Tuesday, January 31, 2012

Recipe for Facebook IPO Fail


Whether through continued, concerted escalation of geo-political tensions whose intent ventures to engulf the Middle East in war, or increased legal threat implicating select Team Fraud players in mortgage-related misdeeds, a relentless drive toward conditions conducive to chaos is unmistakable these days. Were such matters of disturbing contemporary circumstance rightly perceived insane attempts at controlling the disintegration of Team Fraud's financial, economic and political architecture, then just how fragile is the facade masking a hopelessly insolvent banking system lies exposed for anyone with eyes to see.

Most telling is a growing lack of willingness among certain key players to go along with the various promoted agendas risking chaos. Per the Middle East, there's Russia and China resisting regime change a la Libya. Per mortgage fraud there's Beau Biden (and other state Attorneys General) fighting for comprehensive discovery of crimes committed in creation of the largest financial bubble in U.S. history. And let's not forget Germany whose hardline stance toward the EMU threatens an extinction event. Never shy to demonstrate its mastery in the art of lucid dreaming, though, Bloomberg reports Portugal a sound credit (notwithstanding its collapsing debt trading on secondary markets).

So, there's no mystery behind the sudden rush to bring Facebook's IPO to market. Yet I am probably quite alone in thinking the blessed event might not even get off the ground.


$NYA

In the NYSE Composite index we have the leading laggard of all the majors. This is worth pointing out because the excitement today about the S&P 500's "Golden Cross" needs tempering. This follows on the Dow Jones Industrials achieving the same feat exactly one month ago. As you can see, though, the broad market has yet to accomplish this (notwithstanding solid internals — i.e. advances-declines, new 52-week highs-lows). Likewise has the NASDAQ Composite yet to register a golden cross.

Most interesting, though, is the two major indexes now celebrating a "Golden Cross" have seen their respective momentum most negatively affected this week (see MACD, bottom panel). The market's advance since mid-December might be broadening, but it is doing so in a climate finding leaders being trimmed. This is not necessarily foreboding, yet added to volume making fairly plain the fact that, stocks are not being accumulated by strong hands, the hit on leadership offers further evidence a turn lower is drawing near.

Which makes last year's head and shoulders neckline a potential line of resistance to any further advance.

Two things I would like to add about that head and shoulders. First, its minimal objective was met during August's undressing, and second, distribution its appearance suggests remains noteworthy, even following the market's recovery since October. The broad market's lag in the face of this recovery simply the more reveals an advance whose legs are weak (since we're talking body parts).

If you missed John Bollinger's remarks on the "Golden Cross," as well as the "January Effect," here's the clip:







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, January 30, 2012

The Three Bears


Having indicated on Friday that, "2012's buoyant start seems likely to persist, at least to the effect of sustaining major indexes at current levels," just how much longer this might go on is in doubt. Indeed, just how very close major indexes are right now to rapidly sinking to levels last seen in the 1987-1994 period finds one measure suggesting the tipping point could be at hand...


$NYAD 10-DMA v 200-DMA

The 10-day moving average of the NYSE advance-decline differential presents a telling divergence (i.e. contrasted with NYSE Composite) whose recent precedents offer fair warning of possible pressure about to hit the market. Then again, what's to say present levitation might not persist for some days longer — divergent underlying conditions notwithstanding? Nothing, really, other than the matter of the momentum trend mentioned Friday.

As you can see above, though, developing over the past couple years has been the same manner of growing weakness as was shown via $NYHL on Friday, January 27th and $BPNYA the day before. So, this gives us our own cast of characters in an "Occupy Reality" production we can call, "The Three Bears." Theirs was a world, too, whose confidence was shattered by an intruder...


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, January 27, 2012

Lipstick Fail


Respecting technicals, there's both immediate strength and extended weakness presently coexisting in a trajectory leading to the market's impending collapse whose effect is projected to sink major indexes to levels last seen in the 1987-1994 period, this beginning even as soon as days from now.

Per present strength, 2012's buoyant start seems likely to persist, at least to the effect of sustaining major indexes at current levels. If the magic show should deliver deep from its hyperinflated bag of tricks to an audience demanding an encore, there still will be no stopping what's to come. Mere frustration endured for months has coincided with clue upon clue further shedding light on possible paths forward. Yet no frustration presently possible risks madness, as evidence suggests all paths lead lower.

As for circumstance portending collapse, who can deny a growing wealth of real world vulnerabilities whose negative effect on confidence finds decided, technical substantiation, the likes of which these past couple years is unmatched in confirming the market's growing, underlying weakness? Bullish sentiment, now well-restored in spite of this, is but icing on the cake.

(And the rush to IPO Facebook, a candle. Or is it a stick of dynamite?)


$NYA


Momentum (bottom panel) might be diverging from late-October peak, yet it still remains positive, and if there is one trend whose development since March '09 bottom has been a mainstay of the market's counter-trend rally over the duration, positive momentum maintained in a manner more or less in keeping with the so-called "technical trade" facilitated via hyperinflationary injections of liquidity is it. Countless times these past few years momentum faded and diverged. Yet as long as it remained positive, the market maintained its buoyancy. The memory is not lost. More importantly, though, neither is the reality, no matter how mystifying its present manifestation otherwise might be.

Not to be lost in this thought is what wicked danger has been exposed these past three years anytime momentum turned negative. Therein lies more subtle evidence indicating underlying confidence remains razor thin. This is in spite of the market's massive recovery over the interim. Indeed, the extent to which the market's recovery since March '09 has been largely technically driven is revealed by momentum dynamics described here.


$NYHL

Digging a little deeper, there's both underlying strength and weakness to assign the market's near-term state as measured by the daily differential of NYSE new 52-week highs and lows.

A higher differential coinciding with higher NYSE Composite highs (green line) suggests underlying strength.

A higher differential coinciding with lower NYSE Composite highs (red line) reveals a widening divide between the haves and have nots. A fitting image describing this circumstance would be applying more lipstick to a pig, only to discover it to be less beautiful.


$NYHL

Just as was detailed yesterday via the NYSE Bullish Percent Index, the present moment likewise contends with an extended period of persistently increasing underlying weakness, as revealed above via the NYSE's new 52-week high-low differential. This weakness again has registered even as the market has done remarkably well to maintain its levitation. But further evidence this provides of a market driven by a technical trade. Critically, there is no sign whatsoever of this developing into stampede. Quite the contrary.


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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Thursday, January 26, 2012

Fading Hope Floated


No rush to call a top here because the art of floating hope has taken hold in the New Year and those who enjoy to float have spread their joy, and could a bit more as long as the euro-zone cooperates...


$BPNYA

In joy's increase, though, is there better seen a mark willing to be fleeced? Consider above noted, underlying technical dynamics in relation to price action since July 2011 in particular....


$NYA

Such apparent certainty as could widen the NYSE Bullish Percent Index in the midst of falling prices might be better called a "Chip Diller Stand:" smartly dressed and poised to be trampled.

Following a divergent May 2011 top (comparing $NYA with $BPNYA performance) — itself but a marker on a long established march building underlying weakness (see below) — increasing certainty on display at present seems all the more misplaced. Checkmate is October's $BPNYA confirmation of $NYA's low. Were a sustained advance rather commencing, underlying strength measured by $BPNYA at early-October bottom would have better positively diverged, rather than confirm $NYA as occurred.

Well enough, then, is $BPNYA RSI (top panel) and MACD (bottom panel) diverging at October bottom and setting up the bounce whose effect now finds RSI hitting its upper edge. Just how much longer a monstrous turn lower can be delayed appears only a question of how many more hopes can be floated in an age when for 2+ years hope has been fading...


$BPNYA

Comparison of circumstance underlying the market's jump following its August 2011 thumping with what followed May 2010's also is instructive. Today's greater measure of underlying certainty only is the more suspect taken in contrast.

Back in 2010 a similar measure of bullishness as registers now found $NYA in new high ground, post-March '09 bottom. Obviously, this is not so now. Seen rightly in context, then, one is given to wonder how much more must $BPNYA increase before $NYA exceeds its 2011 peak. Or, more relevantly, does the trend established over the past three years suggest long-fading hope, well-established, more likely might overwhelm those who today in the face of diminishing reward float it?


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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Wednesday, January 25, 2012

Hyperinflationary Happy Hour Extended to 2014


Drunk on monetary moonshine served up these past few years at Ben Bernanke's Federal Speak-Easy, party goers today welcomed the promise of three more years in distorted reality stuffing dollar bills into the financial system's chaos-o-meter, and just making the thing leap...


$GOLD

Note spot gold's increasing volume trend since late-December. The stock market (let alone AAPL) could take a lesson. Nevertheless, building is a technical case for claiming spot gold's projected, final parabolic advance appears underway.

The greater bulk of gold's upcoming lift still is thought likely to coincide with the initial phase of the stock market's upcoming dismantling. As such, then, my view supposing a negative turn in the market is very near developing appears substantiated with today's spot gold reaction to the Fed's promise of cheap monetary moonshine through 2014.

A liquidity flood both delivered and promised by immoral incompetents on both sides of the Atlantic plainly finds investment capital seeking a store of value. Of course, this is becoming increasingly difficult to find in securities markets because, following 2008's assassination of confidence in Wall Street's shadow banking system (a.k.a. "Adam Smith's Leveraged Ponzi Scheme"), profit margins are under pressure even to the point of driving into the ground providers of the physical economy's lifeblood — energy. Whether this fact is being ignored or denied in general is inconsequential, as its growing effect is inescapable and Bernanke's Federal Speak-Easy is committed to serving it up with smiling faces demonstrating no empathy for the crazy physical effect their poisonous elixir causes.


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, January 24, 2012

A Date With Chaos


Behold physical economic breakdown on the alter of [insane] hyperinflationary monetary policy: a freight train whose fuel simply is not hydrocarbon-based. Thus, there's no need for so much refining capacity...




Oh? This means everyone gets to pay even more at the pump, so from a collective backside the many times screwed yet again subsidize a hopelessly insolvent banking system whose voracious appetite for capital is but legend receiving its due. Yet the evil of it will extend destruction far beyond even today's insolvency declaration of Europe's largest refiner, Petroplus.

Indeed, following Il Duce's speech tonight how does one not imagine a fast approaching future featuring such shark-on-shark action the likes of which no living person ever has seen? Energy (not to mention China) clearly is under attack. As no doubt must be in hyperinflationary breakdown, the hopelessly insolvent are left only to devour their own. C'est la vie oil industry.


$INDU

If to be is the least disruptive alternate Elliott wave count applied to the Dow Jones Industrials (placing end of wave B at May 1st top, as mentioned yesterday), then my view toward five waves up unfolding from mid-December bottom is adjusted accordingly. It is not so much the size of last week's advance advising this slight alteration, but rather technical factors confirming its momentary staying power. So, some days more might remain to pretend the globe can somehow avoid growing threats on the horizon portending a fast approaching date with chaos.


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, January 23, 2012

A Joe Granville Sighting


Nice to see Joe Granville still in the game. His New Strategy of Daily Stock Market Timing for Maximum Profit was one of my first reads in the voodoo of technical analysis. Finding Granville presently quite bearish on account of his "on-balance volume," no doubt, is encouraging.

Now, being old school the Dow Jones Industrials Average is the object of his outlook. Appropriately enough, too, the Dow, the granddaddy of them all, ever so slightly today exceeded its intra-day peak of last July, much to my analytical chagrin...


$INDU

Back in the day, the boys would call that a "C hair." It is what it is, and for this index means wave B (of an a-b-c Elliott corrective wave down from October 2007 peak) did not end early-July.

Maybe, then, for the Dow Industrials wave B ended on May 1st.

Or, maybe formation of wave B is extending. Per this possibility there are a couple alternatives. The least likely of these will have the Dow leading all other major indexes into nominal new high ground, post-March '09 bottom. More likely is possibility that, forming from March '09 bottom into last year's peak was but wave (a) of B [up], with wave (b) of B [down] presently forming since May 1st.

Rather than ponder nuances of these possibilities, let near-term prospects rest on the fact that, first, early-October 2011 bottom found fearsome technical confirmation on a couple key fronts such that only a die-hard monetarist monkey — a junkie for mis-priced credit — could shrug this off as being inconsequential, and second, 2011's swoon did considerably more technical damage than did 2010's, indicating underlying weakness increasing (as already was evident for months on end leading up to 2011 peak). In other words, let's not lose sight of the forest for the trees. Odds remain that, recovery from last year's setback will fail to match the market's bounce off late-June 2010 bottom. Indeed, even now there are several technical disconnects versus 2010's second half recovery. These, again, confirm underlying weakness is increasing.

Speaking of which, how about those Greek bond holders! From a 20% haircut to 50%, and now 70% while the Greek economy faces collapse as the critical flow of Iranian oil is set to cease on account of EU sanctions announced today. Greece has nothing to lose holding firm in its ongoing negotiations with well-dressed swindlers representing bond holders who risk losing everything. No matter what prospective Elliott wave variation is taking shape, a disorderly Greek default could deliver Granville's 4000 Dow points in a week, rather than take the entire year, as Granville suggests. Keep this in mind, because the possibility unquestionably dwells within the dark forest of longstanding, underlying technical weakness that, indeed, only has been increasing.


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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Friday, January 20, 2012

Levitating Trash


How ever will Team Fraud keep its garbage afloat when the underlying dynamics sustaining its levitation are so frightfully poor?


$NYAD cumulative

You would think by now the NYSE Composite Index would be printing somewhere in the vicinity of 15,000 judging by how far beyond its 2007 peak is the NYSE cumulative advance-decline line. It really just goes to show you that, a lot of weak hands are required to absorb the supply of relatively fewer strong hands whose shares in fact largely have been distributed (as was noted here more than six months ago).

Depressed price performance in the face of unfettered long interest is only the more conspicuous in light of the fact that, the market's advance since March '09 bottom increasingly saw selling diminish, this revealed by persistently contracting volume over the interim. Therein lies stark proof stocks rest in weak hands. Were truth otherwise, then the print on the NYSE Composite Index would be well above its 2007 peak and the volume of shares exchanged would be swelling, not shrinking.

Some are fond of saying price doesn't lie. Yet the truth price tells requires a sense of context in which it speaks. Today's read on price comes in a context all too likely to make its admirers weep.

Just how perilous is the market's current position is further revealed by the leper colony otherwise known as NASDAQ...


$NAAD cumulative

Seriously? A NASDAQ Composite falling to 300 still is very much in the cards. The handful of issues lifting this index soon enough should go the way of Netflix and the dozens of other pump and dump plays this exchange is famous for.

Were the likelihood otherwise, then there would be evidence a widening swath of NASDAQ-listed issues are being accumulated. There is nothing of the sort going on here. Indeed, selling restraint typical of weak hands is the dominant force levitating the NASDAQ Composite Index. When time comes to pull the plug (and it is fast approaching) the shock and awe likely to hit NASDAQ stands to make many a Tory warmonger blush.

Taken together, the above two measures reveal a bit more about the character of the technical trade driving the market since March '09 bottom. All told, there is nothing to be bullish about, that's for sure.


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, January 19, 2012

All Eyes on the Exits


You know what they say: one man's trash is another man's treasure. And so it is with this market, as the NYSE's new 52-week high-low differential rather decidedly suggests (this over the past two years, as well as the past two weeks). Plainly, the future of hyperinflationary bailout is grim. This even for the likes of IBM whose Q4 2011 revenue is reported tonight coming in. Eventually there will be no more subcontractors for large, multi-national corporations to trim and reduce expenses, leaving in the balance physical breakdown induced by hyperinflationary pressure on input costs and promises of dozens more Kodaks entering chapter 11.

Of course, those whose livelihoods hang in the balance are bound to think otherwise until there's no choice but give in. These are marks for an approaching shakedown, apparently failing to fathom how so-called "regulators" are only further stacking the deck against their interests — weak hands whose supply stands to be swept away in a river of tears. The targets of distribution whose greater bulk ended many months ago now are better seen as kindling for the torching still to come. Trouble arriving in 2008: but a bomb hollowing a fire pit filled further with paper fuel perilously close to being totally engulfed. So many facets of systemic stress piling one upon the other for months on end entirely support this outlook.


$SPX

Now, the tendency toward levitating the market in the face of fading momentum (bottom panel) has been the dominating characteristic of the so-called technical trade born of hyperinflationary bailout of insolvent credit securities over the past three years. The current iteration, however, finds coinciding relative strength (top panel) decidedly more strained. It is taking some time for relative strength to reach its upper extreme. Thus further exposed is a market whose interests are thought eying the exits with a panic-stricken sense of what's to come.

As ever has been the case since March '09 bottom, the market's lift since early-October is occurring in the midst of persistently fading volume. Yet selling restraint exercised by long weak hands is failing to incite a bid whose effect ramps relative strength in a more decided fashion similar to that prior to last year's top. Don't get me wrong. Were we in the midst of a sustained move higher (rather than a transitory, "corrective" lift, as is thought), the otherwise constructive balance between the buy- and sell-side displayed by relative strength's slow ascent would be a positive. However, in the grand scheme of a technical trade born of hyperinflationary bailout instead revealed here is apparent understanding of the undesirable effect of this policy. This understanding likewise is displayed via the NYSE's new 52-week high-low differential noted at the start. Subtle though these observations might seem, technical circumstance thus is seen supporting a view that, all eyes on the exits have never been more intense at any time over the past three years.


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, January 18, 2012

Complex Corrective Wave Nears Completion


Back on December 28th the following chart was presented (absent the Elliott wave count), showing that, the market's CME-driven lift from Tuesday, December 20th had hit a patch of weakness (seen via circled RSI), suggesting approaching completion of a five wave advance...


SPX 5-min

Staying with this view, and keeping with more recent perspective supposing these five waves up from Tuesday, December 20th are forming the last leg of a complex Elliott corrective wave since August (namely, a "double three"), there is a certain matter of "time" put forward in the Elliott Wave Principle that needs elaboration here.

You already are familiar with the Elliott Wave Principle's "alternation guideline" and its usefulness in distinguishing second waves from fourth waves in a five wave sequence. Generally speaking, one also will find a certain Fibonacci-based proportionality in the dimensions traced by second and fourth waves. However, there is no such proportionality in time offering a reliable analytical tool for assessing second and fourth waves. Indeed, time is not a factor in the Elliott Wave Principle. So, a second wave could form in a matter of hours, whereas a corresponding fourth wave might take days to unfold.

With this brief background, then, let's consider possibility that, the patch of weakness hit on December 28th was heralding but the start of the fourth wave of five waves up from December 20th, whose completion came last Friday (January 13th)...


$SPX

There are no Elliott Wave Principle rules broken by the wave count assigned above. Likewise the dimensions of the component waves of the fourth wave are reasonably proportional to the span of the second wave.

The alternation guideline also is satisfied, with the second wave forming a simple, 3-3-5 "irregular flat," while the fourth wave formed a complex "contracting triangle" (whose "e" wave exceeded the triangle's established bounds; an occurrence not unusual according to the Elliott Wave Principle, and in this case fitting, too, given underlying weakness displayed during formation of the fourth wave's "a" wave on December 28th). A further permutation of "alternation" is revealed by the second wave's downward bias versus the fourth wave's upward bias.

The only unappealing aspect about this prospective Elliott wave count is time spent forming the second wave versus the fourth wave. Yet time-wise proportionality (or the lack thereof) has no play in the Elliott Wave Principle. So, with long-established technical weakness remaining unchallenged and the technical state of the market's advance since December 20th likewise weakening, the view above finds objective confirmation supporting the prospect that five waves up from December 20th are quite near completing.


SPX 5-min

At most another couple days might be required to complete the fifth and final wave up from December 20th. By all indications, time to trumpet the rumor mill out of Greece is short, as is the list of laggards worth risking a dime on at this very late hour. Per financials on this list, scarcely does anyone imagine strong hands on the short side shaking out the weak. Yet this more than suicidal knife catchers is likely behind the lift these pigs have seen so far this year (noteworthy, maybe, in absolute terms, but relative to last year's loss, a meager bounce at best).


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, January 17, 2012

Shakedown Awareness Day


Yahoo!s talking Yang ignore at their own peril how Greece is the way. Not missing a beat at the heart of today's fantasy is belief a Greek default will be orderly. It better be, because Germany has reiterated its hardline position on [under-funded] sovereign bailout facilities.

The market's true disposition lies exposed in sentiment presented for public consumption. Were an "orderly" default on Greek sovereign debt somehow possible and the EMU's dissolution not threatened, then the talk of the town on what's going down in Greece would be anything but sanguine. That's how a climate conducive to stocks being transferred from weak hands to strong would be cultivated, and this at increasingly attractive prices. This, a subtle, yet relevant, manifestation of contrarian thinking provides a clue to the market's true position. Taken presently with declining 200-day moving averages, reports pushing belief in an orderly Greek default, indeed, evidence such complacency as is fitting a moment otherwise confirmed perilous by a wealth of technical measures.

There's no doubt persistently declining volume since March '09 bottom reveals stocks in weak hands. So, then, when was the shakedown? It was not in August, as something less than panic-stricken NYSE volume revealed stocks then simply falling of their own weight. Contrarily, if strong hands already are positioned to drive the market higher, then could NYSE volume continue diminishing with every manifestation of the market's levitation? HINT: strong hands do not risk fortunes in illiquid markets (relatively speaking), and a market rising on diminishing volume is at risk of becoming just that.

The shakedown of weak hands is a coming event slated to smash major indexes back to levels last seen in the 1987-1994 period. Just how close the market could be to a terrible fall is only further highlighted by Europe's roadblocks ahead. Do let the increasingly dire position of European banks sink in. If any of it were bullish, then my outlook would not be so far detached from the frightfully complacent consensus a successfully deceived public otherwise prominently displays.


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, January 16, 2012

When Exchange Integrity Is Called Into Question


Here's a hot potato that slipped under my radar, and yet still is well-served better late than never...




A real confidence builder. Apparently there's no harm if this message goes viral, as the damage is done and the fallout cannot be contained.

The depth of the trans-Atlantic banking system's insolvency lies exposed in this shark-on-shark attack involving MF Global whose effect so bloodies the water as to relegate trusted markets impotent to protect against massive fraud.

Truth is not every generation of investors is given cause to question the very integrity of exchanges. That the gravity of circumstance bringing this to be has barely sunk into the social consciousness should come as no surprise, then. Still, the forceful use of an exchange to perpetrate a swindle, and this evidently against the will of those overseeing its operation, is a confidence killer extraordinaire. You can just imagine how this is sitting with some of the bigger fish in the ocean. Panic-stricken gazes toward the exit probably have never been more intense.

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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, January 13, 2012

The Lug Nuts Loosen


Were this morning's market setback on "rumors" of European sovereign debt downgrades likely to prove the kickoff to events leading to breakup of the EMU (as well as wave (3) of C targeting levels last seen in the 1987-1994 period), then odds are spot gold would have surged higher enroute to tracing its anticipated, final parabolic surge (this prior to collapsing along with everything else), rather than falling back in unison with stocks, as occurred.

This intra-day first sense of the market's near-term prospect was bolstered after the close by a CBOE Put/Call ratio indicating that, although wave (2) of C is nearing completion, there's probably some days more in store extending the market's dull levitation so far in 2012 before the hedged, short equities position building is likely to begin working. Typically, the put/call ratio will begin turning higher (diverging at the market's peak) once it is time for the market to begin turning down. So, another few days more levitating can be anticipated per this perspective.

Add the fact that, the NYSE McClellan Oscillator is displaying but first signs of weakness coinciding with the market's advance since mid-December (notwithstanding more glaring weakness at present in contrast to this measure's position in October) and appearing in order are a few days more defending 2012's CME-driven surge out of the gate.


SPX 5-min

Some perspective here. Outside the first few minutes of trading in 2012 the S&P 500 has gone nowhere. Relatively speaking, this is about the best to be expected over the hours remaining before wave (2) of C completes and the lug nuts fall off the trans-Atlantic banking system.


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!

Thursday, January 12, 2012

Since Lincoln, You Are Here


I should add long-term Elliott wave perspective to yesterday's near-term outlook applied to the S&P 500. Namely, October 2007 top not only likely marked the end of five waves up from 1974, but also the end of five waves up from 1932. From 1974-2007, then, the fifth wave of five waves up from 1932 unfolded.

Now, five waves up from 1932 are thought to form but the third wave of five waves up from 1861. Why 1861 I will explain shortly. For the moment trouble more severe than a majority apparently are fearing (as laid forth yesterday) is an outlook only further substantiated by this Elliott wave count marking five waves up from 1861.

The first wave up from 1861 carried into the first decade of the 20th century. Not until July 1932 did the second wave from 1861 end. From 1932-2007, then, the third wave of five waves up from 1861 unfolded. Thus, October 2007 began the fourth wave of five waves up from 1861.

Already we have seen moments whose only recent precedent was the Great Depression. Harmonious, then, is an Elliott wave view supposing that, presently unfolding is a fourth wave of the same magnitude as the second wave that unfolded into the depths of the Great Depression.

Now, a funny thing about 1861. There was a cause — a need — begging action. This was met head on by Lincoln with his greenbacks policy: the most powerful weapon in the Union's arsenal — a virtual national bank.

Ditto 1932. Met with another virtual national bank by way of FDR's retooling of Hoover's Reconstruction Finance Corporation.

Chances are, then, the third Bank of the United States will be reality before the currently unfolding corrective wave — the fourth wave of five waves up from 1861 — has completed. Having been taught these past forty years the value of "choice" in markets, it's a safe bet sometime in the not-too-distant future the financial community will choose stability. National banking financing a state-of-the-art, physical economic platform is a proven means of establishing an anchor promoting enduring growth, with the ultimate objective being the effective leveraging of unique capabilities mankind alone possesses, which too, indeed, it is constantly striving to improve upon. This in a nutshell is Alexander Hamilton's great discovery, and I dare say a revelation impossible to erase no matter how many trillions it takes to fill a sophist's "liquidity trap."

As for the moment...


$NYHL

The recently noted disparity in the NYSE 52-week high-low differential coincident with lower peaks in the NYSE Composite index since July now is followed by evidence at this early stage in 2012 suggesting the market's stuffing is thinning with each passing day the market crawls higher. Hardly cause to be excited about 2012's start. Of course, the QVC of financials (CNBC) sees things differently, and Shemp has got his hyperinflationary happiness on, on, on.

That's an echo. Under the covers is plain view the cheer lacks a captive audience. These haven't the time. Too busy raising capital and cutting operations. The facade of promise in 2012 could give out any minute now.


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...

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Wednesday, January 11, 2012

Death By Twinkie


First, some encouraging news: Kudlow finds stocks "absurdly cheap." Tell it to a European banking system collapsing under the weight of a zero due diligence regime whose latest permutation is a page right out of Wiemar Germany — a fact probably not lost on a gasping, crisis wracked political class at the helm of the EMU's lynch pin economy whose surprise, Q4 2011 GDP contraction is a hyperinflationary policy's nightmare come true. Twinkie anyone?

(Better enjoy the luxury while the price of sugar and flour still are within reach. At the rate incompetent, morally bankrupt regulators are going, shutdown of all kinds of food production is bound to accelerate for the very same reasons impacting Hostess today.)

So, how is it risk of the market's utter collapse in a chain reaction of events rapidly spiraling out of control in a whirlwind of controversy and confusion forever banishing today's ghost of Adam Smith's Leveraged Ponzi Scheme is possibility largely believed remote, if not entirely fantastic? This question is asked, of course, in light of today's extraordinary vulnerabilities pressing the limits of confidence.

The fuel, THE fuel: undue leverage applied to enterprises gambling wealth (rather than securing and expanding it in principled, productive commerce). Such a simple matter really, easily straightened out with Glass-Steagall. In fact restructuring should be no more disruptive to civilization than was the bursting of the Holland Tulip Bubble. That is what can be with the right intention, anyway. Yet truth remains that, unpayable debt and added leverage on securities facilitating it — both illegitimate — are a dark cloud over the planet threatening a torrent likely to permanently alter the political and financial landscape. This uncertain outcome, which by all indications evidently is to be reached in a climate of chaos, appears the very intention.

Now, considered strictly from a technical perspective the stock market's present condition is rather well-poised for collapse coincident with all too likely credit market convulsions already well along in developing and still very much at risk of devolving into a systemically threatening disconnect. Thus, my question per risk of the market's imminent collapse. Forgive me for breaking the silence, but the fundamental backdrop scarcely has been more conducive to calamity.


$SPX

And this is how such a thing could play out starting sometime as soon as days even. Still being very early along in the 200-day moving average's turn down, relative strength's persistent weakening places the market's imminent collapse squarely in the cross hairs.

The line drawn across the S&P 500's price chart is interesting. In connecting 2002 and 2009 bottoms it dissects in 1997 the third wave of a third wave of five waves up from late-1994. The market's upcoming collapse is slated to form wave (3) of C, another third wave of a third wave. Thus, the prospective follow-through to the market's pending collapse, as indicated above, slated to complete an a-b-c corrective wave down from October 2007 (or, alternately, September 2000), targeting S&P 500 levels last seen in the 1987-1994 period. Chance are by then, Kudlow will need a padded room.


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, January 10, 2012

Milking the Euro-decoupling Theme


Shorter dated technical confirmation coinciding with today's advance meets longer dated technical divergence exposing underlying weakness to extend as follows an Elliott corrective wave's levitation whose greater success is in time breeding complacency, rather than distance substantiating today's apparent contentment...


SPX 5-min

Not a big change to an assumed wave count whose second "c" wave of an a-b-c-x-a-b-c "complex" corrective wave since mid-August is seen unfolding. Although last Tuesday's CME shot out of the gate kicking off 2012 nicely filled out the Elliott Wave Principle's channeling guideline per a 5-wave move — these forming the second "c" wave — the fifth and final wave, itself, could be forming a "rising wedge," as indicated above.

So, in store appears another several days milking the euro-decoupling theme touting Team Fraud's "well-capitalized" banks chock full of mispriced risk over their European brethren whose mispriced risk is leveraged to the gills. The countdown to EMU disintegration proceeds with a hedge fund fantasy land poised for grave disappointment in a highly correlated sovereign trade whose counter-party risk rather likely threatens the banking system's implosion.


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!