Generally speaking, NASDAQ's cumulative advance-decline line has been in a death spiral ever since Y2k. Indeed, it remains so notwithstanding its turn higher over the past year. Furthermore, no positive divergence was registered by this measure going into NASDAQ's mid-November 2012 bottom and this rather suggests NASDAQ's cumulative advance-decline line in all probability will see its death spiral deepen coincident with NASDAQ's Composite Index sinking to levels last seen in the 1987-1994 period.
Of course, it is equally possible that, the relative handful of NASDAQ-listed issues more or less providing the lifeblood keeping "the stock market for the next 100 years" alive will receive the full brunt of selling in panic likely to mark wave C down from NASDAQ's Y2k peak, while the greater bulk of NASDAQ-listed issues might be left more or less intact over what could prove a fairly short duration lasting only some weeks, during which time major indexes collapse back to levels last seen in the 1987-1994 period. In other words, after having been locked in a death spiral for so many years NASDAQ's cumulative advance-decline line could register a noteworthy, positive technical divergence upon NASDAQ's Composite Index reaching bottom somewhere in its range established during the 1987-1994 period. This, then, would set up NASDAQ for a screaming rally carrying its Composite index to new all-time highs coinciding with the scramble for ROI in the onset of hyperinflationary hell.
To be sure there probably are very few people on the planet considering this possibility. Yet were a massive sell-off to unfold over a very short period of, say, 5-8 weeks and sink major indexes a good 70% or more, then this scenario wherein a positive technical divergence in NASDAQ's cumulative advance-decline line registers might in fact come to pass.
Certainly, the market's utter collapse over such a short duration would be unprecedented. Then again, ever since August 15, 1971 there have been a number of unprecedented occurrences, both in the stock market and in our broader social experience. October 19, 1987 first comes to mind, an all-time record one day throttling of the U.S. stock market. Imagine a 3-5 day bender of that sort. Then was the unprecedented five straight years of 20+% gains in the stock market from 1995-1999, this being fueled by an unprecedented, derivatives-fueled expansion in indebtedness. And who could forget October 2008 when an unprecedented 83% (I believe that was the number) of NYSE-listed issues hit new 52-week lows.
Now, what manner of calamity could in very short order make for an unprecedented Elliott "c" wave down, sinking major indexes to levels last seen in the 1987-1994 period? Well, there are the unprecedented events of September 11, 2001 to consider here. Something along those lines could easily do the trick.
Yes indeedy, Venice has been running wild and the intent of her anti-social oligarchs is sink the United States. This should be as plain as the nose on your face. Then again, this is a tough sell to suckers who believe cave dwelling, monkey bar climbing, dog gassing cannibals are capable of attacking the one nation on the planet spending more on its defense and intelligence than all other nations combined, doing this with extraordinary military precision using large jet aircraft whose skillful navigation flight training using Cessna propeller planes is more than adequate.
Now, per our Elliott wave view applied to NASDAQ's Composite Index, we might consider an alternate possibility wherein 5 waves up forming an Elliott "c" wave and completing NASDAQ's counter-trend rally off March 2009 bottom in fact began unfolding off NASDAQ's early-October 2011 low. This view's heightened probability is raised on account of coincident technical circumstance we see above accompanying formation of these prospective 5 waves higher.
To wit, consider that both NASDAQ's RSI (top panel) and MACD (bottom) registered their best readings during formation of the prospective 3rd wave higher unfolding from late-November 2011 to late-March 2012. Indeed, on both accounts this was the best technical read on NASDAQ since March '09 bottom. Of course, this stands to reason on account of the fact technical "dynamism" is a quality typically accompanying Elliott 3rd waves, and a 3rd wave of a 3rd wave is seen forming here (i.e. wave 3 of (c)).
Then we see typical technical deterioration registering during formation of the 4th wave versus the 2nd wave, this via both NASDAQ's RSI and MACD. So, there's another feather in the cap supporting this alternate Elliott wave view.
What, then, are we to make of NASDAQ's cumulative advance-decline line in the context of this alternate view? A case of suckers taking the bait at the worst possible moment? Well, only time will tell and we may not have to wait much longer, either...
* * * * *
© 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!
