatening presence resulted in today's broad decline in stocks, and whose continued negative portent is probability warned by both RSI and MACD remaining on the sell-side of their respective ranges, one suspects any upcoming bounce could be rather muted. Indeed, going into the end of the week there might be some follow-through to today's decline prior to any bounce developing.

The Elliott wave view above shows the same a-b-c structure as previously was thought likely to develop off last Monday's top. It's a 5-3-5 "zig-zag" [down] forming wave (b) of (2). The Elliott Wave Principle's "rule of alternation" raises this form's probability as wave (a) of (2) unfolded in the form of a 3-3-5 "flat."

Again, the only change in outlook here is to suppose wave c of (b) of (2) might extend considerably below present levels, rather than end here (as was thought previously).


NYSE McClellan

The present position of NYSE McClellan measures alerts one to the prospect of something nasty developing near-term.

I noticed this last night and I thought that, in formation of wave b of (b) of (2) through the end of this week (and quite possibly into next week) — this per yesterday's viewpoint — the negative position of McClellan measures would persist before breaking down coincident with subsequent formation of wave c of (b) of (2) [down].

Much as was thought yesterday, this same turn of affairs more or less is what I still suspect probable over the next week or so. Wave b of (b) of (2) — forming with an upcoming bounce — might likely leave various McClellan measures still rather negatively poised.

And finally, the possibility that, wave c of (b) of (2) — carrying major indexes decidedly lower than present levels — might unfold before July expiration remains as credible a prospect as was supposed prior to today's unexpected, sharp turn lower...


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

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Monday, June 28, 2010

Will Sarah Ferguson Hit Up Andrew for $50?


Gee, who could have predicted it? Congress milks lobbyists to come up with a cream puff financial regulatory reform bill that, lo and behold, is at risk of failing in the U.S. Senate.

It was exactly one month ago in Dollar Shortages, Real and Imagined I said, "Probably the more likely scenario, though, is the hacks bleed financial industry lobbyists and fill up their campaign coffers, then put together a bill that is sure to be voted down."

But that was yesterday, and this is today...
"...equities/commodities will collapse far beyond what even some equity bears anticipate."Andrew Roberts, RBS credit chief

Anyone from the Royal Family care for a piece of my $50 Mega Score? (Sarah Ferguson?)

Speaking of family, one reader had this to say about my proposition...
"I am not necessarily looking for a quick return on any investment if the market were to head steeply south; rather, I'd just like to have something in my account to help cover our house payments for a few months in the event my job becomes a casualty of any severe downturn. I realize my plan here is not all that sophisticated, but I'm just trying to cover some bases for my wife and kids."

Debatable is whether this man's plan is "not all that sophisticated." Indisputable is the fact it sure is beautiful. If you have similar hopes, then please, by all means, get in.

Honestly, I had no idea how well-received my $50 Mega Score proposition would be. In fact, we have reached a point where from our trade's very beginning we can significantly reduce our risk and increase our odds of reaching my goal of multiplying our initial stake ten times as wave (2) further unfolds over weeks ahead.

Those of you who already have ponied up and those who have expressed an interest: I will write you tomorrow and detail this improvement in our prospects.

All because so many of you stepped up, a low-risk proposition prospectively has gained a greater measure of safety. Turns out this is serendipitous.

In the grand scheme of things where is projected, "collapse far beyond what even some equity bears anticipate," we find a dichotomy most fitting this early moment in a Great Unraveling...


$NYA
$COMPQ

NASDAQ's relatively better performance versus the NYSE — still as superficial as ever has been seen over the past year (dig under the covers and there's death everywhere) — persists as it did during its final rise to late-April top. You will recall that, August 2008 was the most recent instance when NASDAQ's apparent leadership proved most inappropriate. What followed is history. So, given a similar outlook, now as then, NASDAQ's relative outperformance increases the odds trouble lies ahead.

The little guys just don't get it. Money is being drained from the larger swath of common stocks ... much as has been the case since October 2007 top. The setup for collapse, indeed, finds things as they should be.

Which is not to say, however, this disparity cannot persist for some weeks longer. I believe it will.

One thing of note I wish to draw your attention to is weak volume of late. Well enough is the fact, "prices can fall of their own weight." Yet considering how far they've fallen over the past week, any slight increase in selling stands to substantiate the probability of wave c of (b) of (2) [down] unfolding sometime over days ahead.

Likewise, any nominal new low, post-April peak (set in forming wave c of (b) of (2)), coinciding with volume that is diminished (relative to volume registered at late-May bottom, and early-May before that), would represent a near-term measure of selling exhaustion such as raises the probability of wave (c) of (2) [up] subsequently unfolding.

The current position of several technical measures presented here from time to time also raise the probability of an upcoming, further move lower from last Monday's "Yuan a be a sucker" peak forming wave (b) of (2).

Yet, bottom line, it appears wave b of (b) of (2) presently forming might require some days more before reaching completion. Today's relatively dull trading is thought but an opening salvo serving to bring some greater measure of stability following last week's volatility increase. Over days ahead look for this to continue, even should further bouts of weakness materialize. (Truth is I am not certain wave a of (b) of (2) [down] has completed.)


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Friday, June 25, 2010

Tulip Bubble Nears Legislative Mandate to Irreversibly Implode


My previous sense about the financial regulatory reform bill that today passed the U.S. House-Senate conference committee appears confirmed. The big shall eat the little ... or at least it is hoped anyway.

One thing refined in my thinking surrounding this effort, though, centers around the conclusion that, FinReg principally attempts to raise confidence in those "too big to fail" behemoths that, in truth already are gone. Given this, you might liken the spirit of what is being called "the most sweeping reform of the financial industry since the Great Depression" to a dare issued with an exasperated pound of the table in a last gasp effort to prop up a confidence game. You might call this exercise "Alan Schwartz goes to Washington."

FinReg reminds me of the Gary Larson Far Side cartoon captioned, "Cattle Humor" picturing a couple cowboys driving cattle, and on the back of one cowboy, unbeknownst to him, is a sign that reads "Trample me." With FinReg, though, the cowboy is daring the cattle as he rides the once mighty steed named Uncle Sam.

FinReg is a hollow shell venturing to appear surrounding a viable, living thing. Trouble is the thing is dead and no legislative effort to close the barn door after the horses have bolted will change this. If the legislation were being called, "the most sweeping transformation since Jesus raised Lazarus from the dead," I still would not change my position. This would infer "too big to fail" institutions finally had become resigned to confessing their true, moribund state, and so agreeable to shedding all that is burying them — a tune that only more quickly would make "Shake, Rattle and Roll" the anthem of the global financial system.


$SPX

Given yesterday's Elliott wave count refinement suggesting that, more or less sideways trading in the range established since late-May bottom might develop over weeks ahead, there appears some better sense to be gained about what lies ahead revealed by coincident MACD behavior.

Highlighted above is MACD performance coinciding with waves 1 and 2 of wave (1) down from late-April top. Noteworthy is its already deteriorating state at the start of wave 1 (marked by MACD divergence when the S&P 500 reached its late-April peak), and its clearly negative trend coinciding with the formation of wave 2, as well as during waves i and ii (not labeled) of wave 3.

We probably will see something similar to this developing during upcoming formation of waves 1 and 2 of wave (3) down. In the meantime, though, as wave (2) proceeds to unfold over weeks ahead, we might rather anticipate MACD continuing its recent improvement (if only marginally).

Inasmuch as coincident MACD registered on Monday at the conclusion of wave (a) of (2) bettered MACD registered at a higher S&P 500 peak set during formation of wave 4 of (1), we might expect much the same coincident MACD behavior when wave (c) of (2) completes sometime over the next several weeks. Indeed, anticipating this one might expect the S&P 500's wave (c) of (2) peak failing to best its wave (a) of (2) peak reached on Monday.

The point is this. Any apparent momentum improvement coinciding with a lower S&P 500 peak ultimately reached in the formation of wave (c) of (2) is likely to produce the same result as we saw over the course of this week's trading. Most fitting, then, would be momentum's marginal improvement leading up to the precipice from which the market subsequently collapses. The measure of obliviousness to the market's grave risk would be seen adequately registered as such.

Now, as you can see above, MACD has made quite a recovery off late-May bottom. Not to be ignored, however, is the fact the measure still remains decidedly on the sell-side of its balance. Indeed, its only slight deterioration in the face of this week's S&P 500 decline (giving back about half its gains since late-May bottom) provides some sense about just how ugly things could get once MACD is on course to take out its late-May low (which in due time I expect will occur during formation of wave (3) down).

Similarly, that MACD still remains on the sell-side of its balance despite its recent improvement raises the probability that, the S&P 500 projection drawn above indeed could develop over the next several weeks. Wave (b) of (2) in fact could bring the S&P 500 to a new low, post-April peak, while MACD simultaneously diverges once again, just like occurred at the conclusion of wave b of (a) of (2) earlier this month.

Still, the fact MACD remains positively trending even in the midst of this week's giveback suggests much of the coming week's trading prior to the Fourth of July holiday here in the U.S. might result in formation of wave b of (b) of (2). This, of course, is assuming wave a of (b) of (2) — unfolding over the course of this week's trading following Monday's "Yuan a be a sucker" peak — is in fact completed. It might not be.

Bottom line, I believe a few more days are being afforded those of you who are on the fence, unsure whether a stake in my $50 Mega Score really is worth the prospect of a multi-thousands percent return delivering you a 5-6 figure sum, conservatively, on the chance wave (3) down, challenging March '09 lows, unfolds sometime over the next few months.

If you are someone with little or no options trading experience, don't worry because I have you covered. You still can easily take part doing two simple things. Write me (SUBJECT: $50 Mega Score) and I will tell you what these are.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Thursday, June 24, 2010

Refinements on Certainty


One thing can be concluded here with relative certainty...

Five waves up from June 1st bottom thought forming wave c of (2) surely must be complete. The market's fall from Monday's top simply has gone "too far" for this move lower to be reasonably considered part of a fourth wave of five waves up from June 1st bottom.

So, does this mean Monday's "Yuan a be a sucker" peak marks the precipice from which will begin a steep decline forming wave (3) of (C) — a throttling likely to challenge March '09 lows?

This certainly is possible. However a further period featuring more or less sideways trading, extending the formation of wave (2) of (C) also is in the realm of possibility...


$SPX

The above view portrays this possibility.

Likewise, once wave (2) finally completes, we might also expect waves 1 and 2 of wave (3) to form within the range established during formation of wave (2). In other words, sideways trading since late-May could persist for several weeks more before, at last, wave 3 of (3) of (C) unfolds in what should be a breathtaking collapse producing some of the worst technical readings in recorded history. (Seriously)

So, why am I raising this possibility?

Well, because it fits the spirit of observations presented over recent days, particularly as these tie into that slightly revised Elliott Wave view put forward Tuesday ... wherein only wave (5) of (C) is projected to form below March '09 lows.

Consider my thesis of a decade-and-running spent building bull traps — these having served to draw in the greatest number of suckers at the highest possible prices. It stands to reason that, at this late hour following formation from March '09 to April '10 of but the third bull trap since October 1998 every effort again will be made venturing to accomplish much the same as before: drawing in the most suckers possible before springing the trap door.

As I have said, and we all understand this, there are more vulnerabilities than you can shake a stick at threatening to reek havoc throughout our world's hopelessly insolvent financial system. Indeed, one would have to be either stupid or a lying thief not to grasp this. Yet until such time as something gives — and it's plain something big will give — we might better anticipate that, in the interim every effort will be made to postpone inevitable collapse.

Yet make no mistake ... collapse is near. Have you ever in your lifetime been exposed to such a fair number of relatively sane souls cogently revealing the emperor has no clothes?

Such, then, is the background to possibility raised above, wherein over the next several weeks a more or less sideways trend might further develop. I suspect that, over this interim the world will be lulled to sleep to an even greater degree than is evident right now.

So, where does this leave my $50 Mega Score? Well, first and foremost, still sitting like a vulture, holding to as much plump promise looking out at its prey as was the case yesterday and the day before.

In fact, the goal I have established with this proposition — quickly multiplying your $50 initial stake ten times and returning you $500 — might easily be met well before wave 3 of (3) of (C) unfolds. Thus, your prospect for taking the $500 I return to you and multiplying this into something in the neighborhood of $50,000 appears to be exceptionally good.

I want to thank those of you who stepped up today, as I encouraged you to do. Inasmuch as I challenged you to demonstrate the courage of your conviction, mine too is bolstered in boldly taking you to task. I would not dare venturing this proposition targeting what is thought reasonably called a "Mega Score" were I not perfectly convinced this object might be easily attained risking but a pittance.

Manning the "Prop Desk" during tonight's Fast Money was Barry Ritholtz. At the start of this year he published a post at his "Big Picture" blog discussing his New Years resolutions. One of these was to cut back his options trading to only those moments when he had relative certainty about the outcome. "Certainty" in options trading crosses a fine line you come to know with experience. If I might enlighten you, I would say it is not so much about "knowing" you're right, but rather having little doubt about the manner in which your speculation will evolve.

Before I fell asleep last night I was thinking about the lessons I have learned in my many years experience trading stock index options. I was visualizing their applicability to the opportunity at hand. I felt no fear these lessons would be forgotten or ignored. Visions of successfully navigating this moment of truth that, for all intents and purposes is upon us right now rested in my contemplation of how the trade would unfold. Never did I doubt the outcome or the reasonableness of my goal. Quite the contrary. My confidence was bolstered in pondering traps of old.

This might seem intangible wisdom if you lack experience trading options. Yet the gist of confidence you should desire is not much different than what you generally are better off recognizing prior to making any substantial investment. The sensation you know is a measure of certainty that raises investing to an art form.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Wednesday, June 23, 2010

Never More Clear in Twenty-Five Years


You understand the subscription price you must pay for insights provided here. This price in truth demands but one thing: your courage to step up — step to the plate — in a moment you simply were made to recognize.

Is this not why you are reading me? You understand that "it takes buying to put them up" ... and you clearly see that over the past decade a transfer has occurred from those who can put up stocks to those who cannot ... in a Great Distribution.

So, you discovered how market technicals shine light on the movement of money into weak hands. Lo and behold, this enlightenment quite agrees with your better sense of things, and indeed, shows the stock market extraordinarily vulnerable, thus confirming your negative view quite conclusively.

Now step up. Put your money where our mouth is. We in fact have a relationship to seal in this extraordinary opportunity to raise your courage of conviction. For so very little might the glory of your legacy find its lasting promise! You, indeed, should be the one who saw great danger ... and made a killing because you took a tiny, calculated risk.

Have faith in yourself — your ability to distinguish not so much a diamond in the rough, but rather plain reality as the world tragically plays stupid. This is your moment to shine.

So, step up because she is about to blow...


$SPX

Weakness, weakness everywhere and not a drop of fear. Were you in need of overwhelming evidence bolstering your conviction prices would fall of their own weight, well, there you have it.

Both relative strength and momentum, now turning over, decidedly remain on the sell-side of their respective ranges, and this while boldly diverging from the S&P 500 at recent lower highs.

We are seeing this sort of thing everywhere among various technical measures I present here from time to time. These bring great substance to my view suspecting correction of the market's initial turn lower from its late-April top largely has passed. In this process such technical balance has been established as decidedly reveals the time elapsed only a period drawing in the weakest of hands.

Yet again we see complacency among a vast majority of holders who fail to recognize the urgency of this moment. Clinging to wild fantasy skillfully spun with great consistency over many decades these tragic souls, of course, are that far greater number among us whom I call "suckers."

The thought of selling some greater bulk of equity positions (if not the entirety) still escapes their desire — this after such a monster advance off March '09 bottom ... which itself followed an historic collapse — holding all the more in the midst of having made absolutely no progress over the past 7-8 months, let alone the past twelve years! This, technically speaking, makes the moniker most fitting.

Not a drop of fear. Perfect marks for a bull trap!

Yet by their slow will to abide belief further — their faith shaken for over a decade ... with May 6th's "flash crash" now a cherry on top — confidence among suckers, although dying hard, still might be objectively characterized razor thin. The slightest upset risks rocking the stock market hard.

Combining all things on several technical fronts, that is the unanimous message.

With more fundamental risks than you can shake a stick at running all the way up the chain of command and reaching deeply into the political layer where the last line of cover presently finds itself providing transparency only to an erupting tempest, has there ever been a moment when a "third wave of a third wave" (i.e. wave (3) of (C)) might suddenly develop?

Not in my twenty-five years experience has risk in the stock market appeared so incredibly high. Separate yourself: distinguish our relationship and step up right now.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Tuesday, June 22, 2010

Springing a Bull Trap for a Hawaiian Hibernation


Considering the critical importance of March '09 lows to those in the bailout camp, an alternate Elliott Wave view toward what lies ahead might offer a more fitting perspective harmoniously aligned with what has come to pass over the last decade.

Although it might seem ridiculous to think appearances are everything, a violation of March '09 lows is rather likely to signify bailout is failing. Thus, it seems likely that, upon any retest of March '09 lows some attempt at maintaining appearances of the viability of the bailout regime in all probability will be coordinated by those who have both nothing and everything to lose.

Now, simply imagine what relatively large number of suckers will boldly take the bait upon a coming, "successful" retest of March '09 lows. This likelihood leads to a key point I want to make today...

The next few years, and quite possibly longer, should bring to a crescendo a trend that has become increasingly severe over the past ten plus years — one featuring massive financial failure of an historically unprecedented kind. Thus, cause to line up as many suckers as possible during each new phase of an inexorable spiral into the abyss is likely to continue creating nothing but bull traps until such time as both the will and the wherewithal of every last sucker has been effectively vanquished.

Bear in mind this process already has been well underway over the past ten years. Yet, even now, what do we continue seeing? That's right, suckers with both the will and the wherewithal to get in the way of an out-of-control freight train barreling down the tracks at ever-increasing speeds.

Indeed, seen in this light the market's counter-trend rally off March '09 bottom is not even the first bull trap set during the course of a Great Distribution over the past decade. The first bull trap developed from October 1998 to Y2k top. The second was from October 2002 to October 2007.

The market's rally from March '09 to April '10 is seen marking the third bull trap in just over a decade.


$SPX

So, in keeping with tonight's bull trap theme — or, more accurately, refining it — consider the above Elliott wave count.

What's "different" from recent projections only is how wave (C) — assumed to have begun at late-April top — is labeled. As you can see, wave (5) of (C) might prove the only part of the market's pending, steep decline to unfold decisively below March '09 low.

Up to now it was thought wave (3) of (C) would smash through March '09 bottom. Yet the above manner of unfolding might more effectively trap the greatest number of suckers at the highest possible prices. If you think about it, hasn't this been the trend over the past ten years?

The bull trap set from March '09 to April '10 threatens to be sprung with wave (3) down — a move that appears imminent. However, this will not be the last bull trap before ultimate bottom is reached sometime over the next few years.

There will be wave (4) ... with accompanying hype claiming a successful retest of March '09 bottom. However this bull trap will be exposed during the formation of wave (5).

Then, once wave (C) is completed (bottoming somewhere in the vicinity of levels last seen in the 1980s), an initial advance off bottom — unlikely to be thought prospectively long-lasting — in all probability will be largely retraced, more or less cementing disillusionment naturally born of all preceding bull traps over the past 10+ years (those past and those yet to spring).

Although this initial advance off wave (C) bottom technically will not be a bull trap, by that time it more likely will be thought so ... resulting in a true bottom retest, and this just prior to an explosive advance. By then, today's suckers will be vanquished, the financial media shell shocked, and the market poised to skyrocket.

I'm getting way ahead of myself, but you get the picture.

One other point I want to make about the prospective Elliott wave count indicated above...

When you get a chance, take a look at price action at the end of the bear markets of 1929-1932 and 1973-1974. Both these very large swoons had one thing in common that is of particular note here. Both ended with a bang. Selling into bottom was swift and devastating. As you can see above, the same is projected in the present instance ... with wave (5) of (C) prospectively serving up the greatest pain in the market's decline from April 2010 top.

As generally is the case here when price projections are drawn, my intention is to present highlights of what might likely lie ahead. Although the dimension of various, projected moves reflect my sense of what to expect, the timing of these is better assumed not "drawn to scale."

For example, you might get the sense from the above S&P 500 chart that, wave (4) of (C) might quickly unfold and soon be followed by wave (5). However, what I rather intend simply is to show wave (4)'s very probability ... and that, too, it is likely to form above the S&P 500's March '09 low. Its form, complexity, and timing remain to be seen.


SPX 5-min

The formation of wave c of (2) [of (C)] is progressing very much as I have been anticipating. Again, assuming yesterday's "Yuan a be a sucker" peak at the open did not complete five waves up from June 1st (forming wave c of (2)), then one last gasp higher might be in store before the March '09 - April '10 bull trap subsequently is sprung.

Let me be blunt. Opportunity to multiply a tiny stake into a fortune rarely ever was greater than is likely to be true over coming days and weeks. So, tell me. How would you like to spend your Christmas this year in Hawaii? I just might be able to get you there for $50.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

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Monday, June 21, 2010

Yuan a be a Sucker?


That about says it all. There is no mere monetary adjustment in the world that can save us now. They leveraged it up and collapsed its wealth-producing capacity, so now we sink no matter what, because the [collapsing] physical economy simply can be leveraged no further.

No mere currency concession can possibly help keep the global financial system afloat, lessening the odds of its implosion. All the monetarist monkey glee over what otherwise should be seen an alarm bell signaling yet another flareup of shark-on-shark action obviously is a smokescreen allowing anyone with a functioning brain cell a few more minutes to batten down the hatches.

One can only imagine what prospective "flash crash" the Chinese are being threatened.


SPX 5-min

I continue to believe a prospective fourth wave of five waves up from June 1st is forming. Were not every minute Team Fraud can buy thought precious, then I might more strongly suspect five waves up from June 1st completed today, marking the end of wave c of 2 (of five waves down from late-April top).

Chances are the next few days will see the end of it, and then collapse subsequently will loom large.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Sunday, June 20, 2010

Fund Your $50 Mega Score Stake


Use the PayPal button below to fund your stake in my $50 Mega Score.

I will send you confirmation after I have been notified by PayPal that your funds were received.

Your stake may be any increment of $50. So, if you want to do $100 (or more), go for it.

Click the Donate icon below...









* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Saturday, June 19, 2010

WANTED: Hungry Bears


Risk $50 for a quick $500 (and many thousands soon after)

A low-risk opportunity trading OEX options is fast approaching.

If just ten hungry bears pony up $50 each, a $500 initial stake can be rapidly increased by over 1000% (easily) during the market's approaching, steep decline.

Here again is my forecast view. This is the same S&P 500 chart I presented on June 5th...


$SPX

My goal is to turn each $500 initial stake into $5500. Upon reaching this goal, $500 will be returned to each person putting up $50.

Following this you could continue trading OEX options with what will be your funds, as I will be sending out Trade Notification detailing my trades as they happen.

Given my outlook, I believe a nice 5-figure gain could be yours, even by the end of the year (6-figures is not out of the question, either).

All risking just $50.

Write me for more information (SUBJECT: $50 Mega Score).

OR...

You can fund your stake right now, seeing your risk here, relative to your prospective reward, is as low as it gets.

* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Friday, June 18, 2010

Agitated Sharks Aggressively Risking Calamity


You have to wonder how the quantitative easing crowd feels about cash- and resource-rich BP proposing a $5 billion debt offering at an 8-10% yield. This occurring, no less, on the doorstep of that previously mentioned tsunami of corporate debt coming due over the next few years is curious.

BP's reported goal apparently is to "restore confidence." But at that yield? Might a better word than "confidence" be panic? (And if this is thought too strong, then certainly doubt. This sense surely was seen among Fast Money traders tonight.)

Might not BP's proposed debt offering also be suspected a case of "push back" after yesterday's kiss of death in Congress? Evidently, Anadarko's CEO finds his company swimming in a shark pool (to say the least).


$IRX

U.S. Treasury yields on the short end — having stabilized in the panic zone, post-'08, following a multi-year trend to absolute bottom — could be in the midst of reversing higher. Judging by cash- and resource-rich BP's proposed debt offering, higher rates the company might be seen fostering could prove devastating.

Indeed, a credit squeeze might be delayed no longer with a Mass Strike in no mood for more bailout. No doubt, bailout has become a much-hated necessity. No doubt, too, both these reactionary facets were easily foreseen, as are their probable increase as election day nears.




Considering today's debt burden, a backup in rates probably will prove problematic to every liquid financial market globally (most emphatically stock markets). This is particularly so largely because the U.S. lacks a Hamiltonian national bank uttering credit strengthening the physical economy's capacity to create lasting, productivity-enhancing wealth.

Having no separate facility to sustain critical physical functioning is all the more troublesome, because over recent decades much physical economic capacity in the United States has been driven into the ground. This trend only continues with the move to shutdown NASA's manned presence in space. Indeed, the will to destroy the nation's most profound potential to produce at higher rates of technological mastery only appears stronger in a headlong charge imposing destructive conditions so stretching the viability of the physical economy's bloated financial underpinnings as to risk calamity. That's where we are.

An environment where increasing financial claims meet a physical asset base whose wealth-creating potential is shrinking absolutely breeds conditions conducive to a breakdown: one whose tiniest technical manifestation might be reasonably thought demonstrated on May 6, 2010.


$SPX

I thought it noteworthy that volume registered while the market fell from its late-April peak rivaled volume accompanying 2008's collapse. Something very similar occurred in July '08 (when volume rivaled that in January '08), during what proved but the opening salvo of a large move down.

Much like the market's decline from October 2007 - March 2008 was but the beginning of a still larger move lower, the market's decline from October 2007 - March 2009 is thought the same.

Volume presently rivaling its most extreme during that recent time of heightened market volatility (September - October 2008) presents much the same demonstration of distribution as was evidenced in July 2008 ... and this once again at what is thought the start of a large decline to come.

This condition is made all the more compelling given the similar positions in which both relative strength (RSI) and momentum (MACD) are in. These measures, indeed, can be seen further setting the stage for a steep decline over weeks straight ahead.


SPX 5-min

This is one prospective Elliott wave view of what is thought a five-wave advance from Tuesday, June 1st seen forming wave c of 2 (wave 2 being a corrective wave in a five-wave decline from late-April top).

For now I am assuming the fourth wave of the S&P 500's five-wave advance since June 1st continues forming (much as was thought the case yesterday). A trip down to the range of "the fourth wave of one lesser degree" (i.e. the fourth wave of wave 3: 1090-1106ish) still could develop before the fifth and final wave [up] unfolds to complete wave c of 2.


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Thursday, June 17, 2010

Yet Another BP Blowout Preventer Fails!


The question asked by CNBC's Melissa Lee at the top of today's abbreviated Fast Money was whether anything new was revealed during today's Congressional hearings grilling BP CEO Tony Hayward. The answer most emphatically is yes, there was.

It came just after 4:30 p.m. when the inquiry turned to the Deepwater Horizon's blowout preventer. It was like a nuclear bomb went off in the capital. Revelation of circumstances surrounding BP's modifications to the rig's blowout preventer was news to me.

Hayward looked perfectly stunned. I mean he was Elmer Fudd. If he had a gun he might have blown his brains out right on the spot. It was incredible theater, all too real and very much worth today's hearings — and this notwithstanding infantile rantings against Congress coming from that CNBC crowd who has yet to meet a hooker or a pot farm that could not be passed off as a respectable "business."

What could Subcommittee Chairman Stupak's line of questioning regarding BP's modifications to the well's blowout preventer be intending to expose? Was the congressman inferring intentional sabotage in an act of war, this following on the attack of the U.S. banking system executed by the London office of AIG Financial Products a few years back? That Hayward simply could not respond (because he knew something along these lines was being raised?) gave off the strong smell of real consequence emanating from a Mass Strike set to explode.

Telling, too, was that this matter revealing grave Congressional concern was left until after the market closed. Who knows, this might have been done to give deep-pocketed backers of the likes of Stupak time to unload as much of their BP exposure as possible. The company is sinking fast.

(On a related side note, CNBC's video library containing their coverage of today's House Energy and Commerce Subcommittee hearing finds a gap from 4:25 p.m. to 4:45 p.m, defying my desire to provide you a link to this most explosive moment. Well, it's like they say: the most damning evidence usually is in the cover up. However, it's not like I am desperate for evidence supporting my extraordinarily bearish outlook. To say the least, that the gap even exists truly is all the icing on the cake one really needs, Mr. Nixon...)


SPX 5-min

The formation of wave c of 2 off last week's bottom probably has a bit more yet to go before completing. Presently, the fourth wave of five waves [up] forming wave c of 2 is thought to be unfolding.

Come next week these five waves up from last week's bottom probably will be complete. If as a result wave 2 (of five waves down from late-April top), itself, in fact is completed, then the next few weeks following could be rather devastating, as wave 3 [down] would be expected to form.

As I have been saying, this approaching, strong move lower is likely to put March '09 lows squarely in the cross hairs. Yet in the grand scheme of things even this coming steep setback is seen but part of an opening salvo with much greater losses still to follow in the dying days of an insolvent financial system whose vulnerability offers incredible opportunity — the first of my adult life — for the United States at last to decisively demonstrate it truly is the land of the free and home of the brave.

It is on this note that, a stock market bear steeped in a history inexorably elevating self-evident truth recognizes today's bombshell exploded in Congress as a sign of times in which many a reckless imperial enterprise stand at grave risk of joining Deepwater Horizon at the bottom of the sea...


Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!

Wednesday, June 16, 2010

More Big Numbers in the Age of Shock and Awe


$20 billion is a big number. It's "shock and awe" big. But is it just buying time, allowing today's still unfolding disaster an opportunity to drift from memory ... like Port-au-Prince? Benefiting, then, should be the "chisel" business and likely little else ... save, of course, the Mass Strike, which all the more is becoming a tinderbox ready to explode.

For in hearing little about wealth lost in the Gulf since April 20th — a sum likely dwarfing $20 billion — during what might have been the lamest 20 minutes a U.S. President ever has spent on national TV ... well, we probably are looking at a fast approaching shock and awe to the fragile edifice upon which the financial system sits ... making that $20 billion BP commitment look like so much chump change.

The Gulf disaster — but a more grotesque incident in the ongoing legacy of "creative destruction," imperial style, in the post-Bretton Woods era — comes at a time finding the nation still many trillions too leveraged. Today's stab at a "resolution" — like all other preceding "shock and awe" campaigns initiated over recent years — in all probability will prove yet another wet blanket venturing to delay a deluge whose yet wrought destruction unfortunately appears inevitable.

Were this the only looming collapse in physical asset values threatening to destroy a whole lot of leverage (and a great many financial firms, as well)! A picture's worth a thousand words, they say. So, have a look at coming Armageddon.


NYSE McClellan

Among various technical measures presented here from time to time the McClellan Oscillator, first, is most emphatically recovering in conjunction with the market's stabilization over the past few weeks. Yet, foremost, this measure also is serving to confirm the view that, late-April marked a top from which further selling likely remains in store.

Not long ago I discussed technical differences the current moment presents in contrast to early-February. Both the NYSE McClellan Oscillator and Summation Index effectively highlight these, serving to challenge any assumption the current recovery might put the market in a similar position as mid-February.

Then, the market was poised to rise to a nominal new high, post-March '09 bottom. Now, however, immediate prospects are not nearly so positive.

You see this graphically, first, via markup I have drawn in the McClellan Oscillator panel. The market's decline from late-April peak resulted in the Oscillator falling below it previous trough reading. Contrarily, the market's decline from early-January peak saw the Oscillator hold above its previous trough reading.

Likewise, coinciding with the NYSE Composite's early-February bottom the McClellan Oscillator diverged from its late-January reading (indicating improving underlying technical conditions) ... whereas coinciding with the NYSE Composite's late-May bottom the McClellan Oscillator exceeded its early-May, flash crash reading (confirming underlying technical weakness).

Finally, we see the McClellan Summation Index presently confirming the market's weakened state by the fact its reading was moved into the negative as a result of the market's decline off late-April peak (and negative it remains despite the Oscillator's recovery). However, as you can see, the Summation Index did not pierce the negative anytime during the market's decline into early-February bottom.

Subtle though these technical differences (now versus February) might seem, they nevertheless are seen as significant, and entirely supportive of the Elliott wave count I have indicated above. Whether the a-b-c forming an "irregular flat" labeled wave 2 in fact completes the second wave down from late-April top remains to be seen.

All unknowns aside, there's a better than 50-50 chance wave 3 [down] — slated to challenge March '09 lows more nearly than most observers fear — is on the verge of unfolding over days immediately ahead.




Fast Money
* * * * *

© 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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!