Off The Charts Panic ~ The Risk Averse Alert

Monday, October 10, 2011

Off The Charts Panic

I quite agree with Josh Brown's perspective here. Yet I am astonished how little is public concern for the real risk of a market collapse. An 11% advance in four days and an hour is off the charts panic.

Per short interest in September rivaling that of 2008, two things. First, with the rise of long-short funds, this measure has become less meaningful, notwithstanding last Tuesday's massive short squeeze. Second, welcome to an Elliott third wave down. Fitting is a strong dose of vested interest, thus far capably keeping the balance tipped in their position's favor, short squeeze after short squeeze over the past couple months.

That shorts remain strong hands is testified by a Volatility Index remaining uncharacteristically elevated. One thing you probably can take to the bank about last week's break below August lows, then outsized reversal: if bottom gives way, look out below. You might say, too, falling or rising since August, there's urgency underlying every move.

Truly, if there were opportunity in equities on account of prospects for halting the implosion of a mountain of debt burying both sides of the Atlantic, strong hands would not reveal such urgency as we have seen over the past four days and an hour. Are you kidding? Strong hands would be driving the market lower if Europe's "plan to come up with a plan" on recapitalizing EMU banks actually had legs.

The gig is up. So, raising capital in liquid markets is in. Apparently this requires volatility. Triple-digit moves in the Dow Jones Industrials during ten of the past eleven trading days offers but further evidence of an Elliott third wave in progress.

The wave count presented here the past two Fridays remains intact. As long as September 20th's peak holds, possibility of a sharp decline rapidly taking out last Tuesday's low is very much alive.

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!