Friday, August 31, 2012

A Head-and-Shoulders Fail Still Is Warning


There is a very good chance the market is on the verge of a significant setback, and in the case of the NYSE Composite index, likely to challenge, if not nominally take out, its 2011 low...


$NYA$BPNYA

More or less the same ominous technical setup as was seen at last year's top and initial turnover is presented via the NYSE Bullish Percent Index. Having registered a negative divergence at this year's mid-March NYSE Composite peak, significantly deteriorating participation in the market's recovery following its May setback is evidence now in place, putting the market in position to crater sometime upcoming.

Before we get excited, though, we should wait for this measure's relative strength (top panel) and momentum (bottom) to turn over and likewise point the way down. As it stands right now, wave c of an a-b-c, Elliott "zig-zag" up from early June might still be forming, with its 5th and final wave possibly to unfold over days ahead. (On a related side note the two circled Bullish Percent Index peaks, last year and presently, venture to display a negative divergence finding this year's higher Bullish Percent Index reading at a lower NYSE Composite print further foreshadowing trouble ahead.)

One telling thing to watch once this garbage turns over is that large head-and-shoulders top in the NYSE Composite Index detailed here on July 9th. Taking into account the complex Elliott corrective wave thought developing since March '09 bottom and the likelihood its completion remains some months off, there is a heightened possibility the NYSE's head-and-shoulders top will be one of those instances described by Edwards and Magee in "Technical Analysis of Stock Trends" where the distribution this technical pattern indicates does not immediately translate into a neckline break and subsequent selloff reaching the minimal objective a head-and-shoulders pattern otherwise reliably predicts (this targeting below the neckline the distance between the head's peak and the neckline). According to the book's authors this sort of occurrence is not unusual, leading to the following conclusion:
"A Head-and Shoulders that does not 'work' is a warning that, even though there is still some life in the situation, a genuine turn is near. The next time something in the nature of a Reversal Pattern begins to appear on the charts, it is apt to be final."

So, then, regarding present uncertainty as to how far along in its development is the Elliott "flat" thought forming since October 2011 the second "three" of an a-b-c-x-a-b-c complex corrective wave up from March '09 bottom, we might better assume the flat's wave b forming since mid-March and, itself, taking the form of an Elliott "flat" (i.e. 3-3-5), presently is unfolding and looking to complete with the market's anticipated, upcoming decline likely challenging last year's lows. Following, then, would be wave c of the second "three" unfolding in a 5-wave move higher and completing the "flat" forming since October 2011. Whether this final advance carries the NYSE Composite Index to a new high, post-March '09 bottom remains to be seen.

As this broad market measure since 2011 top has been persistently weakening, the NYSE Composite Index might be in store for but further divergent performance relative to the NASDAQ Composite, much as was seen over a far shorter duration in the August 2008 period presaging the market's subsequent gassing. But only extending such divergent performance already in evidence since last year's peak (let alone since March '09 bottom), completion of the [smaller] "flat" forming wave b might arrive sooner than yesterday's view implies and hasten the long-anticipated bloodbath likely to follow once wave c of a larger "flat" forming since October 2011 completes, which outcome continues to be objectively substantiated by the market's persistently weakening, underlying technical state.


Fast Money
* * * * *

© 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.


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Thursday, August 30, 2012

Jackson Sink Hole


Obviously it is becoming more difficult to levitate garbage without new money coming in. As relatively pathetic volume suggests, HFT liquidity is drying up, therefore making stocks more vulnerable to falling of their own weight. And so it was with today's giveback.

Bailout junkies likely being on hold until at least mid-September at the confluence of an FOMC meeting and a German constitutional court decision regarding the ESM, the time might be right for an orchestrated scare (a.k.a. swindle) intending to insure a paralyzed banking system gets its "fix" sooner rather than later. All the more does this seem likely should no grease be forthcoming when the Prince of Ponzi speaks tomorrow in Jackson Hole. Can you imagine the firestorm if Bernice unleashes a gusher just prior to the Democratic National Convention next week? Any signal suggesting more hyperinflationary happiness is on the table, then, in all probability will have to wait. Yet force the issue, one can be sure, the hopelessly insolvent soon must.

Thus, the following, slightly altered Elliott wave view...


$SPX

The only change here is to wave b of the second "three" in an a-b-c-x-a-b-c complex Elliott corrective wave forming since March '09 bottom. Whereas previously I had labeled its "a" wave ending early June, the above, alternate view suggests wave a of b might still be forming. As such, the second "three" of the complex corrective wave forming since March '09 could take some additional months longer to complete.

There is no change in the wave form the second "three" is thought to be taking. Just as was the case last Tuesday when the S&P 500 set a new intra-day high, post-March '09 bottom, a so-called "flat" still is thought to be forming off October 2011 bottom, when formation of the second "three" is assumed to have begun. Wave a of this flat continues to be seen unfolding as a 5-3-5 "zig-zag" ending mid-March. Likewise, wave b of this flat continues to be seen, itself, unfolding as a 3-3-5 "flat." Yet rather than wave a of b ending early June, the above view suggests its development could be in progress still.

The only consideration initially leading me to like this alternate view less than the original surrounds the matter of fading relative strength and momentum typical at tops preceding substantial declines, much as was discussed on Monday. However, in this New Era of squealing weenies without a care for a central bank "exit strategy" — these only confirming how hopelessly insolvent is a banking system that, trillions of dollars of bailout later, still is incapable of generating cash flows necessary to sustain itself — we might be subject to seeing a qualitative change in coincident technical dynamics from here on out. Indeed, we already witnessed this at early-June bottom when momentum (bottom panel) by no means registered any sort of positive divergence otherwise typical at bottoms. Thus, last Tuesday might mark top to an a-b-c wave up from early-June, notwithstanding the absence of any negative divergence registered via relative strength (top panel) or momentum (bottom).

All that said, though, how will the criminal fascist leading the Fed avoid hinting at more hyperinflationary happiness still to come, this when he gives his much anticipated speech at Jackson Hole tomorrow? If he but swipes at Republicans challenging his incompetence with increasing ferocity of late, we can be certain mouthpieces for bailout junkies will gush with hope. Thus, tomorrow could bring yet another Friday whose effect fully recovers losses endured throughout the week. We have seen this happen several times over the recent period. Still, if the above Elliott wave view holds sway, Europe's return from its little deserved, month-long vacation could see the well-rested, bankrupt beavers feverishly put to work during a holiday-shortened week in the U.S.

By the way, further substantiating the likelihood that, something nasty might be imminently in store are both the Put/Call Ratio and the Volatility Index, both of which whose momentum is accelerating higher, with the former now positive and the latter about to enter into its same danger zone.


Fast Money
* * * * *

© 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.


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Wednesday, August 29, 2012

McClellan Oscillator Confirms Elliott Wave Count


The McClellan Oscillator certainly is confirming both the shorter-term view depicted Monday, as well as the longer view whose slightly altered perspective was the result of the S&P 500 new high, post-March '09 bottom, set last Tuesday...


NYSE McClellan

The Oscillator's currently weak position no doubt substantiates the likelihood that, a top is at hand. Its similar state in the February-March period serves as a guidepost bolstering probability that an a-b-c Elliott corrective wave up from early June is nearing its completion.

Now, slightly more interesting from this perspective is substantiation the McClellan Oscillator gives to the possibility that the second "three" of an a-b-c-x-a-b-c complex Elliott corrective wave unfolding since March '09 bottom (i.e. the second a-b-c) is taking the form of a 3-3-5 "flat."

Wave a of this "flat" is seen forming from early October 2011 through mid-March 2012. Its "a" wave unfolding entirely in October 2011 saw the McClellan Oscillator rise to a level rivaling its best readings since March '09 bottom (in fact the oscillator might have reached a new peak). This move has been characterized here before as one expressing a "God save our sinking ship" sentiment. Once the fix effected by bailout junkies was in (no doubt anticipating more central bank liquidity), the McClellan Oscillator did nothing but weaken as the "b" and "c" waves of wave a took form and reached completion in March.

Now, since mid-March the flat's wave b is thought to be forming. Curiously enough the "a" wave of wave b, (forming from mid-March through early June) resulted in the McClellan Oscillator sinking lower than any reading it registered during the entire formation of wave a preceding — even lower than that during formation of the "b" wave of wave a last November. Building weakness thus is confirmed, much as might be expected. In formation of the flat's wave b since mid-March its "a" wave already is displaying greater underlying weakness than registered during formation of the flat's wave a.

Moving along, we see in formation of the "b" wave of the flat's wave b (from early June up to the present) another "God save our sinking ship" registering via the McClellan Oscillator. Yet look how pathetic has been the market's coincident performance! Nothing like that last October. One of the defining qualities the Elliott Wave Principle assigns to "b" waves is circumstance leading to the conclusion that, "something is not right." Bingo! This occurring in formation of a "b" wave of a "b" wave is all the more substantial.

The McClellan Oscillator thus is likewise offering fine substantiation to an outlook supposing the market's decline upcoming could be worse than that of August-September 2011, which was worse than that of May-June 2010. This pending swoon would form the "c" wave of wave b in the "flat" thought forming since October 2011 (this "flat," again, being the second "three" in an a-b-c-x-a-b-c complex Elliott corrective wave unfolding since March '09). Once the "b" wave of the flat's wave b completes over days ahead, things could get rather exciting. The heat being directed toward hopelessly trapped central banks on both sides of the Atlantic couldn't be more perfectly timed.




Fast Money
* * * * *

© 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.


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Tuesday, August 28, 2012

The End of Fantasy


And the battle to save the U.S. Treasury is on. Whether Sen. Bob Corker understands it or not, the "humility" he calls on Fed chairman Bernanke to exercise is the same humility requiring bankruptcy reorganization of the banking system along Glass-Steagall lines. Of course, being that the criminal crew from Tory Left (i.e. the current White House occupants) opposes such a move relegates Corker's renewed effort to politicize the Fed an election year stunt whereby Tory Right will insist only on more savage cuts of U.S. Treasury outlays whose effect will no less hasten the Treasury's, and therefore the U.S. banking system's, demise.

So, the question is what will the Fuehrer whose banking dictatorship remains at the top of the agenda do next? It sure looks like this could be the moment when the plug is pulled that all hell break loose, during which period terms of surrender are put on table. Just like '08 they have to move before their useless assets in Washington are set off on their journey to join the dinosaurs.

If ever there were a time for new leadership in Congress to make its move and push for Obama's impeachment, this is it. I'm betting the bankrupt crew animating Windmill Willie is wishing the Democratic National Convention was over already, so his splendid little war in Syria could have been launched already. Now how will they blow out the Treasury to generate the assets needed to backstop Bernanke's confetti? It's a fairly safe bet that, once next week's Democratic convention is over the Fuehrer's Executive Puppet will be taking some kind of extraordinary action aiming to secure his place in history as the man who destroyed the United States.

Of course, one also wonders if Bernanke's first act of humility was declaring Count Draghi-ula persona non grata at Jackson Hole? These guys are screwed and we can at least thank Tory Right's Bob Corker for announcing this publicly yet again. A few days more to savor the dream of more QE and push the last of the suckers into the giant garbage pile covering Mount Insolvent, and at hand could be the end of fantasy that, the status quo of yesteryear might soon be restored.


Fast Money
* * * * *

© 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...

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Monday, August 27, 2012

Now v. 2011 v. 2010, and What Could Lie Ahead


There is a good chance the market's advance since early-June still has legs...


$SPX

Sticking with the view put forward here last week in "Confidence on Holiday Still Matters Most," still in progress appears formation of the "c" wave of an a-b-c "zig-zag" up from early June. Making this prospect likely is the state of both the S&P 500's relative strength (top panel) and its momentum (bottom). We are likely to see a deterioration of these two technical measures coincident with the S&P 500's pending top. This is typical technical behavior marking tops not only over the duration since March '09, but generally speaking. Noted above are incidents of this earlier this year.

It would stand to reason other major indexes probably will extend into new high territory, post-March '09 bottom, as well. Subsequently, however, there is every reason to suspect a trip south approaching last year's lows will commence. The market's technical state more broadly speaking is positively abysmal — a condition indeed persisting over the past couple years.

One thing you can say about the market's continued, death defying resiliency over the duration is that, projections anticipating exceptional market weakness increasingly coincide with an internal effect evoking diminishing confidence in their probability. That said, though, there is ample reason to suspect upcoming weakness could prove even worse than last year's, and furthermore result in last year's lows being exceeded. Considering that the market's technical state last summer had in fact deteriorated from that preceding the May 2010 flash crash, and has only but further weakened, there is good reason to fear the worst case scenario in the context of the Elliot wave-based view put forward here last week.

As such, too, there is a possibility the market's pending top could prove the ultimate high reached off March '09 bottom. Being that the second "three" of an a-b-c-x-a-b-c Elliott corrective wave (i.e. the second "a-b-c") is thought forming a 3-3-5 "flat" — this alternating from the 5-3-5 "zig-zag" forming the first "three" off March '09 bottom — wave c of this "flat" might fall short of the peak about to be set in formation of the flat's wave b. This is entirely within the realm of Elliott wave possibility per formation of "flat" corrective waves. Given the market's poor technical state, this possibility might be better thought, indeed, rather probable instead.


Fast Money
* * * * *

© 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!

Friday, August 24, 2012

Persisting NYSE v. NASDAQ Disparity


Stepping back and taking in the big picture for a view on dead animal spirits, a magnificent ruse, and the depth of troubles likely in store, the NYSE v. NASDAQ Composite contrast provides considerable evidence that, these points of view are true. Now, we have been down this avenue of inquiry a few times before. Still, the evidence has grown but more conclusive, so reiterating its meaning not only remains relevant, but yet further confirms the case for maintaining an extraordinarily dire outlook.


NYSE weekly

What's most astounding about the NYSE Composite's performance off March '09 bottom is fathomed in relation to the NYSE's cumulative advance-decline line. It was in December 2009 that, the NYSE's cumulative advance-decline line exceeded its peak of 2007. Furthermore, the advance-decline line has persistently risen ever since. Yet look how badly the NYSE Composite Index is lagging. Indeed, this disparity has only grown worse.

That's count number one supporting a magnificent ruse. When I first identified this circumstance a couple years ago my explanation suggested NYSE-listed issues by and large were pounded in dollar increments on the way down and bid up in penny increments on the way back up. There is every reason to maintain this view.


NASDAQ weekly

Count number two supporting a magnificent ruse is delivered by way of the NASDAQ Composite. By all appearances the NYSE's little brother is leading the market higher, and this on the surface gives the impression that, animal spirits are expanding, as they should were the market thought in the midst of a sustained advance. When NASDAQ outshines the NYSE the conclusion you come away with is that, animal spirits are flourishing.

However, under the covers NASDAQ in fact is one sick puppy. This is revealed by NASDAQ's cumulative advance-decline line remaining in a death spiral, a point of fact brought to your attention exactly one week ago in "NASDEATH and Other Pigs for Slaughter." Like I said then, the true underlying state of affairs on NASDAQ rather is conducive to a bloodbath once the handful of darlings propping up the composite index are loved no longer.

Taking in the big picture contrasting the NYSE and NASDAQ, and comparing this with a similar relative price performance displayed in the August 2008 period, there is every reason to suspect the worst, indeed, is pending, and will likely hit sometime in the not-too-distant future. Although this NYSE v. NASDAQ performance disparity has been persisting for quite some time, ignoring its ominous portent will no less likely prove a fatal mistake. Quite the opposite to be sure.


Fast Money
* * * * *

© 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!

Thursday, August 23, 2012

Bond Vigilante Captivity


Do you remember all the talk before the first victims of hyperinflationary bailout — the euro-zone periphery — entered the scene, trans-Atlantic stage right? It was the Fed's "exit strategy." Remember that? Well, we haven't heard a word of it since QE2 in 2010.

With hindsight it's obvious why an exit strategy once was an object of considerable speculation. In two words, "bond vigilantes." So, who does St. Louis Fed President James Bullard think he is fooling? Every squealing weenie on Wall Street will tell you QE3 is a sure thing. Its delay only is a matter of physical reality in which so called bond vigilantes are poised to transform an incompetent Ivy League academic heading the Federal Reserve into a parody of George W. Bush at the height of the 2008 financial crisis: an incoherent, babbling baboon.

Fed policy is reduced to holding in check bond vigilantes while at the same time setting up the U.S. Treasury for destruction. Cheap, unbelievable talk feigning a policy involving something other than insane recklessness is all that remains in the arsenal of hopelessly insolvent central banks on both sides of the Atlantic. Keeping every last sucker holding tight their garbage for as long as humanly possible is but an interim objective, while the greater goal is prostrating sovereign states to a supranational banking dictatorship the likes of which has greatly consolidated its control since the financial swindle of 2008.


$NYHL

All of 39 NYSE-listed issues today reached new 52-week highs versus new 52-week lows. Therein lies most relevant context in a market finding major indexes trading near their highest levels in four years. Evidently I am not alone anticipating the wrath of bond vigilantes the minute squealing weenies on Wall Street get their next tranche of hyperinflationary QE, the very necessity being driven, of course, by an insolvent banking system resting atop a physical economy incapable of generating cash flows necessary to sustain a mountain of illegitimate debt. The economy's forced contraction at the hands of seditious ideologues running central banks comes at both a physical cost and a cost to confidence, as well, much as the above measure has consistently indicated over the past few years.

So, how is everyone feeling about a "banking" system backed to the tune of trillions of taxpayer dollars, all for the sake of allowing the NY Fed to exit its AIG holdings while turning a tidy profit? The same bankrupt pricks calling this the price of avoiding another Great Depression effectively advocate in Syria among thugs the likes of whom even a U.S. President despicably animates an epidemic of kidnappings for ransom. You might say "follow the money" is gaining new meaning in today's broken world. We'll see about "what goes around, comes around." Expiring long-term unemployment benefits and stubbornly high jobless claims all too likely could bring an epidemic of something similarly nasty knocking at many a corrupt imperialist's door, not to mention many an innocent bystander whose only "crime" is naivety believing nothing can be done about so-called "leaders" whose devious corruption does everything but serve the national interest.


Fast Money
* * * * *

© 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...

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Wednesday, August 22, 2012

Waiting and Watching a Fraud Nemesis


While we patiently wait for the CBOE Put/Call Ratio and the Volatility Index to signal impending danger, this with each measure's momentum crossing into positive territory, as well as the NYSE Bullish Percent Index likewise entering a red zone well proven these past few years when its RSI crosses below 30 — these conditions setting up major indexes for a trip south that should see them approaching their respective lows of last year — here's an instructive interview with the man who would make a fine U.S. Attorney General were outraged Americans to come to their senses and reject the two fascists currently running for President...






Neil Barofsky has been on a terror since his book "Bailout: An Inside Account of How Washington Abandoned Main Street" was released a few weeks ago. Now, do you suppose the Republican piece of empty promise would ever think to bury his Democratic counterpart echoing Barofsky's message? Of course not. His take instead is certain to sound more like the blind to fraud crew at CNBC whose interview of Barofsky today was disgraceful. The "TARP turned a profit" line is so stale. How politically convenient is a coverup, where in fact non-TARP loans were used to "pay back" TARP. The fraud just never ends. A president pushing the Nazi envelope employing incredible deception in a disinformation campaign targeting Syria, this to posture the nation for yet more war, speaks for itself. Anyone with eyes can see the bankrupt pricks are just desperate for cover needed to mask Wiemar-like hyperinflation the Fed is busy pretending possibly unnecessary. This would be true, of course, only if too big to fail titans of tyranny were about to be let go, and that's not likely to be on the agenda of oh so respectable authorities hooked on fraud.


Fast Money
* * * * *

© 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!

Tuesday, August 21, 2012

Confidence on Holiday Still Matters Most


What to make of the S&P 500 today ever so slightly breaching its intra-day peak of April 2, 2012? Notwithstanding indisputably weak internal conditions but compounding a long standing, persistent demonstration of the same over the past couple years or so, it appears the market's collapse might be delayed some weeks.


SPX weekly

My previous Elliott Wave view toward the S&P 500's counter-trend rally off March '09 bottom was supposing an a-b-c-x-a-b-c "double zig-zag" was unfolding and, indeed possibly had ended on April 2, 2012 (assuming the "x" wave had ended last year). Today's unexpected (and, yes, frustrating) S&P 500 lift to a nominal new high off March '09 bottom (the only major, large cap index to do so) instead suggests some other Elliott [corrective] wave form is developing.

We can assume with full certainty now, though, that the S&P 500's connecting "x" wave in fact ended last year. Today's S&P 500 lift to a new high, post-March '09 bottom, rather fully supports this assumption. Forming since then still is a second a-b-c corrective wave higher. Yet instead of taking the form of a 5-3-5 "zig-zag" as I had previously assumed, a 3-3-5 "flat" is seen developing. Thus, the S&P 500's counter-trend rally off March '09 bottom now is to be assumed forming a "double three," rather than a "double zig-zag."

The Elliott Wave Principle's "alternation guideline" is displayed here on a several counts, given the new wave count indicated above. First, as I just indicated, whereas the initial corrective wave off March '09 bottom took the form of a 5-3-5 "zig-zag" ending in February 2011, the second is taking the form of a 3-3-5 "flat." So, in formation of a "double three" corrective wave off March '09 bottom the Elliott Wave Principle's "alternation guideline" is displayed vis-a-vis the S&P 500, with its first "three" being a 5-3-5 "zig-zag" and its second "three" a 3-3-5 "flat." Likewise, the same can be said of the component waves of the S&P 500's second "three" (i.e. the 3-3-5 "flat") forming since October 2011...


$SPX

Whereas wave a [higher] off October 2011 bottom took the form of a 5-3-5 "zig-zag," wave b [lower] is taking the form of a 3-3-5 "irregular flat." So, again, the Elliott Wave Principle's "alternation guideline" is on display here, too. As you can also see from the wave count applied above, the component waves of wave b likewise similarly conform to the alternation guideline.

Now, whether wave b of b in fact peaked today remains to be seen. Of more analytical value than this minute consideration, though, rather is the simple fact that the market's underlying technical state remains positively abysmal. This strongly points to a sharp reversal in the market's fortunes sometime over days immediately ahead.

Now, returning to the S&P 500's weekly chart, there is an alternate view of what could lie in store once the counter-trend rally off March '09 bottom finally ends (which by the looks of it could be sometime early next year). The view put forward above is one that assumes the S&P 500's 5-wave advance following its bottom in 1974 ended in October 2007 (this 5-wave advance from 1974 formed the 5th wave of a larger 5-wave advance that began in 1932). Thus, forming since the S&P 500's October 2007 top is a simple a-b-c "zig-zag" down, with wave B presently forming off March '09 bottom. So, once the market's counter-trend rally off March '09 bottom completes, wave C down [hard] would be set to follow.

Yet, what if the S&P 500's 5-wave advance from its 1974 bottom instead ended in the year 2000? This in fact is my preferred view. Following, then, is an alternate wave count conforming to this prospect...


SPX weekly

In this alternate (and preferred) view a large "double three" corrective wave is seen forming since the S&P 500's Y2k top. The first "three" took the form of a 3-3-5 flat and ended in March '09. Thus, by way of the Elliott Wave Principle's alternation guideline the second "three" is likely to take the form of a 5-3-5 zig-zag. The question remaining, then, would be just how might this anticipated, upcoming zig-zag [down] develop? To wit, might wave a possibly vastly exceed the length of wave c to follow (in which case wave c subsequently could take the form of a "diagonal triangle," a "special" Elliott wave form unfolding in the final leg of a move in a given direction following a move in the same direction that could be judged as having gone "too far too fast)? Likewise, might wave b of the anticipated zig-zag forming the second "three" in the S&P 500's Elliott corrective wave developing since its Y2k top unfold over a duration lasting some years, such that the second "three" does not complete until, say, 2021?

These questions are but food for thought. For now we can focus on the market's continuing underlying technical weakness which, indeed, is persisting notwithstanding momentary resiliency levitating major indexes. Receding volume rather indicates the market's resiliency is largely on account of trapped weak hands holding on for dear life rather than selling into strength and raising much needed capital. Those who might claim muted turnover is due to a number of players being away for a summer holiday, confident central banks have things under control, ignore last August at their own peril. Indeed, the euro-zone one year later only the more is a disaster in waiting. This much is clear, and the market's terrible technical state confirms the only thing remaining on an extended holiday is confidence.


Fast Money
* * * * *

© 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.


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Monday, August 20, 2012

Dunce Talk and Fuehrer Walk


What a laugh. The ECB's "game changer" apparently involves plans to cap Spanish and Italian bond yields. Apparently, a heaping helping of sophistry addressing "convertibility risk" will do the trick, with bond purchases unlimited in scale being the magic mechanism, or so they dream. Of course, no mention is made of the terrible damage already reeked by the Reichsbank's "limited" bond purchases over the past few years. Just how this "plan" avoids accelerating hyperinflationary breakdown spreading physical shortages and slave labor conditions across the entire European continent, the likes of which will but further destroy demand, evidently escapes concern of the hopelessly insolvent, viciously fascist ECB.

Rising rates and falling core currencies in a race to the bottom here we come. Unimaginable contraction of economic activity the guaranteed result. The real authors of this insane policy positioned to profit. Is it really that hard to connect the dots? The contrast between the ECB's talk and the Fuehrer's walk is stark. You have to be gullible beyond belief to think the American trained incompetent leading the Reichsbank has even a shred of credibility. Yet when your book requires elevating the fascist likes to the status of "genius," what choice is there but buy into the plan? Or, more aptly, at least not sell into it. Not yet anyway. But soon, no doubt.

There will be no escaping the physical decimation if the ECB's hyperinflationary scheme comes to fruition. Yet for the bear camp trapped central banks on both sides of the Atlantic present a "heads I win, tails you lose" proposition. By all appearances in the interim are but suckers to cull. Nothing else explains the market's continued levitation.


Fast Money
* * * * *

© 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.


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Friday, August 17, 2012

NASDEATH and Other Pigs for Slaughter


While we're on the subject of dead animal spirits, the rotting carcass called NASDAQ says it all...


$NAAD cumulative

NASDAQ's multi-year death spiral continues. The exchange's relentlesly declining cumulative advance-decline line reveals animal spirits cannot be buried deeply enough. The greater preponderance of issues traded on NASDAQ are being supported by ever fewer darlings. Once these few give out, as is all too likely, NASDAQ 300 (a long-held target) will move squarely into the cross hairs.

Mark these words: NASDAQ's advance-decline line death spiral most certainly suggests that, the rate at which NASDAQ's Composite Index is likely to descend in all probability will defy today's wide-eyed optimists whose thinking evidently is hopelessly stuck in 1999.


NASDAQ McClellan

Just how soon could begin NASDAQ's historic swoon (you thought 2000-2002 was bad?) is revealed above by NASDAQ's Summation Index. Further raising a red flag is today's new home of irrational exuberance: the junk bond market.
“It has become such a feeding frenzy,” Bonnie Baha, who helps oversee $40 billion as head of global developed credit at DoubleLine Capital LP in Los Angeles, said in a telephone interview. “It’s almost like credit fundamentals don’t even matter in markets like this. You’ve got too many dollars chasing too few bonds.”

Yield hungry pigs ready for slaughter, sir.


Fast Money
* * * * *

© 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.


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Thursday, August 16, 2012

New Guests Arrive at Garbage Party


Long dead animal spirits apparently can be made to appear living when investing is turned gambling with aid of an Ouija board summonsing the spirits of zombies running the trans-Atlantic's central banks...


$BPNYA

Oh look, new guests have arrived at the garbage party! Never mind the 200-day moving average of the NYSE Bullish Percent Index suggesting there's little punch remaining. Not that this measure alone is indicating so much. Has there been anything covered here for God knows how long not signaling much the same dilemma?

Why, this must be the reason many of the stronger guests have left the party...


$NYHL

Well, at least some people apparently are thinking ahead to the day when European oligarchs come back from vacation to discover their house, once a castle, has been reduced to a cold pile of stones in a party paid for with more insolvent debt than all the central banks throughout the galaxy can deal with (never mind the insane asylums of the trans-Atlantic). We can all rest easy knowing there still is a mountain of AAA-rated toilet paper with which to clean up this mess, and a private prison system which to fill with ratings agencies and government officials (Greenspan!) who sanctioned it.

If you wish to swallow more evidence along the same lines indicated above, just take a look at the S&P 500's Bullish Percent Index. Exposed are bonafide suckers holding tight to their garbage while fewer S&P 500 components are bullishly disposed in comparison to a few months ago when the index more or less traded at today's level.

By the looks of it today's party is being hosted by SNL's "Dieter" of old (Mike Myers) captivating those performance chasers among guests to "touch my monkey, pet it, love it!" It's the love likely to prove toxic.


Fast Money
* * * * *

© 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...

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Wednesday, August 15, 2012

Cheer Goes Up for Suckers


Looks like all the suckers to be had for the moment for the most part are in...


$CPC

Yeah.

Slowly bleeding shares for many days now, trapped titans of tyranny tap into more speculative spirits and pull in some vig increasing call option sales to a crowd it could defy in forty minutes flat with head spinning, wallet crushing effect, as May 6, 2010 demonstrated. I could see Neil Barofsky writing the book on that day's event.

$SPX

Some perspective (via red dots) per the CBOE Put/Call Ratio.

The same per Elliott wave character suggests a third wave of a third wave up from early June should be behind us — namely, wave 3 of c, approaching completion of a 2nd wave of 5 waves down from this year's peak. Both relative strength (top panel) and momentum (bottom) support this view.

This would be a good time to restate the view that, if good things lie ahead, then why is momentum positive and this while volume shrinks no less(!)? Strong hands would be disguising good things ahead. Furthermore, there would be nowhere near the current degree of fearlessness as finds shares today increasingly held rather than sold.

All told, there is nothing to be but bearish, and principally parked in short-dated U.S. Treasuries for a period probably lasting longer than the rest of the month while we wait for European oligarchs to come back from vacation where, right now, dreams of how banking dictatorship shall proceed are bubbling over champagne.


Fast Money
* * * * *

© 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...

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Tuesday, August 14, 2012

Devastating Outlook Support


Might as well take yesterday's (amended) picture of negatively poised NYSE weekly momentum to the daily chart, where moving average performance supports a simply devastating outlook...


$NYA

The concentric circles drawn venture a like-from-like perspective per the 50-day moving average's performance — a dip lower followed by recovery to new high ground, only to be taken down yet again (first in May 2010, then again in August 2011). The effect as time has progressed only has become more pronounced, covering ever-greater swaths of ground. Thus, the 200-day moving average being pulled down and yesterday's fading weekly momentum. Taken together, that's enough reason to say, "Houston, we have a problem."

All the more considering last October's huge momentum divergence. Way out of place. Way too panicked. And absolutely no follow-through: D.O.A. Recall the contrast I made via momentum some months ago comparing last year's recovery with that following the May 6, 2010 "flash crash" and its aftermath, citing positive balance between believers and disbelievers in the first instance, and negative imbalance in the more recent. This distinction still holds, and has been confirmed by the NYSE Composite's failure to reach higher highs off its March 2009 bottom subsequent to recovering from last year's early-October low.

Weekly momentum weakening with effect that is confirmed by longer-term moving average performance meets daily momentum likewise weakening in a manner strikingly similar to instances over the past few years preceding notable market setbacks. Add pathetic volume, and the market is well-poised for a steep dive, indeed.


Fast Money
* * * * *

© 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...

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Monday, August 13, 2012

Picture Simply Devastating


What's straight ahead could be this picture of simply devastating...


$NYA weekly

Just look at weekly momentum (bottom panel). It looks a lot like Syria. Both ominously point downward.

One report I heard yesterday from Syria was of dead lawyers being thrown from the tops of buildings in Aleppo. I am unable to find any confirmation of this, however. The victims range from postal workers, to militia loyal to the government, to Syrian army special forces.

I wanted to ask how everyone in the Ivy League was feeling about dead lawyers being thrown from the tops of buildings in Aleppo. Yet the victims in this particular incident really do not matter. What does is the fact a rebel force consisting mainly of military brigands aligned with al Qaeda are terrorizing Syria in a manner far more aggressive and barbaric than did Nazis in Germany as Hitler was consolidating his power during the early 1930s, and this the President of the United States and his administration backs!

What betrayal! So, you have to wonder whether the Ivy League will go on crying like Boehner soft selling its standard fare of sophistry in support of an administration making Nixon's look like a cub scout pack? Or will it grow some nuts and get it up with Bill Black?







Fast Money
* * * * *

© 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!