The Risk Averse Alert

Looks like the individual investor might have been waiting for the much vaunted dip to buy. Their bullish sentiment jumped higher to 27% this week from last week's eye-opening 19%. As luck would have it, too, more "bargains" are to be had...



Trouble is the NYSE Bullish Percent Index has moved to a precarious position that typically has coincided with a market under pressure (this vis-a-vis the measure's RSI dipping below 30). Still, we might suspect nearer is a bounce led by NYSE-listed issues remaining positively poised. Looking back only to this same period last year we might better fathom near-term possibilities...



Then again, just how soon any meaningful bounce develops might first find the market's technical state weakening a bit further, sinking RSI (top panel) and MACD (bottom) to a more decidedly negative position, much like occurred going into early-April 2012 bottom. Already, a more negative technical backdrop than a year ago has coincided with the market's lift into last week's peak, so those hopelessly insolvent, "dirt cheap" bargains Bove spoke of rather have their work cut out for them at the moment. Not to disparage the "great success" the likes have had sustaining the illusion of surviving a self-imposed bankruptcy. The question is, though, how much longer can these hold on for dear life before succumbing to the trap into which they've been led by Venice on the Thames? By all indications coming from Europe it appears time bought will not indefinitely adhere the band-aid taking form in profitable proprietary trading whose mechanics we are all too familiar with here...



© 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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