Market Collapse No Outside Possibility ~ The Risk Averse Alert

Wednesday, April 03, 2013

Market Collapse No Outside Possibility

As various U.S. stock indices are discretely impacted by the cumulative daily trading of listed common stocks—this being a function of the differing manner in which each index is comprised and computed—it stands to reason a unique Elliott wave count is likely to be applied to each. We see this presently being manifest across broad-based major indices such as the NYSE Composite Index and the NASDAQ Composite, as well as narrower measures like the Dow Jones Industrials Average and the S&P 500.

Notwithstanding present Elliott wave count differences across major U.S. averages, we can develop sound technical basis for projecting the market's likely course, while likewise contemplating how the market's forecast direction would discretely impact the Elliott wave count assigned to each major stock average. Broadly speaking on this account we know the score. Strong hands are o-u-t of equities and weak hands are running the roost. Every broad-based measure of the market's underlying technical state, indeed, supports this conclusion. Thus do we have sound basis for suspecting something nasty is in store, and this sometime in the not-too-distant future. That well-traveled adage indicating "prices can fall of their own weight, but it takes buying to put them up" to be sure is on course to its ultimate manifestation resulting in revulsion of an asset class long on contrived trickery sustaining its levitation and short on capital feeding it.

So, having recently developed an Elliott wave-based view of the NYSE Composite Index since its October 2007 peak suggesting its March 2009 bottom could be taken out sometime this year, let's further this outlook with an Elliott wave count applied to the S&P 500 supporting prospect that, a devastating market decline could be imminently in store...

Unlike the NYSE Composite index whose wave V of (III) peak was reached in October 2007 (wave V completing a 5-wave advance from 1932), the S&P 500 is seen peaking in 1999 and forming its wave (IV) corrective wave ever since. Yet despite these immediate differences per completion of 5 waves up from 1932, both the NYSE Composite and the S&P 500 are seen completing in March 2009 a first leg of their respective corrective waves forming wave (IV). In the case of the S&P 500 a 3-3-5 "flat" unfolding from 1999-2009 is seen prospectively forming the initial "three" of a "complex" correction, whereas the NYSE Composite is thought to have formed but wave A of (IV) from 2007-2009.

Since March '09 bottom, then, the S&P 500 is seen forming a connecting "x" wave whose specific Elliott wave form might be thought a "double three" or possibly more likely a "triple zig-zag." Assuming that, wave (IV) itself might be forming a "double three," we might look forward to a "zig-zag" forming the second "three" in the development of the S&P 500's complex corrective wave unfolding since 1999.

Recall wave (a) of B of (IV) is thought to have formed in the NYSE Composite from March '09 bottom to February 2011 peak. Since then, wave (b) of B of (IV) is seen unfolding and now is projected to prospectively take out March '09 bottom sometime this year. Subsequently, wave (c) of B of (IV) should develop (prospectively failing to rise above March '09 bottom if wave B of (IV) indeed proves to be a so-called "running correction"), only to be followed by wave C of (IV) ultimately targeting the NYSE Composite to fall to levels last seen in the 1987-1994 period.

Although seemingly significant differences have become apparent in the evolution of movements in the NYSE Composite versus the S&P 500 over the past decade, we nevertheless can make an Elliott wave-based case assuming the broad market is on track to suffering a devastating decline once its current, death defying levitation has run its course. We can be fairly certain, too, the financial world is jam packed with as many unbelievers in any such dire prospect as it was before the worst year since the Great Depression—2008—went into the books. With bank depositor theft now evidently the Team Fraud approved means of further forestalling a central bank led hyperinflationary blowout, and commensurate markdown of wildly mispriced assets on trans-Atlantic bank books the likely result, there really is no better outlook to consider than that which the Elliott Wave Principle applied to major U.S. stock indices confers. A stock market collapse in 2013 truly is by no means an outside possibility.

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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