It more or less goes without saying we strongly suspect the little engine [of fraud] that could will find its brakes rusted—frozen—once the mountain's peak is reached and the downhill trip is begun. Yet we also recognize capacity stoking the engine's fire, obviously, is yet exhausted. The quality of coal being burned no doubt inferior (this, the market's underlying technical state reveals) nevertheless still keeps the train chugging uphill.
Now, major indexes present only slight variations in their tracking of the train's ascent up the mountain. Above is one proposed view presented by the S&P 500. Assessing RSI (top panel) we might suppose that, yet to complete is wave 3 of (c) of B—wave (c) up from mid-November 2012 bottom is seen being the last hurrah of an a-b-c-x-a-b-c up from March '09 bottom. As the S&P 500's daily RSI has yet to fall below its late-February 2013 low, the above Elliott wave count is substantiated. Typical in a 5-wave progression is technical deterioration accompanying a 4th wave versus its preceding 2nd wave.
So, right now we might assume wave iv of 3 is in the midst of forming off the S&P 500's April 11th peak. At this point it doesn't matter one bit if this peak presently is exceeded during formation of wave iv of 3. What matters is that, at some point over coming days the S&P 500's RSI falls below its late-February base. You can't really much decipher from the S&P 500's daily chart the Elliott corrective wave form wave iv of 3 possibly is taking, but for the moment let's assume an a-b-c-x-a-b-c "complex" corrective wave is unfolding off the S&P 500's April 11th peak, with the connecting "x" wave nearing its completion. In forming the second a-b-c upcoming we should see the S&P 500's RSI sink below its late-February level.
* * * * *© 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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