More Pain Ahead ~ The Risk Averse Alert

Tuesday, October 08, 2013

More Pain Ahead

Today's break was not the last of it. There's definitely more downside in store...

We don't immediately see this confirmed by the NYSE advance-decline differential, but the prospect at least is raised by contrasting this measure over the interim of the market's sell-off from September's Psych!s peak to recent weakness, first in August, then June before that.

There's every reason to suspect the above measure will exceed its worst in August, at the very least, and quite possibly its June worst, as well. Here's why...

We are assuming the NYSE Composite index is forming 5 waves up from its early-June 2012 bottom. These 5 waves look to form wave (c), and will complete an a-b-c Elliott corrective wave up from March '09 bottom.

Typical in formation of 5 Elliott waves up is coincident circumstance wherein technical readings registered during formation of the 4th wave are worse than those registered during formation of the 2nd wave. Both waves being corrective waves in a 5 wave Elliott advancing wave, increasing technical weakness registering during the 4th wave's formation, itself, signals impending completion of the 5-wave advance. This matter of technical circumstance serves to confirm the Elliott wave (all other matters of Elliott Wave Principle rules being met, as well).

We've already seen this manner of technical weakness, 4th wave versus 2nd, register in the NYSE advance-decline differential above. Yet as we can see, too, the NYSE Composite's coincident technical measures (RSI, top panel; MACD, bottom panel) have yet to register any decided technical weakness during formation of its presently unfolding 4th wave versus the prior 2nd wave (completing mid-November 2012). This gives us reason to suspect, then, wave 4 of (c) has yet to complete, and will bring further selling following on the back of today's.

* * * * *
© 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!