U.S. Senate Insists We Have Money to Burn ~ The Risk Averse Alert

Wednesday, October 01, 2008

U.S. Senate Insists We Have Money to Burn

The Shemp PlanSee that lady to the left? She's burning money. German Marks to be precise. November 1923.

That's the Shemp plan. He said so tonight. The guy is out of his mind. So, what do we make of viewers who call in and say, "Thanks for looking out for us little guys." Yikes.

So, as your next President, I promise any person calling CNBC and heaping praise on the likes of Cramer will be banned from ever owning stocks. Like all good regulation, this sort of thing is only for the protection of the little guy who is just too blinded with greed to know any better.

Still, I will give him this... He did project the market's trouble following its two day burst 9.18.08 - 9.19.08. He saw more selling coming.

I, on the other hand, was not so sure this would happen. So, I'll give the Shempster his due.

Now, however, Mr. Dow 8200 suddenly has grown horns. But as I look at the underlying technicals, I am turning Russian. Monsieur Market might not be out of the woods just yet (but he's close).

Yesterday I suggested the bottom has been set and the turn higher I am anticipating probably has begun. Today I am not so sanguine for several reasons.

The first simply has to do with my crazy analysis of Wall Street's ongoing swindle of the U.S. Treasury. Monday's stock market extortion and the subsequent ratcheting up of a massive marketing campaign serving to soften resistance to a Treasury takeover of toxic securities has had the desired effect in the U.S. Senate, which voted up the bailout package by an absolute majority this evening.

The "rally carrot" of the past two days has well-served its purpose, then.

So, the easy work now done, the corrupt legislation moves to the House of Representatives where it will be debated on Friday. Thus, we should look for added selling pressure to soften the more troublesome resistance in the House ... something to nicely coincide with the deafening chatter arguing Main Street really needs Wall Street if it is to manage the present financial "crisis."


The other day I said something worth repeating here...

"I never form an analytical view toward the doings in the world without some tangible basis in technical formulations I use to assess the stock market's prospects."

Well, something rather odd happened during Tuesday's recovery rally. OEX open interest on the Call side expanded three times more greatly than did open interest on the Put side. This is precisely the opposite of what one would expect as a result of such a strong advance. Normally, Put open interest would win the day, as new long positions being added in a rising market are being hedged.

So, what do I make of this? Well, the greater expansion of OEX Call open interest probably means strong hands are hedging short positions ... getting ready for the week-ending squeeze on the House of Representatives.

But wait. There is more reason to suppose bottom is not yet in...


Remember how following the day Lehman Brothers died (9.15.08), I noted the NYSE Advance-Decline differential's confirmation of a capitulation, and yet suggested the market probably would decline further, while the Advance-Decline differential diverged? This, then, would confirm a bottom.

Well, that's exactly what happened later in the week. The market bottomed intra-day on Thursday, 9.18.08 as the NYSE Advance-Decline differential diverged. Subsequently, the market bounced like a champion. All was proceeding smoothly, too ... up until this past Monday (9.29.08).

So, once again it seems prudent to expect a retest of Monday's index lows (probably taking them out, too) while the NYSE Advance-Decline differential diverges.

Now, this is not necessary by any means. In fact, at the bottom of the market's decline in January '08 no such divergence occurred in the Advance-Decline differential. So, again, nothing is set in stone.

One other thing on the chart above I want to point out...

Do you see how at the March '08 bottom the NYSE Advance-Decline differential widened from what was registered at the January '08 bottom? Might this have been a "sign" of things to come? Might it have suggested the March '08 bottom in the stock market was not "the" bottom?

So, considering the present moment in relation to July '08, do we not find the same circumstance? Might this likewise be a "sign" of things to come?

Don't get me wrong... I still believe the market probably is putting in a bottom here. However, I don't expect it to be "the" bottom. Indeed, odds are improving with each passing day much, much deeper selling is still to come. The fact the NYSE Advance-Decline differential has been persistently widening over the course of this year's sell-off more or less confirms this.

Finally, returning to less esoteric thoughts, I give you Senator Maria Cantwell (D-WA) who during tonight's Senate debate over the bailout fraud made a pointed remark about J.P. Morgan's part in the take-down of Washington Mutual. Her highlighting the fact pension and retirement-related investors were ruined when WM debt and equity were driven to zero stands as a stark contrast in reality to the claims made by those pathetic jellyfish among her colleagues who shed crocodile tears for the little guy on Main Street ... who, they say, stands to be negatively impacted if this bailout boondoggle is not passed.

I lost some respect for my state's Senator Clinton tonight. I'm not sure if she rose to speak, but she did vote Yes for the thing. Senator Cantwell's principled opposition stands in stark contrast.

As for Senator Schumer, well, he voted Yes, too. But at least he made my Mr Market Twitter "Joke of the Day" when he rose to say Senator Obama's earlier presentation before the Senate was a "Presidential" display of eloquence.

That earthquake you may have felt after Schumer made this remark probably was Abraham Lincoln rolling over in his grave...

Fast Money
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Anonymous said...

Recently an insurance company nearly wind up....

A bank is nearly bankrupt......

Who fault?

The top management of the Public listed company ( belong to "public" ) salary should be tied a portion of it to the shares price ( IPO or ave 5 years ).... so when the shares price drop, it don't just penalise the investors, but those who don't take care of the company.....If this rule is pass on, without any need of further regulation, all industries ( as long as it is public listed ) will be self regulated......

Sign a petition to your favourite president candidate, congress member again and ask for their views to comment on this, and what regulations they are going to raise for implementation.....If you agree on my point, please share with many people as possible....