Falling of Their Own Weight ~ The Risk Averse Alert

Monday, June 14, 2010

Falling of Their Own Weight

Most pointedly demonstrated today was just how terribly weak is the bid in the stock market...


Remember when some months ago I mentioned the old Wall Street adage saying, "Prices can fall of their own weight, but it takes buying to put them up?"


Mid-day today (1:00 p.m. EST) when major indexes were trading just off their highs, CNBC's Bob Pisani reported the NYSE Advance/Decline ratio stood at 5-1. Five-to-one! You would think with this kind of seeming broad buying support, what little whiff of selling that materialized this afternoon — look at today's pathetic volume(!) — would not have had such a deleterious impact as resulted in major indexes giving back all their gains. Yet fall of their own weight they did.

Well enough is concluding this is not good. Whether this bad start to the trading week proves ominous, however, remains to be seen.

For a third time in about as many weeks the S&P 500's 200-day moving average has proven formidable resistance. Chances are this resistance will persist ... at least over the next four days, going into Friday's June options expiration. Today's poor showing rather assures this. Be that as it may, though, another trip back up to the 200-day moving average still could develop.

SPX 5-min

The above noted RSI similarity seems to raise the probability that yet another lift up to the S&P 500's 200-day moving average might be in store as we approach Friday's expiration.

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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