Fool Me Twice Shame on Me ~ The Risk Averse Alert

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.


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
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