Could Crater Any Moment Now ~ The Risk Averse Alert

Tuesday, October 05, 2010

Could Crater Any Moment Now

NOTE TO FUTURE SELF: when you hear of central banking authorities expressing willingness to backstop equity, you can be sure the globe is awash in a boatload of worthless wall paper.

Well, this is it: the precipice from which stocks quite possibly slip into the abyss. Technical divergences and other indications of weakness abound, as do signs that a breakdown in the global financial system proceeds unabated.

Yet also continuing is adherence to the false promise that, another round of Fed inflation can save the day. At least, that's the general slant we are given. It's how today's rally is sold to those more gullible souls among the money management community.

Listen, the gig is up. Create conditions wherein costs are sure to skyrocket, and chaotic breakdown will be here faster than you can say Wiemar Germany. Tragic is the fact we are voluntarily proceeding to this conclusion. Why protest, though, when only the sooner will come opportunity to pick up choice assets for pennies on today's dollar? This clearly is the goal. Be it by deflationary collapse or hyper-inflationary blowout, both offer the only remaining means by which the transnational swindle called "globalization" might be furthered.

OEX 5-min

The past eight days could prove instructive to what lies ahead going into October options expiration (Fri. 10/15). Although the end of the market's counter-trend rally off late-August bottom appears at hand, a more or less sideways trade setting up the market's subsequent collapse could develop. Thus, respective 200-day moving averages could continue offering near-term support.

That said, don't be surprised if by the end of the week major indexes are challenging 200-day moving averages. Then, going into expiration we could see buoyancy correcting this pending, initial leg lower ... only to be followed by collapse later this month.


I keep going back to what appears a significant volume clue. May's breakdown from top accompanied by volume unrivaled since the awful days of '08 and '09 sure looks a lot like July '08 in relation to January '08.

Seeing that July '08 was the culmination of but a first wave down, the market's decline from late-April to late-June (2010) is thought the same (i.e. but a first wave down). Indeed, the reality of "right fear" displayed in July '08 is seen present once again ... and once again, too, apparently is meeting widespread belief in the manageability of today's systemic threats.

Relatively speaking, no one is acknowledging the magnitude of global imbalances we are up against. Yet their impact continues pressing on what still are ill-equipped regulators who now stand exposed playing a game of chicken. "The market," indeed, appears to have "seen" this coming, with persistently diminishing upside volume since March '09 bottom a red flag revealing little conviction in the staying power of the present constellation of interests.

So, fear's further manifestation in light of our financial system's still vulnerable state is thought awaiting a stock market now in a technically ideal position to crater at any moment.

(p.s. Today's best volume since late-August bottom warrants a look back to volume going into April top. Then, too, the best volume since early-February bottom was registered ... and this at the conclusion of a substantially volume-less advance ... like that since late-August ... yet this time on even less volume. Such fearlessness at what might prove a most inopportune moment!)

Fast Money
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