We might recall here, too, that a so-called "5th wave failure" could mark top, wherein select indexes, despite remaining buoyant, fail to rise above their May peak prior to finally coming unglued. Yet for this prospect to be thought more likely we should expect increasing technical weakness prior to the market's final charge higher, raising probability it ends in a "5th wave failure."
Both RSI and MACD still have a way to fall before in evidence we have "increasing weakness" we better "expect" preceding prospective formation of a 5th wave failure. So, fitting presently is technical weakness threatening a market decline over the near-term. The CBOE Put/Call Ratio, the VIX (both still dancing with a rising 200-day moving average), the NYSE Bullish Percent Index and the McClellan Oscillator series, all are warning near-term trouble easily could develop at any moment. First weakened and now fairly balanced as a result of the market's bounce over the past two weeks, RSI and MACD both appear poised to resume sinking.
This raises probability, then, of market weakness ahead going some distance toward completing an Elliott corrective wave off May peak, which event likewise could set up one final advance failing to lift certain indexes (some/all?) above their respective tops of nearly two months ago now.
Now, the 5-wave Elliott channel drawn above may or may not reflect on today's analysis. It's possible 5 waves up from early-October 2011 bottom form in the S&P 500 wave (c) of B and that these 5 waves, indeed, completed in May, thereby ending the index's advance off its March 2009 bottom quite possibly.
Given volatility of so many market-influencing matters these days, increasing probabilities are a "shock" could materialize at some near moment. A market sinking deeper than most currently fear certainly is on the radar at least. In light of this too, though, risk of market volatility increasing finds "plenty of room," near-term, for completion of a corrective wave off May peak sinking the S&P 500 to 1400-ish or lower, say, followed by an advance failing to exceed May peak. In other words, any "shock" need be spectacularly devastating in its effect at the bottom rung of the capital structure to take off the table the possibility raised here today suggesting the market might remain buoyant over the next couple months, notwithstanding volatility's prospective increase.
* * * * *© 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!