You must understand how reassuring it is to have in our midst such poor grasp of the market's precarious state, technically speaking, as brings weak hands — the vast majority of vested interests — to fearlessly act on the notion that, simply because stocks have been levitating for about a year-and-a-half nothing worse than occurred in 2008, therefore, is likely — as though time's passage has vindicated [insane] policies put in place since — and so every dip should be thought an opportunity to add to long positions.
Today, these suckers made their presence felt. Yet they did so without making a dent in an underlying technical configuration that screams, "Look out below!"
Add to this a consensus of sanguine attitudes toward an outbreak of currency warfare this week and you get conditions ripe for a giant letdown.
With today's CME-driven distribution — likely executed by that concentrated collection of desperate interests whose delusion of solvency now is being stressed by the death pant of the Japanese carry trade — the "you are here" marker indicated yesterday (in noting technical similarity in the formation of second waves unfolding as wave 3 down from 2/18 top forms) is appropriately adjusted above (see RSI).
Tricks like this are all these bankrupt interests have to keep weak hands paralyzed with hope while capital is raised on the backs of those dumb enough to take the bait.
This is where it all looks to lead. With the market's technical state considerably more negative now than was the case early-May last year, an outlook projecting a much deeper decline than occurred last May gains substantiation.
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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.
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.
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