Approaching a River of Tears ~ The Risk Averse Alert

Tuesday, October 19, 2010

Approaching a River of Tears

Boy, if today didn't fit the "temporary blip" play described here yesterday. However, were the outlook for stocks indeed positive the market could be taken much lower on such played up threats to the banking system as help make stocks cheaper prior to the next leg up.

Yet given still positively poised relative strength and momentum — each but just coming off new highs since the market's late-June bottom (these were set yesterday) — it does not appear a steep decline is immediately in store.


Above is highlighted the market's initial drop from April top. It appears today's decline is similarly situated. Thus, further levitation appears in store. Not out of the question is a lift to nominal new index highs since late-June bottom. These critically should fall short of April peak, however. The duration over which this develops easily could extend to early November.

Yesterday's lift carrying RSI (top panel) and MACD (bottom panel) to new highs might be thought indicating there's more life to the market's advance off late-August bottom. This certainly would be fitting an Elliott "c" wave thought forming.

Now should come a subtle turn down in momentum (MACD) as the last leg of the market's levitation develops, and this should lead straight to the bank of a river of tears.

Fast Money
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