A Wave Count Fit for Complete Bankruptcy ~ The Risk Averse Alert

Monday, May 13, 2013

A Wave Count Fit for Complete Bankruptcy

The case made here Friday suggesting the NASDAQ Composite is completing wave B of an a-b-c Elliott corrective wave forming off its Y2k peak now brings us to the NYSE Composite Index's prospective Elliott wave count and a harmonious projection of extraordinary weakness likely in store over the coming period...

Even the above "best case" Elliott wave count applied to the NYSE Composite Index does not diminish the possibility a spectacular decline might be forthcoming, much as the wave count applied Friday to the NASDAQ Composite presently suggests. As has been indicated here before, wave (b) of B could see its completion in a smashing sinking the NYSE Composite below its March '09 low, while wave (c) of B subsequently fails to rise above that low, thus making wave B—the middle wave of an a-b-c decline from the NYSE Composite's October 2007 peak—a so-called "running correction" and trapping today's garbage collectors with claims whose present day, extraordinarily rich value might not be seen again for many years to come.

This is, of course, just one possibility. There are worse, as well as better intermediate-term price action prospects we could consider. One worse would have the NYSE Composite presently completing an a-b-c-x-a-b-c "double zig-zag" up from March '09 bottom and about to collapse to levels last seen in the 1987-1994 period, this forming wave C down from October 2007 peak. One better alternate path forward would have the NYSE Composite falling slight lower than its March 2009 bottom (this completing an a-b-c down from October 2007, thus rather forming a larger wave A down), then rising in a 3-wave advance carrying the index to a new record high, this forming a larger wave B up. Lying in between these worse and better possibilities is future price action remaining within the bounds of the NYSE Composite's October 2007 peak and its March 2009 bottom unfolding over the course of, say, the next five years or so. Given the two better alternate possibilities, the NASDAQ Composite likely would continue forming wave B of its a-b-c decline from Y2k over the next several years, as well.

All credible possibilities aside, though, a couple overriding considerations lend focus to our view forward here. First is the assumption the NYSE Composite in October 2007 completed a 5-wave advance from 1974 and declined from that peak in 5-wave fashion. As Elliott corrective waves unfold in 3 waves, not 5, we can assume, first, the NYSE Composite's decline into March 2009 bottom did not complete an Elliott corrective wave countering the index's advance from 1974-2007, and second, the index's October 2007 peak will not be exceeded until 3 waves down from that peak have formed. Thus, our utter skepticism of the market's advance since March 2009 and commensurate conviction on this account lent by an extraordinarily suspect technical backdrop. Although nothing is set in stone, of course, we can have a lot of confidence that, the market's March 2009 bottom was not the end of it.

The other overriding consideration supporting a more dire outlook, of course, is the complete bankruptcy of today's financial, economic, political and social arrangement. Plainly, by the seeming lack of cogent perception reflected by today's mass consensus we're so broke we can't even pay attention! Obviously, a commanding knowledge of history is not one of contemporary mankind's strong suits. This deficiency apparently is made only worse by a widespread belief in magic, whether this be in religious conviction or so-called markets. It seems there is not an aspect of human existence presently at risk of serious correction. Thus, we might find it no unusual coincidence the weighing machine that is the stock market presently concurs rather thoroughly.

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!