The Foul Smell of Complacency ~ The Risk Averse Alert

Monday, January 31, 2011

The Foul Smell of Complacency

The measure of misplaced optimism — complacency — one typically finds prior to a devastating stock market collapse continues to be vividly evidenced by the NYSE Bullish Percent Index...


Relative to May 2008 (when the NYSE Composite Index traded at 9500) a larger portion of NYSE-listed issues presently support the NYSE Composite's levitation at levels considerably lower (approximately in the range of 7000-8000 over the past year).

More critically, though, back in May 2008 there was at least some measure of skepticism at the conclusion of the market's rally following its initial decline from October 2007 peak. Now, however, skepticism has evaporated. This despite the market's brutal decline preceding this rally, whose bottom was reached in March 2009.

So, there you have it. Plain as day. The place just reeks of complacency. Given no shortage of systemic threats, this bullish disconnect rather substantiates probability that, the market, indeed, is on the verge of a collapse that, stands to catch the vast majority off guard ... as always.

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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