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...
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.)
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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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