Loose Lips Sink Ships ~ The Risk Averse Alert

Thursday, February 03, 2011

Loose Lips Sink Ships

At the top of my list of those beholden to a "fatal confusion ... subscribing to belief that, because every serious, systemic vulnerability encountered with increasing regularity over the past year or so has been absorbed without consequence to the stock market, the worst of the crisis developing in 2007-2008 has passed" is Fed chairman, Ben Bernanke.

And now following his performance today before the National Press Club — weakly shivering beneath the condemning stare of the Financial Crisis Inquiry Commission report — comes a booming voice from the mountain top of illegitimate debt covered with a thick layer of swindled bailout, the likes of which Bernanke defends. Do you hear it? It's saying confidence these days is frightfully thin!

This is what the geniuses do? Trot out Bernanke to promote that which just has been concluded an unnecessary response to the crisis of 2008? And this at a time when in the judgment of the FCIC chairman systemic risks are by no means diminished...

Today, the Fed rightly is seen evincing that full measure of panic which those whom it defends are left to suffer, now that the tomb of QE has been discovered in Egypt.

Think about it. The normally cloistered Fed (because confidence never was a question) now must regularly stage PR road shows (because confidence presently is in grave question) ... with today's instance in the grand scheme only standing a figurative demonstration of how "loose lips sink ships" sailing so near the FCIC's destroyer, as Bernanke did today.

No doubt, I have seen more skillfully staged elementary school plays than today's National Press Club Q&A. At best, it could become a National Free Press Club in the making. At worst, Bernanke will have succeeded only in fanning fears about the Fed's solvency.

NYSE McClellan

For a while there, a few weeks back, Guy Adami continually mentioned that, the market typically does not allow bears this much time to get out. I think that was the gist of it. Yet the present instance appears an exception to the rule, judging by divergences galore in the McClellan series.

Yet considering Adami's frame of reference, might a sudden heart attack rapidly slashing 25% off major indexes alter the gravity of the time element he raises? Might this deception, then, prove cruelest of all, setting up for the fall as many as possible, too?

Divergences galore, wisely not ignored, likewise support this possibility.

NYSE 5-min

As for prospect that, the market's advance off late-June 2010 bottom completed today — ending the market's counter-trend rally off March '09 bottom, as well — there is more than an outside possibility. In fact, three minutes prior to today's close I entered a limit order on 5 Feb OEX 500 Puts @.10 (risking $50 plus commission). However, my order was not filled.

Now, I wonder ... why would no one pick up the $50 I threw on the ground with only two weeks until expiration at a strike price 90 points out-of-the-money?

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!