Smoking Pots Calling Financial Kettles Black ~ The Risk Averse Alert

Thursday, June 19, 2008

Smoking Pots Calling Financial Kettles Black

The index performance disparity continued in earnest today and with maddening effect. Are Wall Street's soon-to-be financially distressed investment banks the writers of June OEX Puts below the market?

But alas... Goldman Sachs has put Citigroup, Bank of America and several well-known regional banks in the cross-hairs. Talk about the pot calling the kettle black! War is breaking out on Wall Street. Might the attacked soon strike back?

Could GS possibly escape the carnage sending the regionals back to 1994 ... and distressed commercials to Dubai and Asia? Methinks all financials might be due for one more round of a no confidence vote — Goldman included. Their boy at Treasury will in all likelihood fail in his attempt to saddle the People with Wall Street's ill-advised risk.

OEX 5-min

Are we now but continuing last week's grope for a bottom? I think not. Today's RSI recovery — much better than I expected — brings the index right to the brick wall it hit yesterday ... which is right where an Elliott Wave Guy would expect a resumption of selling.

NYSE 5-min
NASDAQ 5-min

Today's recovery was slightly less robust on the NYSE than it was at the Pump and Dump.

The NASDAQ ... the NASDAQ ... who do these boiler rooms think they're fooling?


Today's meager improvement in NASDAQ New 52-Week Highs-Lows is very suspicious. Given how the NASDAQ Composite held up quite well all day — raising the probability the boiler rooms are located right on Wall Street — there should have been a broader impact on issues supporting the 1.5% launch higher ... at least you would think anyway. That there wasn't suggests the lug nuts probably are about to fall off.

$NAAD cumulative

There must be plenty of bargains to be had on NASDAQ, right? Just look at NASDAQ's cumulative advance-decline line. It's in free-fall. This simply is not the kind of condition indicative of healthy financial underpinnings capable of withstanding the round of heavy selling I have been anticipating.

Will this situation improve once the stock market hits bottom and the melt-up I am forecasting commences?

Probably. But not much more than it did from August '06 through February '07.

The condition we are seeing at the fringe of equity finance (NASDAQ) is precisely as one would expect over the months and years leading up to a major bear market. Say hello to my little friend: Dow 3600...

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basilderat said...

Tom has been very helpful to me and is one of the better analysts out there. I would suggest to follow his advice promptly if you have the means. The Hindenburg Omen fired on five of the last eleven days ...

Good Luck! Peter