Patiently Anticipating Collapse ~ The Risk Averse Alert

Tuesday, August 24, 2010

Patiently Anticipating Collapse

As bad as today was (with a gap lower and an increasingly dour mood throughout the day), there's enough reason to think everything is not about to fall apart over days ahead.

OEX 5-min

An Elliott 5-wave channel with a lower parallel to the third wave remains intact. However, the fourth wave indicated above might move to Monday's early morning peak.

In wondering where next — where might an upcoming bounce lead — the evidence is mixed. Today's gap lower and 5-minute RSI extreme — producing the weakest reading yet since August 9th top — suggests any upcoming bounce likely will be restrained.


The market's upward momentum (as measured by MACD) remains intact, thus raising the likelihood a bounce lies ahead.


This likelihood is increased by the market's improved, internal performance over the past couple weeks.

I'm just not sure how dynamic the market's upcoming bounce might be. It could be more so than seems likely given today's further deterioration. Right now, the market appears to be transitioning to the downside, but more technical evidence is needed to raise the probability of an upcoming collapse putting March '09 lows in the cross hairs.

Fast Money
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