Thank You Marvin! Have You Met Patrick Henry? ~ The Risk Averse Alert

Thursday, March 10, 2011

Thank You Marvin! Have You Met Patrick Henry?

Just in the nick of time has a presumed "rising wedge" forming off late-June 2010 bottom gained added confirmation by "that tiny bit of downside ... likely to raise fear among the faithful about the growing prospect of being the last to reach the exit."

Honestly? Today's break was HUGE. Everywhere technically: added weakness only raises odds that, the market, indeed, is turning away from this presumed rising wedge's peak whose completion occurred on February 18, 2011.

Don't get me wrong. As ever, this Elliott Wave perspective of mine is subject to alteration as a consequence of developments over the period immediately ahead. Yet as long as underlying technical developments continue confirming this prospective view, past, and then moving forward, then remaining on the table will be prospect that, a 25-40% haircut could be imminently in store.


Oh look! Relative strength (top panel) and momentum (bottom panel) applied to the broad market measured by the NYSE Composite index confirm that, the drain last week seen emptying large caps is increasing its take. So, a view supposing the tide is receding gains substantiation with evidence revealing increasing movement toward the exits.

We see, too, that, relative to the market's immediately preceding advance (in this case from late-June 2010 bottom), today's break continues its similarity to the April-May 2010 period in the days leading up to May 6th's "flash crash." Seen by way of the green lines drawn above, the present instance bears one notable difference: today's close took out the 50-day moving average. So, in the grand scheme one might conclude that, the relative technical lay of things leading to this particular moment of similarity to the April-May 2010 period finds the present instance marked by subtly a weaker configuration. This conclusion seems all the more bolstered by the fact that, in the present instance the 50-day moving average lies considerably higher above the 200-day moving average than was the case late-April 2010. Since underlying conditions leading to this circumstance are objectively demonstrated as being entirely suspect, subtle weakness presently displayed confirms an outlook anticipating a decline far worse than occurred last May.

And yet no one seems worried ... still. There was none of it on the way up, nor has any yet materialized so far at this early moment in the turn down. This volume reveals. So, another subtle difference, now versus late-April 2010, adds to the first just mentioned, exposing a fuller measure of complacency presently existing, such as one might expect just prior to a new bull market in Preparation H.


Paraphrasing Patrick Henry: "Give me more put option hedging, or give Mr. Market death!"

What's that rattling I'm hearing?

NYSE 5-min

It could be the lug nuts holding the market together. Tomorrow holds the promise of raising odds that, a much steeper drop could develop before March options expiration next Friday (3/18). I'm looking at the possibility that in forming wave c of b since yesterday, but the first wave of five waves down have unfolded thus far. This prospective, steep dive occurring in formation of wave b of 2 (of five waves down from 2/18 top) would be in keeping with the "running correction" possibility I laid out last Friday.

We will see...

Fast Money
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