Imbalance Implosion Initiated ~ The Risk Averse Alert

Monday, December 03, 2012

Imbalance Implosion Initiated

We couldn't ask for a better start to a December expected to be a tough month for trapped lovers of wildly overpriced garbage. An outside December Day 1 finishing to the negative? Magnifico!


Today's "outside day" one ups the trade on May 1st. Now is the matter of the market's current technical state in contrast to that prior to May's sell-off. One ominous item of note is seen above via the S&P 500's relative strength (top panel). Evidently there was neither time for registering a positive RSI divergence at the S&P 500's mid-November bottom, nor any capacity to disguise the motivation—panic—behind the market's turn higher. Per the latter matter particularly, an RSI quickly lifted above 50 and kept pinned there is the face of imbalance whose outcome all too likely will bring disappointment to those whose actions created it, be they mindless dip buyers or desperately holding for dear life to fantasy claims at the bottom rung of an insolvent financial system.

The ultimate objective over the next few weeks is seen above via the line drawn extending from the close of trading on December 30, 2011. We might see the S&P 500 sink to its 200-day moving average tomorrow, then spend the remainder of the week working the market's badly broken price discovery mechanism to close Friday little changed from today's close. During next week's trading and the week following a trip to a negative 2012 is thought likely.

How can I not give a hat tip to Capo Confetti for his hyperinflationary policy's success shutting down domestic manufacturing and vindicating every derogatory bit of venom spewed here? How many trillions shoveled into an insolvent banking system does it take to keep a U.S. manufacturing PMI above 50? Does it really matter if Washington goes over the so-called "fiscal cliff" when a still reckless Fed assures that, tax receipts will fall faster than spending on defense and entitlements can be cut, whether this be by a bi-partisan, Tory consensus or their satin sandwich's mandated sequestration?

Word on the Street
* * * * *
© 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!