Whispers of Instability in the Financial Markets

By: Joseph_Russo

There is little doubt that maturing institutionalized paradigms, which foster mounting imbalances of epic proportion, persist in the invisibly slow and torturous erosion across the fabric of collective cultural unity. When mounting imbalances inevitably turn unstable, one may surmise that dwindling unity and collectivism will be reserved for smaller and smaller cultural segments, and eventually dispersed amongst only the most vital of forces who feed upon it - namely the minority of embedded institutions who are most enriched by such deeply layered maladies.

The Financial Sphere Scrambling Amongst Themselves

Inevitably, they will, but not quite yet – and not by a long shot. Continuing imbalances indeed engender growing instabilities, but may take considerably more time to reach majority plateaus of consequence. Initially, increasingly rapid volatile fluctuations in price telegraph uncertainty, which in time, may ultimately manifest to utter chaos and total devastation across the entire sphere.

Triple-digit (1%) headline moves in the Dow, though they receive a great deal of fanfare, are virtually void of notable consequence from such inflated levels of valuation. Minor flip-flop 1% moves are not meaningful displays of volatility; rather they are more akin to whispers of uncertainty.

It will likely require a FOUR-DIGIT move in the Dow to send a convincing institutional message that the markets have indeed overlooked something rather essential in its valuation metric. Thus far, the erratic movements over the past month have done little beyond telegraphing mere whispers of instability.

Are such whispers the start of something bigger? Perhaps - but it will require a great deal of sustained carnage (for which there is no meaningful evidence at present) to remotely suggest that the institutional pillars of behemoth imbalance have fractured beyond the point of swift and painless repair.

Index Traders Edge Vol. 4 , questioned the possibility of an imminent runaway bull. As things stand, such question remains opened to further price discovery as Volume-5 goes to press. In the interim…

Short-Term Traders reap huge rewards

Because of all the sudden reversals, longer duration swing-traders have had some challenge of late; however, short-term traders following our Near Term Outlook guidance have had opportunity to capture superb profits. Over the past week, our analysis defined clear set-ups and targets for traders to have booked a minimum of 17-points profit in the S&P 500 , 20-points in the NASDAQ-100 , and 140-points in the Dow .

That said – let's see how the weekly charts are shaping up, and what might be in store for the week ahead. 

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By Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Copyright © 2007 Elliott Wave Technology. All Rights Reserved.
Joseph Russo, presently the Publisher and Chief Market analyst for Elliott Wave Technology, has been studying Elliott Wave Theory, and the Technical Analysis of Financial Markets since 1991 and currently maintains active member status in the "Market Technicians Association." Joe continues to expand his body of knowledge through the MTA's accredited CMT program.

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