Like From Like and No Bottom in Sight ~ The Risk Averse Alert

Monday, March 25, 2013

Like From Like and No Bottom in Sight

Let's follow through on the possibility 2013 will see the market's March 2009 low taken out like it wasn't even there. An earlier likeness to what might be in store as the year progresses deserves our consideration here. Check this out...


Turn your attention to the period from February-October 2011. Wave a of (b) [of B] unfolded over this interim. Its component waves are labeled a, b and c.

The distance between $NYA's wave a low and wave b high is marked via a thin red line. As it turned out, wave c fell two widths of that measured distance below the wave a low.

Now consider the larger time frame wherein waves a and b [of (b) of B] unfolded, this from February 2011 to present. Check out the width between $NYA's wave a low (early-October 2011) and its yet to be reached (but likely imminent) wave b high. Now consider two of those widths lower as a prospective wave c of (b) [of B] target.

Could wave a of (b) prove but a foretaste of wave (b) in its entirety? Will wave (b) form an even larger "irregular flat" than formed wave a of (b)?

If it does, then March 2009 bottom will be toast sometime this year, probably late summer or early autumn. Thus, too, might the Elliott corrective wave forming since March '09 ultimately prove a "running correction." This would mean wave (c) of B sees $NYA recovering only to its March 2009 low, following completion of wave (b) of B later this year, targeting $NYA significantly lower than its March '09 bottom.

The Elliott Wave Principle's "alternation guideline" is on fine display throughout formation of wave B since March 2009. Having long been aware of the possibility that, rather than the first a-b-c up completing wave B, these first three waves up might form but wave (a) of B, it's fascinating to behold the makings of a 3-3-5 "[irregular] flat" forming wave (b) of B following on the 5-3-5 "zig-zag" forming wave (a) of B. Likewise do we see the alternation guideline similarly on display contrasting wave a of (b) forming a 3-3-5 "irregular flat" (February-October 2011) with wave b of (b) forming a 5-3-5 "zig-zag" (October 2011-present).

I certainly did not well fathom the duration of time that was likely to transpire extending formation of wave B subsequent to formation of wave A from October 2007 - March 2009. I probably will feel a lot less badly about this, though, should a steep setback obliterating March '09 bottom, indeed, occur over coming months. Let's just say the possibility is not a remote one, particularly with the specter of euro-zone bank runs made more formidable by the evident need to skim depositors for capital backing loans needed to stave off insolvency. Not a pretty picture, while who's in it probably stands to make Lehman Brothers look like a thumbnail print. This is circumstance making March '09 bottom appear a lot more vulnerable than most seem to appreciate at the moment.

Word on the Street
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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.

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