Wednesday, August 31, 2011

Substantial Downside Risk Recognized


The S&P 500's fourth straight month lower is in, making today's "Word on the Street" a logical follow-on to yesterday's perspective on equities insurance (i.e. options)...




Seymour, usually more measured and biased toward a glass half-full perspective, is apoplectic, openly describing today's trading environment as "rigged." Another word for unsustainable?

I agree the market is troubled, while being among a decided consensus of active interests is little concern. It's well enough underlying softness is widely felt. This should put a lid on any prolonged advance, as well as a floor under the market, at least for the moment, biding time to confuse even those fearful.

Thus, prospects over days ahead presented yesterday, finding the market holding up during the initial portion of its renewed turn lower, appear supported both by the market's technical, as well as psychological state at the moment.

Duly noted, though, is a panic's risk amidst shattered nerves — a panic like no other in anyone's lifetime, sure to feed on itself, prospectively making today's index levels lofty, indeed, and possibly not to be seen again for decades to come. There's no mistaking this credible, worst case scenario still remains far from the lips of the consensus whose present fear I share. So much, then, for too much bearishness here. Most are not bearish enough.

One thing standing out in the market's bounce off this month's bottom is leadership U.S. trading is displaying in contrast to European and Asian counterparts. Still, this dog has a tail whose euro-zone lynch pin and banking sector more generally appear diseased. So, thinking back to 2008, when "cures" were not forthcoming as trouble entered the breach, what did we learn about shock therapy?

And just to review, this is not 2008 because Lehman Brothers supposedly was a weightier dilemma to then contemporary regulatory arrangements, whereas now an entire continent can blow, and some triumvirate of central bankers named Larry, Curly and Moe has got the situation under control, this on account of legislative changes serving to institutionalize the legitimacy of the disease that brought 2008's "liquidity crisis" while accomplishing little else (save trapping lenders of last resort). No, it's not 2008. It's much worse now. Confidence is shattered.

That's why a retest of August lows might come sooner than most right now appear willing to suppose. We might be looking at an a-b-c wave down to $SPX support at 1050-ish over the next couple weeks. The climate in Germany certainly appears increasingly ripe for shock therapy.




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, August 30, 2011

Manna Seekers Need Convincing


"Manna for the long trade" is how elevated options premium is read (see $VIX)...




Yet also reflecting a measure of unwillingness to write options contracts, the Volatility Index remaining elevated likewise is indicating that, a retest of recent market lows might be necessary to coax the will of yield hungry money managers to juice their returns collecting options premium. A successful retest should serve to bolster belief the worst of selling has been seen.


$SPX

Coming right up, if similarity in the S&P 500's technical configuration with the same during the latter half of June 2010 bears any significance. With elevated weakness preceding the present moment a retest of this month's lows seems rather likely.

It will be interesting to see how the S&P 500's weaker technical state is repaired over weeks ahead. Momentum-wise (bottom panel), standing out are sharp spikes higher, late-June (2011) and presently. Nothing quite so steep developed during formation of wave (c) of B. Thus do interests long equities appear both trapped and desperate to coax a bid. We probably will see further evidence of this, as wave (2) of C develops over the next few weeks.




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, August 29, 2011

Prime Time for Bearish Potpourri Rhyme


Fast track to overbought, indeed.


$BPNYA

Out of dutch or faith too much in the many "healthy" among hopelessly insolvent?
Absent divergence at bottom, faith awaits its test at some near-term moment.


$BKX

Lagging badly, still in the lead in a race to the bottom of the sea
All things technical as negative as can be: woe is the U.S. banking industry.


$VIX

And don't insurers know it, showing this with premiums they reap!
Still to those trapped on Mount Toilet Paper the price of protection remains cheap.


$CPC

Hedged those trapped remain, venturing hours to drip long exposure,
Once levitated with a blank check from Treasury whose recent closure
A Joint Select Committee meets destiny to assure,
That what some call "cheap" soon will be cheaper...


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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Saturday, August 27, 2011

Anticipating Bath Time for Bubbly Gold


According to today's Wall Street Journal Heard on the Street, "Bubbly Gold Might Take a Bath."

Might? Why hedge? The barbaric relic most definitely will take a bath. The question is when...


$GOLD

(NOTE: A link to goldprice.org where the above chart originated now appears under "My Research Assistants" in the left hand column.)

Spot gold's present parabolic advance bears striking similarity to that leading to spot gold's peak in 1980. Equally noteworthy is similarity in consolidation preceding each parabolic surge in spot gold (noted via green dots above). As you can see, this occurred in the vicinity of prior, record highs immediately following a new record, spot gold price high being set.

Now the question is how much further might spot gold rise before the gold bubble bursts? Although the generous answer might not soothe most among diehard gold bulls, for the rest of us forewarned is better forearmed...


$GOLD

Technically speaking, there's no indication yet at weekly intervals suggesting spot gold might be on the verge of cratering. Relative strength, momentum and volume, all increasing; all suggesting spot gold has higher to go.

Yet the same also was true late in the game of another famous bubble of pump and dump fame whose advocates similarly were prone to boasting that, this time is different...


$COMPQ

So, in answering how much further spot gold might rise before the bubble bursts, another 20-30% appears entirely within the realm of possibility. Relative strength divergences (see top panel) and momentum extremes (bottom panel), such as developed when NASDAQ reached its Y2k peak, likely will appear just prior to a great unwind in the spot gold market.

Bear in mind, just like 1980, gold is indicating financial disorder, and history suggests the confluence of causes for this are not likely to persist. In the present instance an insolvent banking system appears only the nearer to being widely recognized impervious to any further liquidity provisions.

As you know, I believe the Fed, like Zed, is dead. So, forget about quantitative easing to infinity and beyond offering fundamental basis for spot gold remaining on its current, parabolic trajectory. Rather, in an astronomically widening crush for capital fast approaching, gold's luster will be lost.

* * * * *

© 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, August 26, 2011

Fast Track to Overbought


Better late than never...


NYSE McClellan

With enough accumulated interest venturing a bid since August 9th, bottom fishing, the market is well-poised to complete an initial, a-b-c counter-trend move off Monday's, wave (1) of C bottom (8/22/2011).

Give it a few days and this measure probably will be as overextended (if not more so) as was the case at early-July peak. Beyond the next few days, there's nothing but further weakness ahead.

* * * * *

© 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, August 25, 2011

Projecting Technical Repair


Ever so slowly the market's underlying technical state is beginning to improve with stabilization of the market's volatility over the past couple weeks...


$BPNYA

If anything, there's a good case for supposing wave (2) of C will take some weeks to form. Plainly, technical repair is at but an early moment in its development. Yet improvement in the NYSE Bullish Percent Index is unmistakable with the NYSE Composite Index printing lower today than on August 15th.

Yet with $BPNYA's RSI still in the danger zone (below 30) there's reason to think that, even at this early moment in formation of wave (2) of C the anticipated lift toward respective index 50-day moving averages is not likely to develop with haste. Rather, an initial a-b-c corrective wave forming but wave a of (2) is likely to see some days forming its "b" wave before a decided lift approaching respective index 50-day moving averages occurs.

Per likelihood that, the huge disparity between $BPNYA and its 200-day moving average will be significantly narrowed before wave (3) of C unfolds, one's sense of the duration required for wave (2) of C to develop should become clearer. The extent of technical damage this month's decline has produced is not likely to be quickly repaired, so some weeks spent trading sideways-to-higher appears rather probable.


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, August 24, 2011

Been There, Done That


Following last Thursday's throttling I noted a certain measure of "capitulation" fitting a fifth wave down — i.e. in forming wave 5 of (1) of C.

Then, yesterday I put forward the supposition that, a so-called "fifth wave failure" might be seen completing five waves down from the S&P 500's July 7th peak.

So, tonight it occurs to me that, the present moment finds more or less is the same manner of circumstance as existed during the latter half of June just prior to the market's final lift in counter-trend rally off March '09 bottom...


$SPX

These similarities are marked in red. You might recall, too, that, on June 23rd I noted capitulation likewise accompanying what turned out to be a fifth wave failure at the conclusion of wave c of 4 of (c) of B.

Now, the reason why this prospective similarity is compelling is reasonable expectation that, during formation of wave (2) of C a challenge of the S&P 500's 50-day moving average seems likely to occur, particularly given the depth and violence of the market's decline in forming wave (1) of C. So, maybe this will happen sooner rather than later. Maybe another entirely suspect advance much like that from late-June through early-July is in the midst of unfolding right now.

Should the S&P 500, indeed, proceed to approach its 50-day moving average without so much as giving any serious challenge to its low on Monday, then the likelihood that, volume will continue coming in seems a virtual certainty (likewise would this further confirm that, those long equities, indeed, are weak hands, much as volume similarly revealed late-June through early-July).

Not forgotten is the fact that, in addition to there being no technical divergences at Monday's conclusion of wave (1) of C (this on account of wave 5 of (1) being a "fifth wave failure"), also failing to materialize was the full measure of long equity hedging (via put options) handily exceeding that at May 2010 bottom, the likes of which I had been anticipating as indicating a well-defended bottom in place. Both are negatives, and all the more so if the market advances more or less unchecked over days ahead.

So, let's take a closer look at the CBOE Put/Call Ratio for some clues about what might be expected, should the S&P 500's presumed, upcoming advance slated to challenge its 50-day moving average develop similarly to the S&P 500's advance from late-June through early-July. There were some notable indications of trouble ahead whose similar appearance at present in all probability will be equally foreboding...


$CPC

First, a whole lot of hedging, relatively speaking, accompanied the S&P 500's lift into its July 7th peak. So far, so good.

Then, as wave 2 of (1) of C was unfolding, suddenly call options were rather in demand. Hindsight suggests these were hedging short equity and/or futures contract positions.

Strong hands typically are prone to hedging their bets, so let's keep an eye on this over the immediate period ahead.

It's possible that, the S&P 500 could advance to the vicinity of its 50-day moving average and in so doing complete but wave a of (2) of C. Wave b of (2) then might sink the S&P 500 to its support at 1050-ish, with wave c of (2) following, and lifting the S&P 500 back up only to 1100. In other words, a so-called "running correction" still could form in wave (2) of C position, and in the course of its development might not see a relative pickup in call option activity until wave c of (2) forms.

No matter how wave (2) of C evolves, we should see a notable, relative increase in call option activity just prior to devastation awaiting wave (3) of C down hard...


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, August 23, 2011

Balancing Suckers on the Bankrupt


There isn't a single positive technical development anywhere to report. Not one. Simply put, weak hands were given a reprieve today, and rather than act on an imminent convulsion within the trans-Atlantic financial system, the ├╝ber levered and overexposed did what they do best: raise prices on their deep inventory of toilet paper, seeking suckers willing to pay up.


$SPX

There's a case for supposing a so-called "fifth wave failure" completes five waves down from July 7th peak forming wave (1) of C. Thus, wave (2) of C would be seen having begun unfolding today.

We're probably looking at several weeks over which wave (2) will take form. Some variation of a three-wave, a-b-c, Elliott corrective wave is slated to develop over the interim. Whether this will produce a so-called "running correction" as detailed yesterday, or some other Elliott corrective wave variation is entirely uncertain.

One thing likely to occur will see wave c of (2) challenging the S&P 500's falling 50-day moving average, this right at the precipice before the market embarks on a decline likely to be the worst in several generations. Right now, wave a of (2) is seen being early in its formation.

Could a trip straight up to the 50-day moving average be in store? I rather suppose not, but anything is possible. How many times over the past three years has the market advanced in the face of a weak technical backdrop? Countless.


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!

Monday, August 22, 2011

Bring Out Your Dead


Until further notice, the following looks to be the theme driving stock trading...




Never shy to give credit where credit is due, Cramer was spot-on during today's pre-market suggesting the open should be sold. Likewise does his sense of the environment going forward very much jive with my own...




Should having such forlorn company be a concern? Not given the market's current technical state. It's ugly everywhere.

No doubt, two weeks spent going nowhere have corrected a number of technical imbalances — extremes reached during the market's hard sell-off earlier this month. Still, before any bid putting a floor under the market materializes technical divergences first should develop, necessarily requiring indexes to decline below their respective, early-August index lows.


$SPX

Here's a prospective view on a so-called "running correction" forming in wave (2) of C position. Wave a of (2) probably will be a bit more prolonged than is indicated above and result in substantial correction of both RSI (top panel) and MACD (bottom panel) from present depths.

Yet per "Support Turning Resistance, Stat," today's S&P 500 support at 1100, slated to turn resistance when wave 5 of (1) completes over days ahead, should cap any advance during formation of wave a of (2).

The key takeaway from this view, though, is the possibility that, even during these early days of formation of wave C whose five waves target index levels last seen in the 1987-1994 period, a very dead trade could persist. Nevertheless, today's widespread faith in the capacity of lenders of last resort to save the day probably will find those weak hands presently long equities no less willing to hang on right up to the bitter end.


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, August 19, 2011

Working Down a Chain of Suckers


With bank shares everywhere dropping like rocks and leading the charge to confirm the market's rally off March '09 bottom but a bounce in a larger bear market the risk of spectacular collapse now moves front and center. Whether this is likely to occur over the next couple weeks or the next couple months is the immediate question...


$BKX

Following the Bank Index's April 2010 peak, the process of dying, though slow to begin, accelerated this month with violation of a long-standing line of support and rapid descent. Most notably were the index's gains of July-August 2009 largely eviscerated. The last line of suckers buying in from February-April 2010 already slaughtered, now come their predecessors' turn.

Yet just as the last line was given opportunity to defend their positions and press their bets following last May's swoon, now those earlier bank equity longs seem likely to have their moment, too. This appears a reasonable read on the current position of the Bank Index's momentum (bottom panel). With no shortage of starry eyed bargain hunters incredulous to reality of the banking system's insolvency, a lift in bank shares somewhat repairing negative momentum seems a reasonable outlook here.


$SPX

Which is neither to say bottom to the market's current move lower is in, nor near enough at hand to produce any meaningful technical divergence indicative of a reversal of fortunes. Rather these are likely to develop as the market grinds lower over days ahead. With the S&P 500's objective remaining in the area of 1050-ish there's plenty of downside remaining for positive technical divergences to form in the interim.

Once this comes to pass focus then will turn to the manner in which negative momentum might be repaired. Prospect for a "running correction" forming in wave (2) of C position raised last week in "Support Turning Resistance, Stat" remains on the radar as a likely turn of events whose consequence still would serve to repair negative momentum in a fashion fitting a market on the verge of collapse.

* * * * *

© 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, August 18, 2011

Bluto Gives Popeye An Edumicayshkin


As if it had not already been amply demonstrated that, those interests long equities are woefully weak hands, today served up confirmation the likes desperately are in need of Popeye's spinach...


SPX 5-min

Well, blow me down: another deep, intra-day RSI extreme ... just like that kicking off wave 3 down in late-July. All that selling into August 9th bottom bringing bargains galore (at least in the eyes of many a sucker) and still no answer to the call of a bull's nature to step up and buy the dip. They're just too whipped and have been for a long time.

Which is not to say the spirit isn't willing! During today's pre-market trading when it was clear it was going be a rough day, Jon Najarian tweeted: "Fear makes the wolf bigger than he is - German Proverb." To which I replied: "... and fearlessness makes the bear bigger," followed by a link to last night's commentary.

(As per Popeye Heebner, here's what one bear had to say.)

Now, about the fact that, today's opening thud dwarfed that on the worst day thus far (August 8th), here, early on in the formation of wave C down (targeting index levels last seen in the 1987-1994 period). At 10:00 a.m. EST today the S&P 500 had fallen 50 points (mercy!), whereas on August 8th it had "only" fallen 30 points over the first half-hour of trading. Two takeaways.

First, this presents a relative demonstration of "capitulation" fitting a fifth wave down. Likewise did the NYSE Advance-Decline differential hold up versus August 8th's awful reading, further confirming that, wave 5 of (1) of C moved well along in its formation today.

Second, today's resounding weakness right out of the gate and lasting to the finish supports probability that, five waves down from the S&P 500's July 7th peak likely are not the end of sorrows, but rather just the beginning.

Referring back to the above chart of the S&P 500 at 5-minute intervals, we should expect typical technical strengthening during present formation of wave iv of 5, versus wave ii of 5. This, then, is to anticipate RSI rising above the green line I have drawn.

Once this first-sign of underlying technical improvement occurs (as seems likely), then wave v of 5 will follow. Given today's vivid confirmation that, weak hands dominate the long equity trade, it seems a virtual certainty August 9th's intra-day low will be taken out like bin Laden. Indeed, I rather suspect wave v of 5 ending wave (1) down from July 7th peak might prove a persistent bugger, and carry the S&P 500 to its next line of support detailed last Friday in "Support Turning Resistance, Stat."

Yet a part of me also imagines the hopelessly insolvent might toy with the foolishly sanguine, and sooner venture a bottom. Still, any floor will need to be well-hedged. Following today's throttling the CBOE Put/Call Ratio still remains shy of its late-May 2010 peak. Given a far more severe backdrop accompanying the market's decline over the past month and a half, a spike in the CBOE Put/Call Ratio significantly exceeding last May's peak seems an entirely reasonable expectation.

As wave (1) of C nears its completion a test of conviction in the likelihood New York inter-bank lending markets will remain unaffected by a frightfully fragile, imploding euro-zone hangs in the balance. Should August 9th bottom be taken out decisively, then faith in the trans-Atlantic banking system's stability naturally could be thought waning. Such further confirmation of a crisis of confidence yet to reach its zenith would set up perfectly for wave (3) of C soon enough to follow.




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!

Wednesday, August 17, 2011

In Fearless Weak Hands We Trust


For the longest time the market's greatest strength — a virtual sellers strike — was enough to keep an increasing buyers strike from forcing the market lower. So, seeing this buyers strike persisting following this month's thumping, there's every reason to fear the worst, particularly given the market's still decidedly negative technical state...


$SPX

That volume quickly has dropped to a relatively muted level once again suggests the same weak hands whose buying strength dried up going into July 7th peak remain incapable of pressing their bets and mounting any effort to defend their positions. Those left holding the bag during the market's recent decline have a dilemma, then.

Undeniable is truth the market sold off for good reason. With risks to leveraged interests increasing through threats both real and perceived, a heightened impetus to raise capital simply met a stock market dominated by weak hands. Thus is the magnitude of this month's swoon explained.

Since these risks are doomed to grow with the U.S. Congress' Joint Select Committee ready to rout the lender of last resort, weak hands, as well as interests left holding the bag for scrambling, leveraged players, present a dangerous combination for as far as the eye can see. So, the market's remarkably weak technical state right now rightly might be thought all the more foreboding, then. Rapid resumption of the recent thumping is by no means not out of the question.

What's more, widespread conviction that, the worst of this month's bloodletting is over — this absent any sign a well-hedged long interest stands ready to defend its position — raises probability that, end of the market's sorrow more likely is nowhere in sight. In fact, merely anecdotal evidence of this misplaced conviction, indeed, finds objective evidence demonstrating its presence rather conspicuously displayed...


$NDX

The relative manner in which the best of the U.S. stock market's more speculative issues are holding up is offering conclusive evidence that, the general consensus among those long equities is judging the market's recent setback as signaling nothing foreboding on the horizon.

Yet continued faith in these top NASDAQ-listed issues rather should be judged only the more suspect given the long-noted, incredibly weak underlying technical backdrop on NASDAQ. So disparities under the covers add to the weight of evidence revealing disparities on the surface, shown above via the NASDAQ 100's relatively stronger performance versus the S&P 500.

The simple takeaway is this: the market's risk over the immediate horizon could be even greater than was implied here on Friday. The depth of selling upcoming could blow through identified support as though it were non-existent.

Weak hands otherwise thought leading white shoe firms on Wall Street must first step up to the plate with a well-hedged attempt at forming a bottom. Anything short of this leaves the market at risk of suffering something far worse than I and a vocal consensus of far more sanguine interests presently is assuming.


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!

Tuesday, August 16, 2011

Quantitative Easing Is Dead


Bravo those tricky Euro-marionettes! Their suggestion of a "financial transaction tax" might just fit perfectly with the massive consolidation of financial and industrial power about to sweep the trans-Atlantic. You can be sure, if ever there is such a tax, it will be a pittance. In no way would it detract from an endgame, which as I just said, ventures massive consolidation of power into private hands. Most likely would such a tax be but a carrot coaxing the public-private partnership arrangement offering the only hope that, those who purposely ventured the financial system's current, insolvent state, in fact, might win the day.

NOW HEAR THIS! Quantitative easing is dead. Sans any grease forthcoming from one FOMC meeting last week and today's hotly anticipated emergency heads of state meeting between euro lynch pin leaders Germany and France, it's time to start thinking differently than the pack.

Does anyone really think the likes of Texas Governor and Republican presidential candidate Rick Perry in publicly claiming Ben Bernanke's QE policy is borderline treason is but a loose cannon? A lot of hay was made about this today! Now the real news: it's official policy.

The bearded one no longer is needed. Nor might the bankrupt Federal Reserve anymore have a place, at least one resembling its present manifestation. Its days managing the illusion of setting interest rate policy appear over. From now on the real dictator of monetary policy all along — "the market" — probably only the more overtly will be calling the shots, and there will be no doubting this among honest observers over months ahead. The very demise of the Federal Reserve System could be at hand.

Which leads me to proof: The U.S. Congress' new, Joint Select Committee. How simple is that!

Most don't get it. The JSC's purpose is not so much to cut government spending as it is to make prostrate the U.S. Treasury. Symbolically, this already is accomplished with just the JSC's creation. Bought-and-paid-for jellyfish in Congress led by one fascist-in-chief have dutifully swallowed the bait. Now it's time to get down to business of rendering impotent the public sector of the United States.

That's why there will be no more quantitative easing. For Team Fraud the whole bailout thing was a one step backward operation only meant to grease the skids for what's next: massive consolidation of financial and industrial power into private hands. Two steps forward are to accomplish this.

First begins with congressional marionettes whose "Joint Super Committee" purposely is to act on the symptom (namely huge deficit spending) rather than the cause. No discussion in Congress about the real culprit: a hyperinflationary policy existing long before Bernanke's quantitative easing. Indeed, this began when the Bretton Woods system of fixed exchange rates was destroyed forty years ago yesterday by President Richard Nixon at the urging of his fascist Secretary of Treasury George Schultz. Rather lured to addressing only today's dire symptom Washington is prime to do its best "Schwarzenegger runs California into the ground" routine.

Like I said, most don't get it. The end to which we came in 2008 was intended — only Jamie Dimon has the gall to say "no one saw it coming." So too intended was the response from lenders of last resort: cultivating a useful "we must save this rat infested ship" political consensus, while at the same time issuing the coup de grace to the "full faith and credit" of the U.S. Treasury, luring it into backing the hopelessly insolvent arrangement disdainfully known in these parts as Adam Smith's Leveraged Ponzi Scheme.

So, now with the JSC completing the first step forward on the path toward massive consolidation of power, Team Fraud is ready to take its second step. Chaos unleashed upon every imaginable lap dog in both the public and private sectors. Per this latter group, let's not forget leadership here, too, was educated in the same esteemed universities as were many a jellyfish in Congress, as well as our despicable fascist-in-chief. No less cowardly, then, these nevertheless being similarly well-trained will fall with dignity, much as Congress and the President of the United States already have.

So, a little outside the box thinking tonight. It's more likely banks and financials were weak today not because of some phantom threat, but rather frightful reality. The virtual insolvency of most no longer can be denied within the framework of arrangements defining today's market-based financial system. It's time for convulsion, destruction, and asset grabs for pennies on the dollar. Thus does fundamental circumstance now arrived at with breathtaking speed have me siding all the more with Friday's view anticipating support turning resistance, stat.




(How long has CNBC had a "Sovereign Credit Default Swaps" page? There's now a link to this page under "My Research Assistants" way down in the left column. This probably will be something worth keeping an eye on over weeks and months ahead.)


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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Monday, August 15, 2011

Sprechen Sie Deutsch, Empiricist?


Gotta love the consensus of well-known names pitching a "don't worry, be happy, the worst is behind us" theme. Pitiful empiricists all too willingly overlook the one thing making this moment unlike any other over the past eighty years: a collapsing banking system burdened with a mountain of debt that simply no longer can be papered over.

Three plus years pretending a physical economy operating far below breakeven could be ignored while a phantom "liquidity crisis" facilitated the only thing keeping the trans-Atlantic financial system afloat — more debt — have reached their end. It appears German resistance to reliving their Wiemar experience will see to that.

They say to every rule there is an exception. Well, if misery loves company, then I could not be more pleased to see virtually no peer with an outlook so dire.


SPX 5-min

The market's counter-trend rally off last Tuesday's bottom appears to be fading, and is peaking right about where you would expect.


NYSE McClellan

The NYSE McClellan Oscillator reveals improving underlying technical conditions typical in formation of a fourth wave of five waves down. The fifth wave down from July 7th peak could commence at any moment.

With the configuration of other technical measures presented on Friday still ominously poised, the market's further, sudden, steep decline remains fixed on the radar.


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!

Saturday, August 13, 2011

Hamilton v. Jefferson Meets a Misguided Ron Paul


One of my favorite philosophical questions is, "If a tree falls in the woods and there is no one there to hear it, does it make any noise?" The answer, of course, is no. What are trees, woods, hearing and noise but ideas created by man? Without man these ideas do not exist.

Alright, now here's a kicker. If a tree falls in the woods and there is but one person there to hear it, does it make any noise?" Again, the answer is no. What good is any idea without someone with whom the power of its truth can be shared and leveraged?

The same for noise from falling trees goes for God, and here too the idea's power is in its being shared among humanity that its truth be duly leveraged, that mankind's posterity — its highest natural potential — foremost be elevated.

Mankind's posterity is a consideration of utmost supremacy no matter what set of earthly ideas one might take into account.

Pity our time is one in which mystical formulations said to give money its value are being elevated above thoughtful consideration of money's ultimate, lawful service to mankind's posterity...




Aside from easily refuted historical distortions in the above presentation, let me just say that, Alexander Hamilton as the nation's first Treasury Secretary buried then Secretary of State Thomas Jefferson's objection to a National Bank with his 1791 Opinion as to the Constitutionality of the Bank of the United States.

The critical distinction between the defunct Bank of the United States and the present Federal Reserve System is that the former represents a constitutional credit system operating through a public corporation giving Congress direct power to finance investments serving the nation's posterity, whereas the latter foremost attempts to unhinge Congress' power over finance aiding its service to the national interest, instead fostering private interests, and this even at the expense of the national interest.

What is the national interest? Read the U.S. Constitution's Preamble. In one eloquent sentence the national interest is clearly stated with utmost intention to elevate mankind's posterity. Thus does Hamilton's conception of a national bank in fact offer a superior formulation for a banking system capable of serving such classical humanist purpose necessitating a constitution at all.

Herein, then, is the battle line drawn in truth regarding banking in the United States. The above video's distortions purposely denigrating power over finance possessed by the people of the United States through its federal government is nothing but an attack on our constitutional republic masked by a heaping helping of populist mumbo jumbo that these days finds the likes of Ron Paul championing to a receptive (albeit poorly informed) American audience.

So, for truth's sake does the following recitation of American history set the record straight...




I'm not about to suggest the populism of Texas Congressman Ron Paul represents the sort of seditious threat President Monroe is reported to have feared. The bankruptcy of monetarist ideas spurring the likes of a Ron Paul without doubt have the globe on a fast track to the greatest economic collapse humanity has ever endured. The trans-Atlantic arrangement fostered following the U.S.A.'s August 1971 surrender of sovereign control over its currency is on the verge of imploding. Be it by the banking system's hyperinflationary blowout or deflationary collapse, physical urgency about to be raised among countless millions is likely to relegate Ron Paul a rather obscure and irrelevant figure whose "understanding" of money devoid of its lawful purpose in elevating mankind's posterity already today can be respectfully judged misguided.

This is not to suggest Mr. Paul fails to understand which parts of our current arrangement are problematic. His charges against the Federal Reserve, no doubt, find a basis in reality and so are credible. However, Paul's trouble is the cure he advocates. Too few Americans understand why it is worse than the disease. (To these I might impose the following consideration: why does Ron Paul receive any coverage at all from a mainstream media whose part in sustaining the "credibility" of the Federal Reserve is indisputable? Here's why: Ron Paul represents no threat to monied interests whose domination of the Federal Reserve has brought it to its current, insolvent state! Indeed, Ron Paul's "cure" plays right into their game, which remains effective dominance of private interests over sovereign states, and by extension its affairs.)

Coming patriotic representation for the nation all too likely will be cut in the cloth of such figures as Henry Clay, a man whom Abraham Lincoln called, “My beau ideal of a statesman.” Indeed, the likes of Lincoln, and Franklin Delano Roosevelt thereafter — both of whom were avid proponents of the American System of Political Economy, carrying forward ideology established by Alexander Hamilton and furthered by the likes of Henry Clay and John Quincy Adams — might better be thought products of history whose cause and consequence simply cannot be erased from the soul of the nation, having commonly risen to prominence during periods of chaotic upheaval by way of what the nation's founders identified for posterity as "Nature's Law."

Practically speaking you should not be surprised to find yourself amidst living history. You can see with your own eyes the battle continues. Now, being that we are at what history is likely to judge a decisive moment, your imagination might be impressed to be living in it. You should have all the facts, then, particular as the key to victory is presenting an enemy a face-saving way out...




Truth is Hamilton's American School is more than "face saving." It is the promised land of investment banking — amber waves of green awaiting to be created out of thin air in a nation harnessing its resources evermore productively, raising efficiencies in its commercial economy and opening opportunities scarcely dreamed of today. The American Revolution's contribution to capitalism — more specifically, the U.S. Constitution's — is in the possibility of harnessing the resources of the United States creatively employing efficiencies in a manner not easily replicated anywhere else in the world. In its 200 plus years of existence the United States has yet to harness the ultimate power of both the nation's physical resources and the creative resources of the nation's citizens through dedicated, focused, long-term investment in the economic platform upon which its citizens should thrive. In the midst of the presently unfolding social calamity, then, is opportunity to reverse course and put the peddle to the metal like never before.

The sort of capital-intensive, long-term investment imperative necessary to create an economic platform most efficiently fostering command over the resources of the nation — whose most precious is the creative capacity of its people — is assured through the operation of a Hamiltonian national bank: the centerpiece of the American System of Political Economy.

Only through sovereign control over finance can the posterity of a nation's people be assured. Directing finance toward foundational investments effectively serving to elevate productive, economic efficiencies in perpetuity is the means of creating both abundant opportunity within the commercial economy, as well as a rock solid base impervious to the occasional business failure. Unlike today's situation where foundational elements of the nation's commercial economy are profoundly vulnerable, the so-called "two-tier credit system" at whose top tier is a Hamiltonian national banking system presents the framework for stability conducive to long-term investment, both public and private, foremost serving mankind's posterity as a living being.

(For more see also: Hamilton's Constitution)

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This majestic work brings into sharp focus the private and public Henry Clay (1777-1852): gambler, drinker, duelist, as well as brilliant orator, a man with a "gift for the outrageous," and savior of the Union.

"Henry Clay and the Struggle for the Union" delves into the intricacies of our nation’s history like never before, telling the story of the man who promoted ‘honorable compromise’ for the greater good of the nation. (DVD)

Friday, August 12, 2011

Support Turning Resistance, Stat


Contrary to last night's suggestion that, a scalping of options premium in a range bound trade might be upcoming over the next week, the market's technical state rather is bad enough that, rapid downward assertion further confirming the beginning of the end could instead be at hand...


$SPX weekly

That's the weekly S&P 500 over the past three years ... whose momentum (bottom panel) is juuust turning negative, and hard, after persistently fading since February 2011 peak. Momentum-wise, big picture, there's a lot to lose. Relative strength (top panel) confirms this. Indeed, within the realm of reasonable probability, it seems — judging by technical shockers earlier this week — is the S&P 500's weekly relative strength exceeding its worst in October '08, and sooner rather than later.

Since an Elliott wave C is thought unfolding — again a third wave typically being most dynamic, according to the Elliott Wave Principle — even during its initial leg lower, there could be shocking, technical devastation. As we saw on Monday, the likes already have been delivered.

Which brings us to the interesting area of intermediate-term support shown via the green line drawn above. There is reason to believe this line of support might be tested sooner rather than later...


$BPNYA

Satan still burns red. No less does his disposition, then ($BPNYA RSI <30), welcome stocks further into Hades.

As you will now see, insurance stocks need to bide time in limbo has not yet been forthcoming...


$CPC

Still no worthy spike in long equity positions being hedged with put options. With damage already done this month, hedging enough to suggest a firm bottom is in place no doubt should exceed that seen at May 2010 bottom. There is every reason to believe more hedging will be required before there is any prospect of a "bottom" being at hand.

So far, no sign of bottom. In fact, on a couple occasions over the past eighteen months the CBOE Put/Call Ratio has been similarly disposed as now. In both instances another leg lower in the market immediately followed.

So, the S&P 500 might be on rapid course to meeting its intermediate-term support at 1050-ish. This week's respite might prove short-lived. There's no reason why the fifth and final wave forming five waves down from July 7th peak could not rapidly unfold next week...


$SPX

As I just demonstrated, technical evidence very well supports this probability.

On the S&P 500's daily chart there is a similar line of support, much the same as was seen on its weekly chart, having more or less the same precedents during its development. So, the market's behavior once this line of support turns to resistance is worth keeping an eye on.

Should resistance be maintained once support at 1100 is violated (prospectively next week), then support at 1050, itself, could soon afterward turn resistance, too. I'm picturing formation of a so-called "running correction" as wave 2 forms, as two lines of former support turn to battle tested resistance.

Subsequently, wave 3 could rip right through March '09 lows by way of a breathtaking collapse, probably coinciding with the EMU's demise — a likelihood increasingly heard to be inevitable.

The point is on this Friday night the market's upcoming undoing could proceed at a speed more rapid than everyone seems capable of imagining (this, too, is circumstance making collapse all the more likely). Of course, technical developments as current lines of support turn to resistance will need assessment in their own time. Right now, it is enough that, the first line of support could be toast next week, given the market's current technical state discussed above.

* * * * *

© 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!