Plunger Raised ~ The Risk Averse Alert

Tuesday, February 01, 2011

Plunger Raised

Full disclosure: I am licking my chops...


Friday's hole-in-one is followed by a strong approach on the par 4 18th, landing the ball five feet from the pin in just two shots. Technical deterioration proceeds on target, reaching its mark with pinpoint precision. One putt to home, and let the fireworks begin.


The market's levitation continues losing momentum (bottom panel). The acceleration of momentum's loss during the latter half of April 2010 might prove instructive over the next several days.

A conspicuously tame bid once again was displayed today (see volume) — this being made only the more impactful, of course, on account of increased selling restraint that has been religiously exercised every step of the way higher off March '09 bottom.

Then there's relative strength (top panel) rather diverging for the second time in a week. Not a concern is whether this persists over the next day or two as the "rising wedge" off late-June bottom completes.


This is a good time to check the seat in front of you for a barf bag. Judging by what fairly is described widespread complacency amidst a conspicuous technical backdrop — one whose weakness continues increasing — there's a good chance someone you know might be needing it. What are friends for?

Again, others as well are sensing an ill wind...


There appears to be some trouble raising fees on the back of the "bullish fundamentals" crowd. Why if now even the weakest hands fail increasing interest in a piece of tomorrow's "promise" (by going long call options), then what becomes of those capital-challenged dribblers of equity who remain at grave risk of choking on a mountain of debt?

With the CBOE Put/Call Ratio similarly situated as late-April, early-May 2010, a "rising wedge" nearing its completion finds further technical substantiation suggesting that, a rapid decline could be imminent, wiping out the markets gains since late-June 2010 (and then some) in short order.


The Volatility Index delivers the same message, likewise being similarly situated as late-April, early-May 2010.

Indeed, there is no shortage of evidence suggesting things could turn ugly fast. Yet scarcely a soul imagines it. Most rather scheme to buy on dips. These appear perfect marks for the last hoorah just prior to the obliteration of March '09 bottom — an unthinkable possibility whose passing could be a mere matter of weeks away.

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.

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