Turmoil Season ~ The Risk Averse Alert

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...

Get Real-Time Trade Notification!