Bears No More, So Quickly ~ The Risk Averse Alert

Tuesday, September 14, 2010

Bears No More, So Quickly

Mr. TC has been spot on since May 6th's flash crash. Several turns have been well-anticipated.

And now, building technical weakness coinciding with a sideways trending market. Who needs an explosion sending stocks dramatically lower when there are but well-fed sharks with only each other to devour?

Apparently, over 70% of trading volume these days is a result of high frequency trading. If this is going to be cited as cause for May 6th's flash crash, then it truly must be a miracle the market doesn't crash every day!

I have nothing new to add to my very near-term outlook for "levitation" possibly lasting into next week. This is to precede what could be a nasty turn lower set to challenge March '09 lows in rapid order — a move that could evolve even over a mere matter of days.

Two weeks ago there was a great deal of excitement about the American Association of Individual Investors poll showing only 20.7% of investors surveyed were bullish stocks. Yet give individuals a technically weak rally and an endless line of dolts saying "There will be no double dip," and wha la: in two week's time 43.9% of those surveyed by AAII now are bullish.

Over recent decades AAII bullish sentiment typically has topped in this vicinity during prolonged, advancing periods lasting months and years. Now it takes just two weeks. Everyone wants to believe, and this despite every reason not to. You could not ask for a more appropriate investor psychology at this moment in a bear market whose end is nowhere near.

Fast Money
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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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