Friday, December 30, 2011

Building a Brick Poor House


Assuming wave (2) of C forming since late-August continues to unfold, as appears likely given developments over the past month or so, one view forward among several accommodates the possibility that wave (2) still might take a "simple," a-b-c Elliott wave form, rather than the "complex," a-b-c-x-a-b-c form discussed here recently...


$NYA

Here, wave (a) of (2) from late-August through late-October took the form of a 3-3-5 "irregular flat" (which has been my long-held conviction), while wave (b) of (2) unfolding since is taking the form of a 5-3-5 "zig-zag" (thus satisfying the Elliott Wave Principle's "alternation guideline"). Whether wave b of (b) of (2) of has completed remains to be seen, though.

Again, this is one possibility among several still living per the manner in which the corrective wave forming since late-August might further develop.

Make no mistake, though. Diminishing volume since late-August is testament to the probability that a corrective wave, indeed, is forming. This follows on August's throttling, which for the broad market (seen via NYSE Composite trading) brought no exceptional increase in the volume of shares traded (particularly contrasted with May 2010 volume), demonstrating a market falling of its own weight.


$VIX

Raising probability that, the above, prospective variation on the corrective wave currently unfolding rests on solid analytical ground is a marked pickup in volatility seen at the start of each year subsequent to the demise of Adam Smith's Leveraged Ponzi Scheme in '08. Odds are this year will prove no different. Indeed, increasingly wild swings in the momentum of the Volatility Index's movement over the latter half of this year (see bottom panel and contrast to '08) only further raises the probability that, whatever technical machinations have brought weakness to the market early on in each of the past three years will not fail 2012's experience.

Just for grins, too, check out the last time the 200-day moving average on the Volatility Index rose above 25: May 2008. Funny how this occurred then, too, at a time when the market was recovering from earlier losses, with all eyes on an unimpeded return to happy days again. Hindsight, however, reveals the so-called "best and brightest" soon afterward were laughed all the way to the poor house.

Which reminiscence makes for Prediction 2012: This time around they'll not be so quick to [appear to] get out...


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.


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Thursday, December 29, 2011

Broad Performance Disparities Spell Trouble Ahead


I owe you a few days. Charts (and video) are ready, but writing is delayed.

No change in the weather to report today. Rather, a negative turn of affairs instead should be feared likely to appear sooner than the average baboon apparently is wont to pontificate, as these in large number sell hope in fantasy of a pending return to days of old, blithely ignoring truth that, major currency unions do not collapse with great regularity and the EMU probably is doomed.




So, where does some of the money running from the European continent take refuge? In but the bluest of the blues trading in the U.S.

Forget for a moment the unique manner in which the Dow Jones Industrials Average is computed. More important is the simple fact that, it is weak hands who still refuse to sell even at this late hour — much as was exposed for many months prior to this year's top — "allowing" the market to remain buoyant. The trickle of new money coming in during advancing periods (see volume) for now is enough to bring victory to a tried and true CME goose whose number has grown into a flock. Weak hands holding (rather than selling into strength) no doubt continue proving invaluable, much as was true right up to August's kick in the can.

Now, new money coming into a healthy stock market (one likely to continue rising) should find participation broadening, with more speculative offerings generating the most excitement. This is not the case today. Safety and yield rather are preferred. That this does not qualify a broad swath of equities certainly speaks for the Dow's leadership. However the broader market's performance disparity rather reveals how fragile is this moment...


$SPX

Of course, the next best thing to old big blue might be indexing, yet here a lagging interest, broadly speaking, begins to be seen.

Such a condition at this moment, given both recent developments, as well as over the past ten years or more, suggests stocks not only are vulnerable to falling of their own weight, much as occurred late-July, early-August, but are at greater risk of collapsing in the face of some exogenous event.

Again, over the long-term that matters to any living investor a broadening of interest in stock ownership effectively assures further share price increases. Without this, the entire asset class is subject to attack.

Just to drive home this moment's present vulnerability, consider the market's performance disparity revealed by respective composite indexes of all shares listed on the NYSE and NASDAQ...


$NYA
$COMPQ

NASDAQ's present weakness is more subtle (see 50-day moving averages and MACD), while its longer leadership (revealed more or less over this year's entire duration, let alone since March '09 bottom), relatively speaking, remains fitting a moment in which the nastiest of selling might soon commence.

Remember August '08? Where else would weak hands be venturing to separate themselves from the pack than on NASDAQ? Its subtle weakness here in the face of a supply-constrained market in which safety and yield are preferred is thought a red flag warning of broad weakness straight ahead.

Still, that said, formation of wave (2) of C since late-August might proceed for some weeks longer. More immediately, however, the path of least resistance looks lower.


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.


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Wednesday, December 28, 2011

Team Fraud Mount Athos Fades the EMU


There is a point-of-view supposing calamity the British Treasury is reported to be bracing against instead is an end the City of London is proclaiming its interests intend to bring about...




Reports like this are all the more interesting in light of prospect that, MF Global could be a harbinger for a fast-developing run on the global banking system.

It appears year end circumstance is setting up for a tough New Year, indeed. Even in the face of a near-term rising trend, too, does the market subtly confirm this an ominous underlying consensus...


SPX 5-min

At no time following last Tuesday's CME goose did the very short measure of the S&P 500's relative strength extend into such a positive extreme as it sunk to today. Just how contrived and inconsequential is buying support appears plainly exposed by a tailspin like today's falling on the weight of a feather (a.k.a. "holiday volume").

Still, per the possibility of five waves up since last Tuesday, today's dive could be part in forming the fourth of these, at least as seen via the S&P 500. Broader measures like NYSE and NASDAQ composite indexes are not so convincingly confirming this view, however. Both were relatively weaker today. NASDAQ's recovery since last Tuesday appears particularly strained. Although a different Elliott wave count applies here, NASDAQ's conspicuous weakness of late focuses in the cross hairs those handful of issues that, over the past few years principally have kept NASDAQ's Composite Index levitated above 1000. Stands to reason the speculative darlings should begin cracking, as an increasingly turbulent backdrop risks ending all fantasy that credit to infinity and beyond will forever grease the wheels of commerce no matter a banking system seized by the rusted gears of Ponzi finance...




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.


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Tuesday, December 27, 2011

Tired Legs


Since last Wednesday's indication that, the CME-driven short squeeze of the day before looked to have legs, the S&P 500's subsequent advance, having maintained positive relative strength, now appears to be losing steam...


SPX 5-min

As projected, the market did not run away following last Tuesday's CME goose. With fading relative strength now decidedly negative attempts to take prices higher could be challenged. Thus, one prospective view has in the books the better part of five waves up from last Tuesday's open. The remainder could form over the next few days. Last Wednesday's relative strength low should be taken out during upcoming formation of the fourth wave of five waves up from last Tuesday.


Fast Money
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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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Friday, December 23, 2011

Photo of the Day: Suckers Being Spoon Fed


The CBOE Put/Call ratio's traverse over the past few years tells the story of a distribution of shares into weak hands whose present capacity to absorb supply is challenged...


$CPC

Every challenge to the market's liquidity-induced, counter-trend rally since March '09 has required an increase in hedging protecting long positions, that those whose credit market exposure has been given a temporary reprieve are not prematurely made to choke on their toilet paper. The level of this protection has even challenged 2008 peaks reached consequent with the market's worst selling.

Once protection has been established and selling abated the CME-driven force-feed to the weakest of suckers has begun. Selling these call options, driving the market higher via the CME, then offloading shares to those with good reason to exercise their call options has been the order of things. The current instance is no exception.

Standing out continues to be the elevated measure of long position hedging via put options necessary to maintain an order whose accomplishment is buying time only likely to further complicate the credit-market unwind once hopelessly unsustainable leverage invariably implodes. Such has been the state of things — the driving force — for longer than most care to admit. Buying time to the same effect of forestalling credit market implosion certainly goes a long way toward explaining how the so-called "best and brightest" forsake due diligence and allowed every sort of weak credit a piece of their Ponzi scheme (think sub-prime and a host of other credit market products).

Laughable are attempts by lenders of last resort to resurrect confidence in this regime. The fat lady will sing and those choking on toilet paper not only know it, but are struggling mightily to conceal their quandary. The CBOE Put/Call ratio makes this reality plain. Not much longer can doom be delayed.


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.


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Thursday, December 22, 2011

Weak Hands Drinking the Kool-Aid


Pete Najarian was more than mildly positive on financials this evening, so let's take a look...


XLF 15-min

Today's rally filled $XLF's gap lower of two Mondays ago. So, how many more portfolio managers now might be inclined to further trim their exposure to the market's dogs of 2011? How this group doesn't fall of its own weight in muted trading to close out the year is what one should wonder. The same consideration two Mondays ago is no less applicable now. Waning underlying confidence will not be easily restored, as both yesterday's look at 1-month U.S. Treasury Bills(!), as well as financials, themselves, confirm.

Now, prospect the market might suffer imminent weakness is fortified by yesterday's Elliott wave perspective anticipating extended corrective wave development forming a "complex" corrective wave since late-August. Technical evidence both raising likelihood a complex Elliott corrective wave is forming, as well as prospect the market presently is vulnerable to weakness, follows...


$NYHL

What's up with a rising NYSE new 52-week high-low differential as the NYSE Composite registers declining peaks (see green line above)? Art Cashin probably nailed the mechanics, providing more evidence of a broken financial system.

Broadly speaking, is this condition not the same old face of a stock market dominated by weak hands? In spite of this year's collapse of the market's lynch pin — financials — a consensus still holds out venturing to pad positions playing a momentum game on dips when selling evaporates (as described by Cashin). Rather than increase pressure on issues likely to suffer as a controlled disintegration's prospect further bears down over months ahead, weak hands instead are passing off this clear and present danger choosing to remain exposed, in the process only increasing operations targeting high beta issues among the market's leaders over the past year.

No doubt fitting a moment poising to prove weak hands perfectly foolhardy once the bottom falls out. Then again, these folks probably have no choice other than go down with the ship...


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.


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Wednesday, December 21, 2011

Controlled Disintegration Comes At Great Expense


Still well shy of the Geithner Minimum ($2 trillion), today's net $200 billion euro grease courtesy the ECB apparently plugs a few holes in leveraged exposure burdening the European banking system (at least through year end), but does little more than stall its inexorable slide into a shark infested abyss, failing capacity and will to support lenders of last resort, much as is being widely reported (possibly for German consumption?). With attacks on sovereigns proceeding to inevitable chaotic crescendo, then, controlled disintegration of precarious arrangements left in the demise of Adam Smith's Leveraged Ponzi Scheme rather appears the best Europe's dyed in the wool fascists are capable of mastering.

Needless to say the times they are a changing...


$CPC

Controlled disintegration (and accompanying debt destruction) is a likelihood that, commodities could be projecting in a CRB whose 200-day moving average is falling and 50-day below it.

Seconding the motion is spot gold, whose 200-day moving average still is rising and 50-day still well above it. Observations I made on 8/27/2011 and 10/19/2011 still are very much alive.

Since the bid for spot gold is expected to go parabolic a la August once the stock market begins its next leg lower (i.e. wave (3) of C), gold's current heaviness offers a point of reference in the ongoing development of a corrective wave forming across major stock indexes (i.e. wave (2) of C). Perspective supposing this corrective wave's completion is still some days away (possibly extending into weeks) gains substantiation in spot gold's current "weakness."


SPX 5-min

Per variations on this [still forming] corrective wave detailed here to date, any advance carrying the S&P 500 above its peak on Friday, December 9th will require throwing out prior Elliott wave count possibilities applied to this corrective wave and adopting an alternate view.

No big deal. This appears the right moment to raise the possibility, though, as judging by today's finish, the market appears poised to continue its advance off Monday's late-day bottom.


$SPX

So, here's another prospective variation on a corrective wave. In the parlance of the Elliott Wave Principle the above view finds wave (2) of C forming a "complex" corrective wave. Rather than ending late-November, though, the so-called "connecting wave" (i.e. wave x) of this complex corrective wave might still be forming (thus projecting end of wave (2) of C some weeks ahead, rather than days as suggested by the wave count above).

Overhead resistance is indicated via green lines. So, although today's trade suggests the market's advance since late-Monday still has legs, there's not a lot of upside remaining. Things are not about to run away. Indeed, [near-term bearish] perspective on the CBOE Put/Call Ratio covered here over recent days remains entirely intact.

Per prospect major indexes over weeks ahead might remain fairly confined within the wide range established since late-August, given where things are heading — a controlled disintegration inevitably flushing toilet paper down the drain — a "complex" Elliott corrective wave seems a natural setup for trapping a consensus of interests.

Duly noted above, too, are waves 1 and 2 of (1) of C circled in red (July). Second waves are famous for retracing almost the entirety of first waves preceding them. So, per wave (2) of C presently unfolding since late-August, there's "precedent" raising prospect this larger second wave might correct the better part of the first wave preceding it. Such has occurred already (yet could further manifest, as well).


$UST1M weekly

1-month Treasury Bill yields once again have sunk to negative. Now that's a broken financial system! So, in keeping with possibility the stock market will continue to levitate and form a "complex" Elliott corrective wave prior to inevitable collapse we find a present reality revealing liquidity abundant, but confidence thinner than Gandhi. The case for considering equities so much toilet paper, then, rightly finds harmonious the rush for safety revealed by 1-month U.S. Treasury Bills.

Now, some assign this extraordinary circumstance to money market portfolio manager "year end window dressing" ...




Since when, though, does April mark year end?

(Pssst. The banking system is insolvent and time's passage is more firmly entrenching this perception!)


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.


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Tuesday, December 20, 2011

The Thinnest Support


Since Joe Terranova is not impressed by today's short squeeze bringing the hopelessly bankrupt to lead the market higher, then let's talk the bear business. Chances are a well-hedged short equities/futures interest is ready to pounce all over a levitation sustained by the thinnest of underlying support...


NYSE McClellan

You really couldn't ask for circumstance more technically vulnerable. Go figure at a time when leveraged finance must be suffering quite a fright on the whipsaw ride that is the market for European sovereign debt. Yesterday's ECB stick, today's carrot, brings tomorrow's hyperinflationary promise of some 4-letter fantasy program anticipating hopelessly insolvent banks will borrow "cheap" from the ECB to buy debt securities of sovereigns whose credit ratings are on the verge of being downgraded part and parcel with the downward spiral of their economies.

In other words, the ECB pig won't fly and it's a good bet a well-hedged short equities/futures interest knows it.


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...

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Monday, December 19, 2011

Controlling Disintegration In Sustained Levitation


The market's conspicuously slow turn lower so far this month raises prospect that, the second wave of five waves down targeting levels last seen in the 1987-1994 period continues to form...


$SPX

An Elliott a-b-c corrective wave, of course, is believed to be forming since August. Yet only its initial component (i.e. wave (a)) might have unfolded into late-October peak. This prospect, as well, the market's slow turn lower so far this month might serve to substantiate.

Entirely unclear, though, is whether wave (b) of (2) lower formed from late-October through late-November, with wave (c) of (2) higher leading into early-December peak. Given the market's slow turn lower since — demonstrating an underlying disposition conspicuously uncharacteristic of what otherwise might be thought part of a devastating "third wave" lower (i.e. wave (3) of C) — the question arises whether this larger a-b-c corrective wave from late-August through early-December might form but wave (a) of (2), with wave (b) of (2) presently unfolding.

This is just one of several possibilities. Still, worst case, a corrective wave to August's smashing — no doubt a setback whose underlying disposition was entirely characteristic of a devastating Elliott "third wave" lower — might continue forming over weeks ahead, keeping major indexes levitated within the fairly wide range established over the past three months.


SPX 5-min

Per prospect that, an a-b-c wave lower is unfolding since early-December — this forming wave (b) of (2) — an initial five waves down appears well along in developing. Ever so slightly is relative strength at 5-minute intervals revealing an exhaustion of selling interest as the S&P 500 sinks lower.

Yet notwithstanding this likelihood that, the corrective wave forming since August's throttling could see the market remaining relatively levitated for some weeks ahead (that is within the bounds of the wide range established since August), there remains a very good possibility major indexes will finish the year negative and near their lows. As consistently as long equities/futures stakes have been hedged via an elevated accumulation of put options — this venturing to sustain the market's suspended animation since August (let alone over this year's entire duration!) — every instance when this hedge tailed off and hedging of short equities/futures stakes filled the void (bringing the CBOE Put/Call Ratio to the lower end of its range over recent months), the market soon after succumbed. Curiously, following today's trade hedging rapidly is approaching such bias as over recent months has indicated the short equities/futures trade gaining the upper hand.


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...

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Friday, December 16, 2011

Turmoil Season


No matter what cynicism is deserving, the drumbeat for a modern-day Pecora Commission just got louder today with the SEC's indictment of the former heads of Fannie Mae and Freddie Mac on civil fraud charges. The mere whiff of impropriety prosecuted so close to the Comstock load of Ponzi finance could be enough to set off an awful chain reaction these terribly vulnerable days...




And right before the 2012 election season moves into full swing. You might think this likely a "controlled burn" serving il Duce's reelection bid, but winds of change picking up speed across the Atlantic could set off a raging wildfire whose twists and turns become entirely unpredictable.

In fact one might better argue this is the very intention. 'Tis the season of turmoil, financial and political.


$CPC

It remains to be seen if the present moment's late-July technical similarity carries forward to an August-like calamity. Given that over recent months an elevated measure of put option hedging has been necessary to keep market indexes buoyed within a relatively wide range, one wonders if a clear break from this character might occur just prior to the market's pending unraveling. Might a sharp spike in call option hedging of short equities/futures stakes precede the market's demise? Or is the market, even now, doomed to fall of its own weight no matter the present appearance of fewer hedged short equities/futures stakes than was the case in July?


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...

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Thursday, December 15, 2011

Bad News for the Leveraged Casino Business


Still absent technical evidence detracting from the present prospect that, the market could sink like a stone going into the New Year and at the start of January, Friday's trade nevertheless seems likely to see another day consolidating, much like today. This is not to suggest major indexes might not close on their lows for the week. Rather that a 5% drubbing does not appear in the cards tomorrow. Maybe next week.

Hey, have you heard that, in some circles within the Republican party there is a loud cry calling for bankruptcy reorganization of Fannie Mae and Freddie Mac? Check it out...




So much for last week's EU appeasement protecting holders of EMU sovereign debt from any future haircuts. Apparently some in the United States finally are coming to their senses, taking their appeal for sanity before a national audience. This is very bad news for the leveraged casino business. God help us these coming weeks and months.


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...

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Wednesday, December 14, 2011

Like A Sinking Stone


Technical conditions like those late-July persist. So, let's consider prospect that, the market's collapse is imminent, a la an awful throttling comparable in relative terms to that in August...


$SPX

Red boxes drawn above present relative perspective. Differences in the absolute position of the S&P 500 to its 50- and 200-day moving averages, now versus late-July, as well as a qualitative degradation of underlying conditions confirmed by these moving averages offer objective points of reference projecting the market's imminent doom. A collapse significantly larger than that in August could be at the door.

Should this prospective, near-term view forward pan out, then get ready for a 2011 close at the low for the year and a not-so-happy start to the New Year...


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...

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Tuesday, December 13, 2011

Machines Built to Attack


Curiously, several technical measures are in a relative position not unlike late-July, thus bolstering an outlook projecting a sharp market decline straight ahead. Consider the NYSE McClellan Oscillator, the CBOE Put/Call Ratio and the NYSE Bullish Percent Index. All are simultaneously presenting technical backdrops well-poised for an imminent market gassing.

Now riddle me this. In today's fast-evolving power struggle between sovereign nation states and supra-national interests (these wielding an insolvent financial system like Democles sword) what was August's market setback? Was it not part of such well-established means (swindle) as the latter employs to further subjugate the former? As for the former, did not those representing the EMU's core last week demonstrate at least some political will to surrender power to the latter?

So, what was Hitler's move after Chamberlain got his "peace in our time?"

(Strange how in our time a nationality role reversal is occurring on a different field with Merkel playing Chamberlain and Cameron playing the Fuehrer. What choice, then, does a bankrupt City of London and its junior partners in New York have but launch an attack? Has not the whole [hopelessly bankrupt] "special relationship" been built up for just that, much like Nazi Germany's military machine was in the former age? Those tricky fascist imperialists! When it comes to subduing external threats in chaos we see there are many ways to skin a cat.)


$SPX

Right now, the green line of support-resistance drawn above appears a near-term point of interest. I'm rather suspicious, though, this might be taken out before Christmas. If wave (2) of C rather ended at late-October peak and wave (3) of C presently is underway, then $SPX support just under 1100 could give way any day now, and this even if the market should bounce tomorrow...


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.


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Monday, December 12, 2011

Volatility Index Conundrum Solved


A brief remark on today's "surprising" VIX performance which appears a newly developing trend whose import projects imminent market weakness...


$VIX

Essentially being a measure of options premium pricing, seeing the Volatility Index come in today while the market fell (as has been the general case this month, as well) is an oddity all the more strange given last week's hyperinflationary bailout fail in Europe. Yet this probably is simply a consequence of strong hands increasingly becoming options buyers, while weak hands, their sellers, scramble for what relatively few crumbs of capital are available.

So, how are strong hands positioned? The CBOE Put/Call Ratio suggests they're leaning short, yet still protecting long positions. This essentially has been this measure's message since August, remaining in an elevated trading range.

Yet just as strangely as $VIX came in today, so too did $CPC. Thus is my hypothesis confirmed, then, as strong hands are seen hedging short equity stakes with call options and, indeed, doing this more cheaply. Thus, the market's path of least resistance appears lower and stat.


Fast Money
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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.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!