Confirming August 2011 Redux ~ The Risk Averse Alert

Friday, November 16, 2012

Confirming August 2011 Redux

Well, we certainly know where Europe's money fled to today. And wouldn't you know it, already proven "dumb money" just moved into U.S. trash right about at the worst moment.


As I was saying, August 2011 redux, here we are. Ho, Ho, Ho and a lot of selling yet to go is today's message yet again. Urgency to bid stocks higher is not yet seen per today's NYSE advance-decline differential. This is unlike the latter half of May when the market's decline from its March-April peak was nearing its end. Recently detailed here are several similar instances over recent years when A-D likewise signaled an approaching turn higher. May's was just the most recent (marked via the red dot above). Such [relatively] exceptional interest bidding NYSE-listed issues higher simply did not materialize today. Rather only a bounce in a continuing decline probably is most fairly seen. What's more, the likelihood of the market continuing its decline appears bolstered by the above measure's present [perilously declining] momentum. Note similarity to early-August 2011 on this account (see bottom panel).

Today's advance appearing but a bounce (this being suggested by a less than standout NYSE A-D) finds nothing but technical confirmation across the board. Mr. Market is in a bad way right now, and odds are its southbound journey is not even halfway over.


As promised an Elliott wave count we could similarly apply across all major indexes and find no [Elliott wave-based] analytical quandary with the fact a broad measure like the NYSE Composite Index has been lagging all other major indexes over the past year, this by not having yet exceeded its May 1, 2011 peak. Here, across all indexes wave (b) of B is seen forming since February 2011 peak.

On this account wave (b) is the middle wave of a 5-3-5 "zig-zag" up from March '09 bottom. It is taking the form of a "double three" (at least) whose further formation is some months away from completing. Satisfaction of the Elliott Wave Principle's "alternation guideline," this as wave (b) continues developing per the above, prospective wave count, would be easily achieved.

Yet the above wave count variation presents neither the market's only likely path forward, nor its most probable. Indeed, the following wave count rather is thought more likely for both technical and fundamental reasons I will further elaborate over the weekend...


Here again is an Elliott wave count we could similarly apply across all major indexes. In this case a "double three" is forming off March '09 bottom. Its first "three" took the form of a 5-3-5 "zig-zag" higher from March '09 bottom to February 2011 peak. Its second "three" is alternating by taking the form of a 3-3-5 "flat." This currently forming second "three" has been developing since early-October 2011 following completion of the connecting "x" wave.

With this wave count variation the end of the market's counter-trend rally off March '09 is in sight, unlike the prior alternative detailed above. Likewise, applying this second wave count variation across all major indexes we find distinct differences evident going as far back as 1998 (this in the case of the NASDAQ Composite in particular) satisfactorily accounted for. Per the NYSE Composite Index, as well as the S&P 500, distinctions noted in "Forewarned is Forearmed" likewise remain intact, thus combining with the wave count variation above to present a decided warning that, the market's anticipated demise slated to sink major indexes to levels last seen in the 1987-1994 period (at least) could begin and, indeed, end as soon as 2013.

Word on the Street
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