Wall of Worry Destroyed ~ The Risk Averse Alert

Tuesday, February 22, 2011

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.

OEX 5-min

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...

Fast Money
* * * * *

© 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!