Extended Channel ~ The Risk Averse Alert

Thursday, February 23, 2012

Extended Channel

Noted here about a month ago was an Elliott wave channel marking a 5-wave advance off mid-December 2011 bottom. The view then was that, five waves up were completing, this as the market moved higher into late-January.

Interestingly enough this same channel continues to contain the market's progress since then...


It would be easy enough to suspect the fifth wave of five waves up from mid-December is extending. So, rather than it having ended late-January, its formation is seen continuing. Just how much longer this might proceed is entirely uncertain, yet there nevertheless appears room for a move higher. That is without factoring in recently detailed overhead resistance.

Then, too, relative strength once again is diverging (top panel). You might recall an observation made here the 1st of February when, ever so slightly, relative strength again was diverging, and this for the first time at a market peak in quite some time. That one didn't work out. Maybe the present divergence will. Bolstering the probability is momentum (bottom panel) now turning down and, likewise, diverging as well.

Very much on the radar is possibility that, in an instant a stunningly sour undercurrent could appear with a vengeance and have a "deer in the headlights" effect more or less magnifying the market's present sanguine psychology dilemma highlighted yesterday. On this count the matter of prospective Elliott wave views presented here over recent weeks might seem contradictory. However, what is rather true is that, were the market to rapidly collapse and sink major indexes to levels last seen in the 1987-1994 period over the next few months, living would be prospect that wave forms unfolding in various indexes were to be seen as more distinctly unique in their development since 2007 top, and the year 2000 top before that. Right now, what really matters most, though, simply is that, fundamental, systemic vulnerability whose persistence over the past few years has coincided with abundant technical evidence indicating confidence is fading continues substantiating the probability that, the market is subject to collapsing in a fitful manner challenging to the core many institutions that, today, more or less are taken for granted. The exchanges, themselves, quite likely will be among these.

Fast Money
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