Here we see that, not until wave iii of 3 of (c) was in the midst of forming did NASDAQ's better relative performance to the S&P 500 register (see bottom panel). This, of course, followed the turn higher we saw in NASDAQ's cumulative advance-decline line in November 2012, which fact was again noted yesterday and seen an anomaly reversing that measure's long-standing death spiral, effectively serving to signal the end of NASDAQ's wave (b) and pending formation of wave (c). With NASDAQ's superior relative performance to the S&P 500 registered in formation of wave 3 of (c) we see here a display of "dynamism" typical of Elliott 3rd waves. It stands to reason in keeping with typical Elliott 3rd wave dynamism that, the most speculative issues—NASDAQ—would benefit most.
Alas, though, we should note how sharp spikes in NASDAQ's relative performance to the S&P 500 have preceded the market generally coming under pressure. Even the relative performance spike registering following August 2011's market sell-off brought to bear market pressure persisting to mid-December 2011 (while we might conclude, too, that NASDAQ's better relative performance to the S&P 500 during the August 2011 decline probably was a technical harbinger of the market's recovery we have seen since). We might note here, too, how when NASDAQ's relative performance to the S&P 500 has reached the floor indicated above, the market has been poised to rally, generally speaking. We're a mile from that floor right now and, indeed, NASDAQ's relative performance to the S&P 500 is more extended than at any time since March '09 bottom. We have a good case here, then, for claiming an Elliott 3rd wave—wave (c)—in fact is forming.
Yet consider here, too, NASDAQ's momentum in the face of its better relative performance to the S&P 500 (see PPO, top panel). Here we might conclude "something is not right" (a conclusion typical of Elliott "b" waves, here being wave B forming off March '09 bottom). The fact NASDAQ's momentum is shown lagging in contrast to its early-2012 performance, and this while the index is markedly outperforming the S&P 500, seems indicative of today's entirely contrived basis for rallying stocks, founded on Confetti's Garbage Subsidy provided in perpetuity. It's a sign all eyes are fixed on the exits, as well they should be. NASDAQ's superior relative performance to the S&P 500 simply is a function of the most speculative issues among garbage at the bottom of the capital structure offering a better opportunity for outsized gains while all other considerations driving investment decisions—interest rates and the dollar's exchange rate value most emphatically—remain relatively conducive to fostering the chase for return on investment. Yet the fact is favorable conditions forcing surrender to Confetti's hyperinflationary elixir simply cannot last forever. Something must, and will, give. Were underlying perceptions otherwise, then NASDAQ's momentum probably would not be so markedly lagging in spite of its superior relative performance to the S&P 500.
* * * * *© 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!