Who is That Tory Hiding Behind Volcker? ~ The Risk Averse Alert

Friday, November 07, 2008

Who is That Tory Hiding Behind Volcker?

Did you see Cramer go off on the rumor NY Fed President, Tim Geithner, is on President-elect Obama's short list for U.S. Treasury Secretary?

I'm not sure what Cramer's real reason for objecting is. But Geithner's resume reads like a road map to Monetarist Monkey Lane, traveling right into the seedy neighborhood where a green light given by the Hjalmar Schacht of our day — chairman of the Blackstone Group, Pete Peterson (of IOUSA fame) — flashes, "Beware change you can believe in."

At some superficial level Geithner might make ex-Fed Chairman, Paul Volcker — a tall dose of incompetence made "respectable" by the Tory press — look like that near-dead office plant you keep forgetting to water. Yet Geithner's lifelong connection to all that has ruined the nation and brought the world to its presently vulnerable state makes his prospective appointment to Treasury Secretary pure cyanide in comparison.

Which only makes me wonder... Is this why Volcker prominently appeared on stage during President-elect Obama's press conference today? Is he a tart for the unthinking observer who might believe this blast from the past could represent sweet "change?" Or is he being dragged out to provoke fear of the "controlled disintegration" disease, so death by Imperial finance can be quietly ushered in?

Surely, Cramer raises an interesting question regarding Geithner's role in the Lehman Brothers' bankruptcy, particularly given how quickly the Barclays' sign went up...

Looking at the market's current similarity to early-February '08 I should like to qualify my view toward the ongoing bottoming process. Truth is there's more I am unsure about than certain ... at least immediately speaking.


Probably the one thing I expect to see shortly is shown on the bottom panel (MACD). The sustainability of the bottoming process awaits a test of 12- versus 26-day moving average momentum. That RSI (top panel) remains on the sell-side (i.e. below 50) suggests this momentum test is imminent. And this is where the outlook begins getting cloudy...

Will price action in the current period differ? Applying the Elliott Wave Principle's "Rule of Alternation" one might rightly expect this. (Of course, I am taking the applicability of this rule to an unheralded realm ... yet its significance remains. I have seen it time and time again.)

The point is indexes might fall to nominal new lows sometime over the days ahead.

In the grand scheme of things this might further sour an already rotten sentiment...

Investors Intelligence

Yet it also would raise the likelihood the market's bottoming process could end early next year. Indeed, a move to nominal new lows might present a favorable long-side entry point (depending on the investment of choice) because, in fact, bottom might not be much lower from here.

And if nominal new lows are not imminently reached? Then bottom might not be seen until sometime next spring at the earliest. That's because the wave structure of the current leg of the market's decline since May remains relatively wide open. So, a move to nominal new lows might help clarify things.


In my mind if there is anything suggesting one should expect near-term selling pressure, it's this bad boy. The condition it presents is a bit of a double-edge sword. On one hand it's a positive seeing such a high percentage of NYSE-traded stocks hold up during this week's rather sizable give-back. On the other it suggests plenty of stocks are vulnerable to a bout of profit-taking.

Yet even if selling pressure is to develop near-term (as appears likely), the worst of it might be delayed until late next week. A couple days of relatively dull action could be in store first...

Fast Money
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