Bounce Reveals But a Bad Case of Complacency ~ The Risk Averse Alert

Friday, February 25, 2011

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...

OEX 5-min

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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