CME Fail II

Unlike the outside day occurring on June 21st, today's came with the market in a more technically positive position...




Thus, there appears opportunity to raise additional capital and further build short positions over the first few days of the fourth quarter while the fifth and final wave up from late-August bottom forms. Yet given today's second "CME fail" of the week, it is evident that strong hands have power to keep any further gains in check.

The lessons of a third wave's resiliency have been served up with great consistency since March '09 bottom: first in five waves forming a "c" wave from March 2009 - April 2010, and now in five waves off late-August bottom forming another "c" wave. Surely, the upcoming third wave down will prove no less resilient. Should this be slated to complete the corrective wave begun in October 2007 the devastation will be incredible.

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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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1980 No More

Back in the day — the early-1980s — the Federal Reserve was a cloistered, secretive body whose deliberations by and larger were kept a mystery. Today the Federal Reserve is a bunch of blabbermouths whose disparate opinions among voting members are made widely known without delay.

This contrast is raised because, back in the day a great opportunity in the stock market lied ahead. Today, contrarily, an historic reckoning appears at hand, and bigmouths like the Fed chairman and Boston Federal Reserve President, Eric S. Rosengren, only make obvious the fact that, deep-seeded, fundamental systemic problems are the ultimate source of the stock market's vulnerability.

Back in the day there was wide latitude for Fed accommodations of every sort (including greater openness). Today, however, the only latitude the Fed maintains is power to publicly engage one incompetent blunder after another, the likes of which presently are being manifest with threats to monetize dog droppings if this might enliven animal spirits among a much larger mass of captive interests than existed thirty years ago.

This subtle observation is something both young and old investors alike probably are well-served to appreciate. Sometimes we get caught up in the moment and fail to step back and consider our radically changed "cultural landscape." History is replete with contrasts that, in hindsight demonstrate changed states as representing anything but progress — indeed, quite the opposite. This is one such moment. The reality of it is obvious, although not yet widely acknowledged.

Enter a mind stuck in the past (but one among majority interests)...

If only we were in the midst of a bull market! Then, this report of short interest building in stocks leading the charge during this month's exceptional rally might mean something different than it does.

Now, let's think about this. First and foremost, whether or not a short squeeze is behind this month's rally is irrelevant. Stocks most certainly are not being accumulated, and this is all that matters. Volume (or lack thereof) plainly reveals this fact.

Likewise, diminishing volume — the perpetual trend since March '09 bottom — demonstrates that, hope-filled suckers, bruised and battered, largely are holding their positions rather than increasingly offering them up for sale. The market's levitation over the past year has been achieved as a result of this, allowing time for wiser players who rightly fear the moment opportunity to reduce their exposure and raise capital.

(Not long ago I made the case claiming their distribution was done, and I am standing by this conclusion.)

One obvious question not covered in the above report is this: who are these shorts? Well, their names we cannot know, but the depth of their pockets is plain. These are not weak hands. Were they, would their number continue rising while the market's levitation persists? Of course not.

So, cite an increase in short interest all you wish. That strong hands likely are building it supports the view that, this is not a bull market. These positions aim to profit during the approaching train wreck and, as is being amply demonstrated, are not subject to being squeezed.

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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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CME Fail

Despite positive, pre-market futures indications, today's open was incredibly soft...




Two gaps lower reveal yesterday's final hour created a serious crack that, no save over the remainder of the day disguises. Indeed, this morning's downside follow-through to yesterday's lousy close raises concern that, top in fact is in.

Two things are certain. One, trading like that at today's start is unusual. Two, someone was raising capital and doing so with haste, finishing a job begun during yesterday's last hour.

So, today appears to have delivered more direct, trading-driven indication that, a forecast, strong turn lower — quite possibly devastating — is drawing near.

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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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Here We Go, Bud ... Almost

Sir Elliott Wave comes armored with fine technical substantiation...




For those paying attention that's a brand new wave count labeling five waves down from April top ... and three waves up correcting this decline. The third wave (i.e. wave c) of this corrective wave is seen presently forming.

A third wave's typical "dynamic" character is confirmed by both RSI (top panel) and MACD (bottom panel). Yet that both these measures approach levels at which a reversal appears likely — this for several technical reasons — one can more assuredly suppose this month's advance is completing the better part of but a corrective wave.

Volume, too, is seen confirming this a corrective wave ... first, by its absence during this month's advance relative to that accompanying August's decline (look closely) ... and second, by its persistent contraction since late-June bottom.

One well-established trend since March '09 bottom has been momentum's levitation (and this at ever-declining peaks). The last instance of this led into April top. There is no reason why we should not expect the same here, too. Thus, wave 4 of c is seen presently forming ... leaving wave 5 of c upcoming ... and then at last the very real threat of collapse.

As you can see, then, the market's levitation might continue into early October. Today's trading — holding Friday's CME-driven gains — confirms this. Likewise, today's final hour — its decisive bout of profit-taking — indicates both a powerful dose of long interest leaving, and just how thin is the bid underlying the market's advance this month.

Top might not be here, but it surely is very near. Yet another day passes and still, every technical measure continues supporting probability the market is proceeding toward a precipice from which a strong turn lower could ensue.

(Elliott Wave International Founder, Robert Prechter, today on CNBC)

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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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Zen and the Art of Faking It

So, have you come to see Elvis is dead? Or are a flood of dolts — lost in the past — intimidating your keener sense about the stock market's precarious state — its most perilous in many decades?

Surely, nothing about today's lift was unforeseen...




Levitation that began on September 13th when the NYSE Composite Index jumped above its 200-day moving average — something forecast to evolve in a fashion similar to what followed August 1st's jump — has developed precisely as expected.

Momentum (MACD) — still fading — now is seen flattening, just as it has at every top this year. Like clockwork, too, upon today's rise to a new high off late-August bottom relative strength (RSI) is seen diverging, further confirming that, weakness is building.

A multi-month corrective wave forming following the market's initial decline from April top clearly is ending, and a crushing leg lower is imminent. Fast Money traders — unanimously bullish following today's rally — "get it" no more today than they did early-July, when wiser then was expecting the unexpected while they stood united in bearishness.

One other thing worth noting above...

Despite a sizable lift off Q2 bottom going into the latter half of June, the quarter still ended very poorly. Indeed, following today's rise we appear at a point quite similar to Monday, June 21st. Thus, in but a mere matter of hours a strong reversal lower very easily could commence.

If September should end on a sour note (a mere four trading days from now) do not be surprised, then. The set up for disaster is complete. The next five weeks could be among the market's worst ever.




Trading on NASDAQ confirms the peril. The sudden leadership of this more speculative class of equities — particularly since September 13th — reveals something of the same depth of complacency underlying stock trading much as was present in August 2008.

NASDAQ's leadership over the NYSE at this point, too, is all the more conspicuous when you have a look under the covers...




Hello death spiral. If this is leadership, stocks are doomed.

Really, though, the market's frail state is best seen contrasting cumulative advances-declines on the NYSE...




It's the same old, same old. NYSE-listed issues are being bid higher by the penny after being throttled by the dollar. That's why the NYSE Composite Index continues lagging so badly.

If the mountain of advancing issues off March '09 bottom were being built by strong hands accumulating shares, then their presumed buying interest — apparently still growing — certainly would not be expressed so consistently in small dollar increments, and this for such an extended duration.

Animal spirits rich enough to deeply touch NASDAQ simply are neither present, nor building. Animal spirits on the NYSE are a capital-poor display. Such meets a multitude of technical indications supporting an Elliott Wave view forecasting a steep decline straight ahead.

If you have been checking on evidence cumulatively presented here, then you see with your own eyes trouble looms. Not one thing has developed to challenge the perspective taken on a number of technical measures. You could not ask for more certainty about the risk of a serious sell-off straight ahead. These are times when aggressive trading is made a low-risk proposition.

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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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Well-Poised for An Outlier

Prior to the flash crash of May 6, 2010 I had never before heard the name Mark Fisher. During that evening's Fast Money broadcast Fisher was interviewed and spoke about the fact that, because energy market trading was closed at the time the stock market's flash crash transpired, crude oil was spared a $20 haircut. (See "The Fat Finger Called Glass-Steagall" for Fisher's interview.)

Oddly enough, just last night it seemed appropriate to summons the spirit of that day's chaos in anticipation of more to come. And who makes an appearance on tonight's Fast Money show? None other than Mark Fisher...

Fisher's remarks during the first two minutes are of interest here....

"Outright fear," eh? Well, apparently bullish investors surveyed by the American Association of Individual Investors haven't gotten the message. Fisher's conclusion regarding policy response to date, and its affect on market psychology, certainly jives with my sense, too. One is not at all crazy to think that, at best, time for battening down the hatches has been bought.

Enter the Fast Money chartmeister, Carter Worth...

Worth concludes the market is at "a moment of equilibrium." It's the same conclusion I recently made via OEX monthly RSI.

But "muddle" going forward? With Fisher's "outright fear" driving market psychology? (Indeed, is not this the principal cause for "leadership" resting with large cap issues paying a respectable dividend yield? [David Goldman is chasing these, too.])

So, add an Oppenheimer technical analyst to a very crowded complacency camp.

It is this element — widespread complacency — most concerning to that fear of a giant gap lower catching most everyone off-guard. Complacency is meeting a lack of political will to honestly deal with deep issues affecting financial security: a condition also breeding "outright fear." These opposing mindsets really make for fine opportunity to press upon both and make a killing — first, playing fear to drive the market sharply lower, then counting on complacent suckers to feed their shares at bottom.

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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.

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

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The Voice of Spectacular Collapse

This seems as good a time as any to embrace the spirit of coming chaos, because there is sufficient reason to believe a chaotic collapse could be just around the corner...

That's Ben Lichtenstein of Trader's audio calling the trade on the CME in S&P 500 futures during the May 6, 2010 "flash crash." (For a transcript of Lichtenstein's call, see comments here.)

Whether what serious bout of selling likely to develop over coming weeks will simply retest March 2009 lows or smash right through them is unknown. Either way Ben's voice should get another great workout.




The pullback so far from Tuesday's peak appears a corrective wave. This wave could extend lower to the range marked via red parallel lines above, or continue with the same upward bias (levitation) along the green trend line indicated above.

Once this suspected corrective wave is completed a final lift to the very precipice (marginally higher than Tuesday's peak) is thought likely to develop. What technical weakness already apparent across several measures probably will increase, as well as broaden with further divergences entering into the picture. Thus, the stage will be perfectly set for the stock market's collapse.

This probably is a good time, too, to make note of my assumption that, the corrective wave forming since October 2007 is at the same level as that which formed from 1929-1932. Presently unfolding is the fourth wave of five waves up since the start of the industrial revolution in the United States (mid-19th century). The 1929-1932 collapse is seen ending the second wave of these five waves up.

As is typical, technical conditions during formation of a fourth wave generally will deteriorate from those accompanying a second wave's formation. Already we have seen this tendency when in 2008 the percentage of NYSE-listed issues hitting new 52-week lows smashed through all prior records.

The coming collapse should be just spectacular. Whether this might be imminent simply is better suspected given the lesson of 2008 when the magnitude of selling far exceeded expectations.

Likewise, whether some manufactured geopolitical head fake might play a part in this is possibility one ought be aware of given that, we are in the midst of a power grab over finance (and by extension, political influence) in an era when "controlled disintegration" (a.k.a. "quantitative easing") clearly is the policy response to the end of the Ponzi scheme that was the securitization market.

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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.

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

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Capital Impaired Pigs Tip Their Hand

It's hard to say whether the market topped today. Chance are it did not. Likewise, one cannot help but suppose every last second possible will be spent milking the vast sea of suckers who neither appreciate nor care to fathom the stock market's precarious state — a condition supported by a wealth of technical evidence.

Much more easily discerned, though, is desperation for capital among those weened for decades on a credit-creating machine equipped with an infinite multiplier that, unfortunately, hit its operability ceiling about three years ago ... and then suddenly seized.




Judging by the trade going into today's close (following FOMC confirmation that, the U.S. financial system remains dysfunctional), winning the day were those who recognize the Fed is a lilliputian, technically insolvent institution in comparison to the public-private partnership that built a mountain of financial claims by such means as affected the most reckless allocation of capital the world has ever seen. The magnitude of mispriced risk — even now widely ignored — absolutely dwarfs the Fed's capacity to maintain appearances of that risk's viability.

Much more capital than the Fed reasonably can provide via "quantitative easing" is needed for that task. Much more capital, too, than a paralyzed, overhead-heavy economy can generate will be forthcoming for as long as such productivity-enhancing investment as has been neglected for decades is left to hope in a public-private partnership whose public side is so weak as to appear pathetically animated by hopelessly bankrupt interests with too much experience in playing a consuming game of make believe using such empirical formulations as have become the work of the "best and brightest" minds of America's premier, higher education institutions.




Friday's volume slipped past my radar. You might recall the tendency since March '09 bottom for volume to peak upon completion of third waves. Whether Friday's volume demonstrates this same tendency is not certain, but it deserves notice nevertheless.

How ever unclear is the Elliott wave count off late-August bottom, last week's outlook for continued levitation remains intact. Five waves up are seen forming and these are thought nearing their end. This is likely to occur over the next few days (if it has not already).

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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.

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

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Everything Zen

Not a thing curious about today's lift. Last week's [unusually] hedged longs apparently became today's [largely unhedged], technically-driven asset allocation into equities.




According to Pete Najarian during tonight's Fast Money "Word on the Street" various indexes saw put volume exceed call volume by 2-1. I would assign to this the same conclusion as was given to CBOE activity the past two weeks: some was for hedging and some was for prospective short positioning.



Diminishing relative strength supports my view that, the market probably is nearing a top and not poising to explode upward (as is claimed by those citing a phantom inverse head and shoulders that is absent such volume as typifies accumulation — first, during the up-leg of the right shoulder, and now accompanying the neckline's penetration).

Look for top toward the end of the week.

The New Bush — Everything Zen

The Original Bush, "Everything Zen"

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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.

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

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The Rabid Bite of a Dead Dog

Returning to last night's OEX monthly chart...




RSI 50 — essentially yesterday's "support" (see 1988-1990+), now seen "resistance" — could prove a pivot point for some months and years ahead, much like the late '80s and early '90s. Thus, OEX support at March '09 low might persist, much like OEX resistance at August 1987 peak did.

Yet then again...

Fear of a credit bubble's unwind rather likely will operate differently upon equity than did confidence during that bubble's effortless inflation. Indeed, we vividly see this dynamic already at work in bonds and gold.

So, a stock market collapse, indeed, could be imminent, putting the ultimate objective for the corrective wave unfolding since October 2007 squarely in the crosshairs. A sub-200 OEX could be reached sooner than most imagine. The question is when might the throttling begin?




On one hand, a still positive McClellan Oscillator (its ominous divergence from August peak notwithstanding) suggests the market's levitation might persist.

On the other hand, the McClellan Oscillator twice since late-May bottom was on the positive side of its balance, yet the market nevertheless turned south and took the oscillator into the negative.

Now, with the market prospectively nearing a decisive turning point the measure of selling restraint thought largely behind its advance so far this month might persist despite a weakening McClellan Oscillator. A useful point of reference here is seen during the week or so leading up to late-April top.




Seeing today's lift to a new high for the month confirmed by 5-minute RSI, there is reason to suppose the market's levitation could continue a few days longer, and that should about do it.

With 51% of individual investors surveyed by the American Association of Individual Investors now bullish, and with NASDAQ this week outperforming the NYSE by a couple percent it appears suckers are convinced that, somehow, someway, the credit bubble blown over the past couple decades can be sustained indefinitely. There even was talk of swapping Irish sovereign debt for equity. But why not just swap it for a pot of gold at the end of a rainbow? Might as well when prospects for further leveraging the globe's fantastic mountain of financial claims are zero.

This fact — the fallout from shattered confidence — apparently is lost on just about everyone. Few are figuring it into their forecasts. Cite all the lovely tails they like, the dog is an ever-expanding indebtedness, and it is as good as dead.

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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.

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

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On the Prospect of Imminent Doom

How is the lender of last resort backstopped? Of course, it is with tax revenues. So, might the Bush tax cuts simply be left to expire at year end?

Last Friday I thought the stage possibly was being set for a "coaxed" extension of the Bush tax cuts. However it occurs to me that, failure to legislate an extension might be thought best given the financial system's still awfully precarious state.

Consider this prospect in the framework of a herculean effort to maintain the illusion of normalcy made over the past couple years in an attempt to buy time so excesses might be worked through. Well, the excesses — in fact, historic imbalances — are proving rather momentous. Were taxes set on a course to dramatically rise, then, suddenly, any illusion of a near-term return to normalcy might be shattered.




It has been some time since a longer-term view has been assessed. My, how monthly RSI suggests the present moment probably is best thought extraordinarily precarious!




Ditto weekly RSI.

From this perspective an imminent trip back down to March 2009 lows might be a "best case scenario," for it rather appears something much, much worse could be in store. Richard Russell's forecast earlier this year for an unrecognizable country by year end, indeed, has real possibility. Collapse could be at hand.

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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.

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

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Currency Crisis Brewing?

Updating Monday's view, nearer still is a great discrediting...




And proof is in the hedging...





Shall I babble on, or do you get the picture? This in the midst of technical weakness everywhere.

Now, about the BOJ selling yen ... is that blood I see in shark infested waters? What next? Capital controls? I see, too, the heat on China to float its currency is being turned up a notch as well.

So many imbalances! Such tight constraints on capacity to keep everyone happy. Flight risk grows. This while leverage makes many a highly correlated trade all the more precarious. Should some unwind lead to a scramble for capital, then it will be bye-bye equity.

In parting wonder could sub-prime breakdown be to the securitization market's freeze (2007 - 2008) as another Asian currency crisis is to the collapse of the post-Bretton Woods, floating exchange rate system?

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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.

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

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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.

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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.

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

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Nearer a Great Discrediting

It's like August 1st, but in September...




A similar rush to a peak also occurred on July 13th. Much like both these prior instances when the market flattened out for some days following, then turned south, the same appears in store following today's leap higher.

Long fading momentum — the trend for a year and a half — meets a moment when a wave sharply lower is thought the likely path of least resistance. Long-fading volume only adds icing to the cake.

With little buying interest keeping the market levitated — rather restrained selling has been doing the heavy lifting — one can easily imagine how quickly outright collapse could come to pass amidst vulnerabilities no gaggle of incompetents calling themselves "regulators" could pretend manageable given the true, insolvent state of the global banking system. Were not many investors convinced yesterday's lies and frauds persist — these having been tolerated while easy money could be made — then, surely, we would be seeing a whole lot more volume underlying the bid.

Just how many more hours spent drawing in every last sucker before the trap door is sprung is the only mystery remaining here...




The altered wave count you see above conforms to typical RSI behavior coinciding with a five wave advance. Whether wave 3 completed today remains unclear. Given this wave count, one might suppose this week's expiration of September options and futures likely will pass without serious incident.

No matter. The risk of collapse has never been greater. This is the trend that is your friend. Proof is in the long-developing rush into Treasuries and gold. Contrary fairy tales of central bankers, politicians and financial commentators alike merely are distractions — sucker food packaged by Alan Schwartz & Co. — as these surely find suitable parallel in 1945 when the Russians were on the outskirts of Berlin and victory for the Third Reich was just around the corner. A great discrediting nears.

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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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