Things of Bearish Beauty ~ The Risk Averse Alert

Wednesday, September 01, 2010

Things of Bearish Beauty

One old gap lower filled, another no less tougher dead ahead (OEX 491-ish)...

OEX 5-min

I predict resistance keeping a lid on any further advance.

Above is a suitable wave count for wave v down from August 9th peak. Now, this fifth and final wave lower completes only some initial move down. Truth is the start of something big — a move set to challenge March '09 lows in as little as a few weeks — indeed, might have commenced.

It's also possible these five waves down from August 9th are continuing the market's correction since late-May. We might be in the midst of an a-b-c, "zig-zag" down since August 9th, with wave "a" formed by five waves completed yesterday and wave "b" largely through today. Wave "c" down, fast approaching, should prove interesting as that previously noted head & shoulders neckline comes into view.

There's no need to split hairs here. The market's technical condition is decidedly negative and setting up for a big, big letdown.


What a thing of bearish beauty! Everything well-positioned and precisely as one might expect just prior to a nasty smacking...

Moving averages, already pointing lower with the 50-day under the 200-day, now are both declining. This as the index trades below them both.

At the same time RSI and MACD both are fairly in balance and both are on the sell-side of their respective ranges. The best of strength amidst far greater weakness probably was displayed today.

All things taken together strongly suggest today's was but a rally in a larger decline still unfolding. The magnitude of today's move, given negative technical circumstances, has all the look of a head fake in a rapidly developing disaster. The past ten years have seen plenty of days like today in the midst of some larger meltdown whose worst, indeed, was imminent.


Could the Volatility Index possibly be more ominously poised? Just another thing of bearish beauty. It's a disaster just waiting to happen. The moment appears to have arrived...

Fast Money
* * * * *

© 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.

There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!