Left Fielder, Tomstradomus ~ The Risk Averse Alert

Tuesday, November 18, 2008

Left Fielder, Tomstradomus

Did I mention yesterday Cramer claims no one is calling for a big sell-off to follow on the disaster we've already seen in the stock market?

Well, you probably know as well as I do this simply is not true. Rather, it only is more generally the case those dream weavers on team Tory — both its left side (Happy Green Week!) and its right (just say no to protectionism threatening to ruin the free [falling] market) — abhor serious, principled dialog engaging voices that appeal to reason.

We saw this in the spring when the NY Times' Floyd Norris proclaimed, "It's a Crisis and Ideas are Scarce." (That's Tory code for stop worrying and bend over.)

Now, what's really missing from the analytical community who make the rounds in Tory Town is neither doom sayers nor cautiously optimistic book talkers. Rather, it's the gutsy forecaster who comes out of left field and says, "The thing I fear the most is a melt-up leaving most investors in the dust."

Enter Tomstradomus...

NYSE weekly

I recently suggested the market's bottoming process might be "similar to the July - October 2002 period." My thinking was that, "although October '02 marked bottom of a three-year bear market, a positive reversal of fortunes did not develop until March '03."

But what if the market's decline since October '07 is more like what unfolded from May - September 2001? Could a massive melt-up follow in this instance, too ... leaving little opportunity for the shell shocked to get on board and ride the bulk of the move?

Here's how I see it. If a melt-up could follow 9/11, it certainly could follow a most terrifying train wreck. I think Secretary Paulson would agree...
"As policymakers face the difficult challenges ahead, they will begin with two considerable advantages: a significantly more stable banking system, one where the failure of a major bank is no longer a pressing concern; and the resources, authority and potential programs available to deal with the future capital and liquidity needs of credit providers."

Let the government subsidized consolidation of financial power ... er, uh, I mean free market M&A ... begin!


The Elliott Wave's channeling guideline has me wondering whether five waves down from May 19, 2008 might manifest in a manner similar to what I have drawn above. In this case bottom still might be several weeks away.

Or will bottom, instead, be reached in only a matter of days ... if not hours? Take a look at this...


What trend might be noted over the past year or so whenever an unusual rush to the safety of T-Bills took hold? Has not each and every instance coincided with a significant turn in the stock market? Indeed it has...

Fast Money
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