1974: The Exception Rules

The media mouthpiece cheering on the bankrupt enterprise called "globalization" today tells us that, since 1941 there have been twenty-six occasions when stocks were positive in both January and February (much as has occurred this year), and in all but one of these instances the market finished positive for the year.

Well, wouldn't you know it, the one year when this positive precursor did not pan out was 1974. 1974: featuring exactly the sort of correction-ending, devastating, cascading selling accelerating into bottom much as I am expecting this year.




The view above presents prospect for but the first wave of devastation ahead. The hard turn lower begun last week should continue any minute now.

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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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Bounce Reveals But a Bad Case of Complacency

Only a slight change to yesterday's Elliott wave view dissecting the market's decline since last Friday's peak...




As well, a slight adjustment to the line marking relative strength's "crossroad" mentioned yesterday — this coinciding with RSI lows reached during formation of a "rising wedge" off late-June 2010 bottom — reveals a break whose significance increases probability that, a rising wedge indeed completed last Friday (2/18/2011) and is on the verge of being rapidly retraced (much as the Elliott Wave Principle indicates is typical following completion of this special wave form)...




That the CBOE Put/Call Ratio and the VIX continue displaying noteworthy similarity to the late-April/early-May 2010 period ... while volume today reveals a very bad case of complacency (with conspicuously absent fear apparently still on holiday at Club Fed) ... a 25-40% gouging over the next several weeks remains a real possibility.

Now, the presently forming second wave of five waves down from last Friday's peak might result in a brief dance around the 50-day moving average, both above and below it. However, its penetration should come sooner than occurred following April 2010 top, that the greater significance of last Friday's top — its being accompanied by a fuller measure of underlying technical weakness — might be further confirmed as a result.

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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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Toward a Bull Market in Preparation H

For your consideration today is the following, prospective Elliott Wave view dissecting the market's decline this week...




Using relative strength as a guide in applying the above Elliott wave count we see a very typical RSI configuration coinciding with the various waves of a presumed 5-wave decline from last Friday's top (2/18/2011). Third waves produce worse RSI readings than were recorded during preceding first waves, and fourth waves produce better RSI readings than were recorded during preceding second waves, while fifth waves produce RSI readings that fall short of those recorded during preceding third waves.

Third waves generally being the most "dynamic" Elliott waves, a third wave down typically will produce the worst RSI reading. We see this in the above Elliott wave count.

Indeed, it was as the third wave of a third wave of a third wave down unfolded just before 1:00 pm on Tuesday that RSI recorded its worst reading thus far over the course of this week's decline. Curiously enough, too, the green line drawn above separates first and second waves from third, fourth, and fifth waves in a manner perfectly dissecting Tuesday's third wave of a third wave of a third wave (i.e. wave 3 of iii of 3).

Already, RSI registered during formation of wave 4 has bettered that recorded during formation of wave 2. So, wave 5 could unfold promptly and complete five waves down from last Friday's peak.

Now, whether wave 4 completed late this afternoon remains to be seen. Once it does and wave 5 follows, our focus should be on the prospect that, these five waves down mark but the first wave (i.e. wave (1)) of a larger five wave decline from last Friday's top, whose unfolding might rapidly clobber the market for a stunning hit in the ballpark of 25-40%.




Relative strength (RSI) and momentum (MACD) reveal technical conditions at a crossroad. This same precarious state is revealed by several other technical measures.

If over the next couple trading days some change in underlying conditions portending a possible improvement in the market's immediate prospects fails to materialize — this that further levitation might develop (argh!) before the lug nuts fly off — then a rapid decline toward the 200-day moving average could prove the path of least resistance over the next week or so.

It's not difficult imagining how technical deterioration might beget the same, and this coincident with fast sinking markets over the next several weeks. Those who are bullish stocks had better check the Vaseline for sand kicked up by global protests increasing by the day, all of which are being precipitated as a consequence of an accelerating breakdown of the global physical economy. The likes may delude themselves with hope for QE until kingdom come, but seeing clearly already what terrible damage this hyperinflationary policy has done, the question really is whether this insane policy's repudiation might coincide with blood in the streets coming from a source making for a bull market in Preparation H.

Now, I have been wondering what I might replace those first two items under "Things I Believe" once these come to pass. Tonight I have stumbled upon my first candidate...

"There's always a bull market somewhere, but the price of finding it might be a nasty case of hemorrhoids."

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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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Heads Up: Duck!

So far, so good in the quest for top from which the market upon reaching might crater soon after. That top very well could have been reached last week.

Technical evidence supporting an outlook for a broad-based gassing, of course, has been long in the making, accumulating without challenge over the interim of the market's advance off March '09 bottom, and furthermore confirming what now is a decade and running distribution of shares from strong hands to weak (among which finds white shoe firms, as well as countless hedge funds, whose excessive leverage worked beautifully on the way up, but acts as a knife in the back now that leverage can no longer be furthered at necessary rates required to forestall calamitous collapse — pity, and I mean this sincerely, as many livelihoods are threatened, as is the life of many nations including the United States).

Now, being so early in the present, prospective realization of the market's forecast unraveling, all due diffidence is in order, that some last gasp effort extending the market's levitation might be accommodated. Yet given the granularity of evidence supporting the possibility that, a "rising wedge" forming off late-June 2010 bottom, indeed, completed last Friday (2/18/2011), deserving immediate attention, then, is the weight of evidence raising prospect that, a 25-40% collapse over the next several weeks could develop.




Momentum (bottom panel) — now having turned lower in a fashion similar to mid-April 2010 — sets the stage for further weakness straight ahead. Yet given that, this measure remains pinned to the positive side of its balance — a price-supportive condition whose existence has extended over the past five months — some retracement of the market's decline this week along lines occurring over the latter half of April 2010 could be in order. Relative strength (top panel) — likewise still positively positioned — further supports this view.

Still to be seen, though, is whether any near-term bounce might prove "lasting," extending for a period lasting several days and raising appearances that, the market's further levitation could be in store. Yet there's also reason to suspect the market might fall apart more rapidly than occurred last year...




Relatively speaking, the sharp pullback in the NYSE Bullish Percent Index — this following the measure's divergence from prior peaks over the past year coinciding with the NYSE Composite index trading at lower levels — appears a red flag.

No doubt, this measure's break is fitting underlying conditions coinciding with the market's advance since early-December 2010, as the fifth wave of a presumed "rising wedge" forming since late-June 2010 unfolded. Over this duration upside participation notably narrowed (as evidenced by the NYSE Advance-Decline differential). Thus, the NYSE Bullish Percent Index's present, sharp pullback further demonstrates a measure of underlying technical weakness substantiating a bearish outlook whose imminent manifestation might be thought elevated as a consequence.




With only modest increase in hedged, long equity positions (this via put options) as this week's decline has proceeded — these potentially acting to put a floor under the market — we have more evidence that further selling could rapidly develop ... much along lines following April 2010 top.

Judging by positive momentum of the Put/Call ratio (bottom panel), a period of weakness could be at hand sending stocks lower until such time a well-hedged, long equity bid once again enters and provides price support. Most noteworthy is the rightful, coincident manner in which the Put/Call ratio's increasing momentum has been evolving as a presumed rising wedge forming since late-June 2010 has been moving toward completion, quite possibly reaching its end late last week. And now prospect this rising wedge might be rapidly retraced via an imminent 25-40% haircut likewise appears supported by the CBOE Put/Call ratio's return to a positive momentum bias following this week's bounce off that measure's "0 line."

Considering similarity here to early-May, 2010, when the Put/Call ratio's momentum likewise turned decidedly positive, the message, then, might be heads up. Or better yet, duck!

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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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Wall of Worry Destroyed

There's a good chance today's break marks the beginning of the end, as the NYSE Advance-Decline differential saw its worst day since late-June 2010 bottom....




Recall that, this measure confirmed the component waves thought forming a "rising wedge" off late-June 2010 bottom. So, assuming this special Elliott Wave form indeed unfolded over the past eight months, its completion appears signaled by today's broad-based decline.

However appreciating that, an increasingly isolated assortment of desperadoes propping up a bankrupt trans-Atlantic financial system might have a final trick or two up its collective sleeve, let's save the "end of days" call for sometime in the not-too-distant future when holes in a dike short of fingers to plug them develop into gaping cracks destined to precede all out collapse.




Now, when did we last see a similarly violent, 5-wave decline whose effect rapidly erased a preceding advance?




Ah yes, it was during last year's "flash crash." Thus, this week's worst might have come today, leaving the remainder of the week for consolidating today's loss and setting up for much heavier selling still to come.

Despite today's pickup in volume, share turnover was notably less than occurred mid-April 2010, when the market made its initial turn from top then. This offers more proof that, the so-called "wall of worry" has left the building, reserving for some future date the fleecing of a crowd whose present, misplaced faith will not dissipate until much lower price levels are reached...

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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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Faith (in markets) Without Works Is Dead

"Nothing is more common than for men to pass from the abuse of a good thing to the disuse of it."
— Alexander Hamilton

That is a quote possessing at the moment several forms of meaning. Most imminently, it speaks of skillfully played gags presently bolstering faith in risk assets and restraining such fear as in bullish times otherwise precipitates increased selling of shares over the course of an advance in the stock market. This is the so-called "wall of worry" the market is said to climb — an abstract notion made real where the rubber meets the road when money changes hands, and measured by the volume of shares exchanged. Nothing of this worry has been displayed over the entire course of the market's rally off March '09 bottom. "Thus also faith by itself, if it does not have works, is dead." (James 2:17) Another twist on the current situation, and my sentiments exactly.

"Abuse" presently is valuing too much a past whose impossibility of re-establishing has become only more plain with time's passage. Absent capacity to further leverage an economy in an advanced state of physical breakdown, the past rather is fated to fade in the memory of an ongoing reckoning with a mountain of badly mis-priced risk whose illusion brought yesterday's "prosperity," that now with backing from lenders of last resort brings faith still to abound in the return of that illusive prosperity's promise. However such belief appears fated for "disuse" at the depths of collapse whose elevated probability is proportional with the impossibility of restoring confidence necessary to revitalize a credit system equipped with an infinite multiplier. Indeed, Hamilton's observation well-summarizes that shadow banking system of old whose last hope rests on GSE reform leveraging every last dime of the U.S. Treasury (this in desperate attempt to extend fantasy insisting that, "it's a liquidity, not a solvency crisis" beleaguering the trans-Atlantic financial system) and whose added policy agenda requires taxpayers be gouged that Treasury's coffers find adequate backing. Pity this isn't 17th century, colonial America, when, because of technological constraints, it took decades to form a consensus in opposition to such overreaching frauds. Seeing the effects of physical collapse beneath it all now being met with increasing revolt across the globe, well, how does one not fear that, it could be game over for lowly equity?




That said, a couple long-held beliefs of mine find suitable moment for reaffirming. First, the Dow Jones Industrials Average could fall to 3600 tomorrow and still remain in a long-term uptrend. The area in which this index traded in the 1987-1994 period is indicated above. This is the range to which I expect the average to fall even as soon as over the next twelve months or so.

Now, despite unsettling imagery one's mind might conjure upon reading my long-established (and still well-confirmed) bearish case described with words like "chaos" and "collapse," let's not ignore those many decisive battles and lessons predating this moment and extending over many centuries. Let's not suppose great leaps made inevitably must be followed by great falls.

No doubt history reveals many horrors and a river of tears, even in an uptrend wherein mankind barely has scratched the surface of discoveries allowing it to radically improve life on this earth. Yet despite terrible setbacks, advancing means elevating mankind's attainment of its natural and intended perfection simply press upon our collective experience over countless generations, every last one of which found many who were called into purpose toward this end, but few who were chosen in truth as a path maker. Our generation will be no different, nor will any that follow. No scam invented by man could ever alter this.

Yet impede progress to the point of causing a plague whose effect wipes out a third of the population of an entire continent? Been there, done that, don't need the wake up call...

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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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A Rising Wedge Completing a Rising Wedge

The other day I suggested that, the final wave unfolding in formation of a "rising wedge" off late-June 2010 bottom might be, itself, forming a "rising wedge." Here's a view presenting this possibility...




As you see, wave c of 5 appears to be forming a "rising wedge" off late-January 2011 bottom, with its third wave probably unfolding presently. Still rising relative strength and momentum (yet both still diverging) support the view that, wave c of 5 has legs remaining.

So, were a rising wedge completing a rising wedge completing an a-b-c corrective wave off March '09 bottom, then in no more than ten trading days should the plug be pulled on fantasy that, lenders of last resort can forever backstop a bankrupt arrangement whose perpetuation requires increasing sacrifice the likes of which several generations of Americans now are becoming disinclined to swallow quietly.

For now is fairly seen an extraordinary moment finding pitched voices crying out, "Fed dictator Bernanke needs to be toppled." Yet only were every monetarist fraud likewise removed might answer be given to a perplexing quandary feeding popular rage: "Why isn't Wall Street in jail?"

Restoration of shattered confidence awaits.

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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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Clarity Through the Magic of the Market

Congressional representatives whose political fortune depends on the impossibility that, fantasy masking spreading insolvency might prevail indefinitely, that cowardice displayed today in response to the Financial Crisis Inquiry Commission Report might not sorely irritate those 100-to-1 among constituents who in 2008 rightly sensed they were being swindled in the rush to bailout an unsalvagable entanglement created via a fraud-rife Ponzi scheme whose most visible effect has been the ruin of millions: welcome to the gateway of your political doom.

There is no way the game of semantic head fakery will fly through devastation straight ahead, as the Great De-leveraging proceeds as it must. At hand is the hour necessitating sudden command over fraudulent financial claims — a capacity that, otherwise is proven effectively raised with constitutional power granted the House of Representatives to "establish ... laws on the subject of bankruptcies." With 100-to-1 staunchly opposed to any further bailout swindle — be it through the front door or the back — there is but one inevitability: Glass-Steagall. Indeed, were restoration of the 1933 Banking Act well on its way to being accomplished by the end of this year, thus would be circumstance fitting an outlook projecting, first, the worst year in the history of the stock market, followed by a bottom rivaling that in 1932.




All things technical continue supporting the possibility that, a dizzying decline could commence at any moment. Warning much the same is today's unanimous bullishness of Fast Money traders. Their positive disposition stands in stark contrast to the same group's unanimous bearishness in early July, 2010, when the "rising wedge" whose completion is at hand was just beginning to take form.

Likewise, today's excitement over the fact that, the S&P 500 has doubled from its March '09 bottom stands as a red flag. Any double off a lasting bottom rather should be met with great skepticism. There is none today.

Seen in light of those historic, systemically threatening vulnerabilities as precipitated collapse into the bottom from which the S&P 500 now has doubled, presently revealed, then, is but widespread complacency believing the worst has passed. Yet when everyone believes — with skepticism conspicuously scant — who else remains, that belief's reward might be all the more assured?

If all believers largely are in the game, then how might support grow?

Thus, do foreboding questions with no compelling answer gain clarity through the magic of the 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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Oscillating Upon the Threshold

The masters of monetary shell games today featured their U.S. Treasury Secretary pitching a budget plan whose irrelevance to the collapsing Ponzi scheme bankrupting the trans-Atlantic financial system took no more than 45 seconds for the Secretary to make plain. Next subject...

The game ending potential manifest in a NYSE first becoming a "for profit" business in 2005, now given to risking its ultimate "utility" as an established facilitator of equity capital in the United States is a curious state of affairs at a moment when a good 75% or more of U.S. equity value could be wiped away within the next year or so. Coincidence? I think not.




Examining the McClellan Oscillator during formation of a presumed "rising wedge" off late-June 2010 bottom we see the oscillator's consistent, positive position (albeit persistently diminishing) as each impulse wave of this rising wedge approached its end. Not until the oscillator turned negative did corrective waves take form.

So, here on the verge of the McClellan Oscillator turning negative we have a potentially useful indicator confirming completion of this rising wedge, as well as raising probability that the market's collapse is 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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Collapsing Odds on Tranquility

A concentrated collection of bankrupt, global financial conglomerates whose leverage only fools believe can be sustained still today finds its head in a noose whose tightening now but awaits a trap door's opening by a Congress acting to bring the Egyptian riots to the United States, and stat, all in the name of some insane cause they call "fiscal discipline."

Stupid is as stupid does, and with "tough choices" to be made for the sake of sustaining bailout falling upon a generation whose peers took to the streets in the 1960s protesting an out-of-control government escalating war in Southeast Asia, we might see 2011 bringing walkers and canes raining on the White House lawn one day, while empty prescription bottles shower the Capital, this in response to Washington's preliminary, bi-partisan focus on cutting "entitlements."

Yet, then, too, might many dozen, strapped college administrators conspire that students walk like an Egyptian? (Make noise, win a prize.)

One simply wonders whether any attempted, further sinking of the U.S. Treasury occurring in the upcoming battle over the federal budget might serve to dramatically alter the social and political climate here at the epicenter of systemic collapse. Thus, too, does one wonder whether Treasury's ultimate sinking at this time might prove most useful to those backers of causes possessing distinctly anti-government sentiments, the likes of which have been made rather fashionable these past fifty years.




As you see, the market's strained march toward cliff's edge continues with further upside likely remaining, affording still more pretend time before the precipice, at last, is reached.

All eyes still remain fixed on the exits. This conclusion delivered by underlying technical conditions rightly should be seen a natural outcome in a climate demonstrated rife with fraud — a scourge whose presence is boldly revealed even now with political focus on "deficit reduction" rather than that full measure of scam prevention as alone will restore confidence.

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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...

Get Real-Time Trade Notification!

A Foreboding Question With No Compelling Answer

Technical conditions raising prospect that, the stock market could imminently collapse remain intact — nothing challenging this prognosis anywhere, and this now for many consecutive months — and so, a simple point of reference in this context for your consideration...




Should momentum's presently flattening, diverging state (lower panel) persist as a technically well-justified "rising wedge" completes its formation over hours ahead, then the market's collapse — a possibility technically well-substantiated — is better feared at hand.

Unlike April 2010 peak which saw coincident momentum confirmation, the market's approaching peak more reasonably should coincide with a momentum divergence in keeping with an outlook supposing that, the top at hand will not soon be exceeded.




It's the same message from large-caps leading the market's rally since early-December 2010. Indeed, over the entire duration of this year's trading thus far momentum continues confirming growing, underlying weakness long-revealed by several other technical measures.

Yet, still being positively positioned, there appears underlying strength enough to buy at least a few hours more of levitation. Then, something along lines as developed late-April 2010 should develop, and kick off what might become the worst year in the history of the U.S. stock market.




NASDAQ completes the picture. Relative strength and momentum divergences galore, while a five-wave Elliott wave channel forming off March '09 bottom reaches its completion.

Now, a question...

What news brought on the crash of October 1929? October 1987? Or NASDAQ's collapse in the second quarter of the year 2000, wiping out 40% of its value in a mere matter of weeks?

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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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Angry Streets ... Everywhere and Cairo

Hat tip to Egyptian President, Hosni Mubarak. Backbone is such a rare trait these days.

No dictation from outside Egypt will be tolerated, you say? A 15% wage increase for everyone? But won't this tweak that handful of insolvent financiers whose mask over bankruptcy needs weak and chaotic political conditions preventing such things? Backbone, indeed.

So, where might a growing threat of social breakdown lead?

Well, for the moment any nation possessing oil, or whose geography is strategic in its transport, it appears time has come for a raise, adding pressure on margins everywhere.

And those nations without strategic resources? Having nothing to lose and everything to gain in peacefully taking to the streets ... with historic strides in national identity waiting to be made ... one wonders how long before Ireland, England, Spain and Italy EXPLODE.

It is strange, though, how growing risk of social disintegration coincides with a national terror alert being called by the Homeland Security Secretary the most severe since 9/11 in some ways.




Unable to depict the full breadth, time-wise, of the market's anticipated levitation over days ahead, you see a sense of it in tiny gains remaining to be made before wave c of 5 completes ... this likewise prospectively completing wave C of an a-b-c corrective wave up from March '09 bottom and setting the stage for the market's subsequent collapse.

Unfortunately, only in hindsight will be proven my assumption that, time is precious, indeed. Still, every instance of what for months has been persistently growing, underlying technical weakness continues supporting this point of view, this by a long-developing configuration plainly and consistently revealing the risk of collapse is quite considerable.

Growing harmony among interests in both the political realm, as well as the stock market make for a rising tide, socially and financially. Plainly, harmony has left the building. Everywhere, this is what we see. You don't need me to connect the dots. No doubt, risk of chaos is increasing...

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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...

Get Real-Time Trade Notification!

Selling Restraint Raising the Risk of Collapse

Supposing that, a financial system living on trillions of dollars in life-support from lenders of last resort — trillions that cannot possibly be repaid under present physical conditions — is, in fact, a financial system living on borrowed time, let's assume, then, every last second available to offload as much risk as possible without upsetting the applecart will be exploited, thus extending formation of what still appears by all technical measures a confirmed "rising wedge" unfolding off late-June 2010 bottom...




So, consider in this light the above, prospective Elliott wave count labeling five waves forming wave c of 5 (whose completion will mark top both to the "rising wedge" forming since late-June 2010, as well as the market's counter-trend rally off March '09 bottom). This view raises the possibility that, the market's levitation might persist a few days more without displaying much, if any, price weakness suggesting collapse is just around the corner.

There are other, prospective Elliott wave counts by which wave c of 5 could unfold, and likewise extend the market's levitation, this notwithstanding the extremely limited upside remaining within the confines of the "rising wedge" believed to be forming off late-June 2010 bottom. For example, another, smaller "rising wedge" could form wave c of 5 itself ... with but its first wave completing at yesterday's close (2/8/2011).

Come what may between now and top, were some explosively disruptive circumstance to rather immediately precipitate a dizzying decline upon the market reaching its summit, thus trapping a majority of interests who then are left with no other alternative than either swallowing some significant loss or holding another decade or more in hope of breaking even, who could be shocked given an abundance of evidence warning of this risk well in advance of its actually coming to fruition?

Ongoing selling restraint whose effect has extended the market's levitation has not, and likely will not, diminish this risk. Indeed, that restraint has persisted makes only more probable the market's subsequent, sharp contraction, particularly were some fear to develop raising the well-justified, yet frightful risk of being the last long interest to reach the exit door...

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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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Hopelessly Insolvent (and All Captives) One Day Nearer Extinction

It appears there is some difficulty increasing interest in rights to own wildly overpriced equity whose risk of evaporating under a crumbling mountain of debt is even more pronounced now than three years ago, when lenders of last resort were not so completely exposed as being no more solvent than the banking systems whose integrity over several decades they had been part in destroying with the blind eye they lent to that Wall Street-City of London Ponzi scheme dominating a so-called "shadow banking system" employing the use of leveraged credit securities...




So, let's see. Buyers at higher bid prices are evaporating — this being revealed by persistently diminishing volume of shares exchanged — while now, even the hope these might materialize appears to be fading. All eyes surely must be nervously gazing toward the exits these days.

Now, as you will see, too, long equity hedging during formation of an a-b-c corrective wave up from March '09 bottom decidedly confirms that Elliott wave view of mine presently finding the market at imminent risk of collapsing.

Duly note how put option hedging was more pronounced at the start of wave c (late-June 2010) than at any time during formation of wave a throughout 2009. All the more, too, was put option hedging elevated at the start of wave 3 of c (early-September 2010).

Increased hedging is an indication of a more dynamic measure of underlying strength, such as typically characterizes Elliott third waves. There it was ... right where it should be during formation of wave c of an a-b-c corrective wave up from March '09 bottom.

And now during formation of wave 5 of c? No doubt, long equity hedging was markedly reduced at its start (early-December 2010). Apparently those still riding the "recovery" train feel there is less need to protect their exposure. This is a noteworthy change in disposition, indeed, only the more raising probability that, completion of the market's counter-trend rally off March '09 bottom is at hand.

Of course, foreboding technical circumstance could not possibly impress those among a majority of observers who dare not imagine that, lenders of last resort are bankrupt. Yet an otherwise well-confirmed Elliott wave view is suggesting this subject might become the talk of the town even within a mere matter of days.

Increasing discord on the Federal Reserve Board — although a symptom fitting the moment — largely reveals the institution flush with lunatics, and so an enduring barrier to anything promoting financial stability for as far as the eye can see. Thus probability is raised that, establishing bottom over months ahead somewhere in the vicinity of levels last seen in the 1987-1994 period might prove a painfully excruciating process.

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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...

Get Real-Time Trade Notification!