Momentary Strength v. Staying Power ~ The Risk Averse Alert

Friday, August 06, 2010

Momentary Strength v. Staying Power

A couple weekends ago you might recall BP's long-term support and resistance was discussed here. I mention this because trading these past two weeks in the macrocosm of a major index like the OEX seen in a microcosm of trading at 5-minute increments presents a similar picture...

OEX 5-min

Now, today's fall below support (at 508ish) ... then rise to close above the same ... substantiates a positive, near-term view. A furthering over days ahead of five waves up from June 29th bottom appears in store. Today's late-day recovery ... going into a weekend no less ... supports this position.

Nevertheless, RSI presently suggests this week's relatively flat trading following the market's rocket higher during Monday's opening fifteen minute (8/2/2010) might likely extend into the start of next week. Being the past two days has seen RSI confirming bottoms, and at tops diverging, trading early next week sets up for at least some pressure serving to retest today's worst level.

You might say the market's present, near-term technical condition appears not much different than was the case following its launch higher at the open last Thursday (7/29/2010). However now it might be thought a more concerted, purposeful intention venturing to put a floor under the bid made its presence felt today. Yet the true strength of its staying power once again was revealed by the volume of shares exchanged...


Though relatively pathetic today's volume once again might be, underlying technical conditions remain positive. Thus, a drift higher mimicking that from September 2009 to April 2010 seems a distinct possibility here.

Furthering this prospect is the fact that, technical similarities to the March-April 2010 period remain intact. Indeed, from the perspective of momentum characteristics (MACD) displayed over the entire duration of the market's advance since March '09 bottom, an upcoming, flat-line momentum levitation on the buy-side of MACD's balance should be thought neither a strange phenomenon, nor an unlikely possibility.

Indeed, this has been the norm ... as was last demonstrated in the March-April 2010 period. So, we might better expect a repeat performance here. After all, another Elliott "c" wave is thought forming (albeit wave c [of (b)] off June 29th bottom is of a magnitude one degree lower than wave (c) [of A] from March 2009 - April 2010).


The market's continued levitation going into, say, August options expiration (8/20) seems a reasonable estimation of how much longer it might be before the CBOE Put/Call Ratio finally falls into technical position indicative of a market top ... and a fairly significant one at that.


Another couple weeks likewise should offer weak hands opportunity to focus on those laggards whose bullish turn might create conditions in which can best be achieved the daunting task of raising capital for the next rainy day precipitated by a still dysfunctional, global credit system whose tentacles reach deeply into many a white shoe...

Fast Money
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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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