On the Second Wall Street Waterboarding Within a Week ~ The Risk Averse Alert

Monday, May 19, 2008

On the Second Wall Street Waterboarding Within a Week

What a day...

You know, it's all well and good to note how the low volume of trading on the NYSE over recent weeks reflects a crisis of confidence on Wall Street. However, what good is this observation when the consensus trade holds its position while prices are bid higher? You can imagine my consternation as another low volume tribute to Goldilocks carried indexes higher, with scarcely a pause along the way, right into mid-day today.

On the plus side ... supportive of my view the stock market is about to turn sharply lower ... is the fact the NASDAQ Composite has been under-performing the NYSE Composite ever since last Wednesday (5.14.08) ... a day that was rather similar to today, particularly by its avalanche of selling going into the close.

NYSE 5-min
NASDAQ 5-min

Now, there's a reason I did not publish any analysis of 10-day index charts in my last two posts. Truth is trading last Wednesday (5.14.08) bewildered me. I did not quite know what to make of the late day price-RSI collapse (in fact, I still don't ... at least not conclusively).

One good turn deserves another they say. In as much as last Wednesday's (5.14.08) turn-around came unexpectedly, so too did today's.

Looking at the NYSE Composite ... RSI confirmed the index's rise all the way to today's top, just as it had last week prior to Wednesday's (5.14.08) late-day collapse. Again, this sort of price-RSI performance is atypical (I discussed this last Wednesday). It suggests the stock market has farther to rise.

Be that as it may, the NASDAQ Composite is no longer showing the same leadership it was demonstrating early last week. Its advance has largely stalled since its peak last Wednesday (5.14.08).

Will the NYSE Composite now follow suit and similarly stall while the NASDAQ Composite begins to show distinct signs of turning over? Obviously, this is what I will be looking for. Of course, I would expect this to occur with all due subtlety, the likes of which Mr. Market has made into a science.


The S&P 100 finally traded at a new, post-3.17.08, intra-day high today. High-cap indexes (like the S&P 100 and the Dow Jones Industrials) have been lagging badly over the past couple months. Their leadership today confirms the stock market is in the late stage of its advance off the March 17, 2008 low.

OEX 5-min

Another meaningless trend line for your viewing pleasure. We should like to see the S&P 100 take a leadership role over the days ahead as the stock market reaches its summit and falls off the precipice. Could it trade all the way up to the top of its rising wedge? Could it pull off another sideways levitation, much as occurred following April '08 options expiration?

Time will tell...

A New Inflationary Epoch
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