Bear Stearns Redux ~ The Risk Averse Alert

Tuesday, April 21, 2009

Bear Stearns Redux

Continuing with the view that, (a) the market currently is tracing a counter-trend rally off March '09 bottom (rather than embarking on a "new bull market") ... and (b), this advance is nearing its end ... let's take a closer look at what prospectively lies ahead.

For whatever reason the NASDAQ Composite is providing a greater measure of clarity allowing more certain analytical discernment of finite Elliott Wave possibilities...


As usual, nothing is set in stone. I won't go into the various Elliott Wave-related considerations making this prospective wave count attractive. Suffice it here that everything about the market's underlying technical condition supports the possibility presented above.

In keeping with what conditions continue indicating ... this wave count leaves room for further extension of the market's current counter-trend rally. It's possible, too, the ultimate top might not be reached until sometime well after the May 4th "stress test" fireworks. Judging by what was leaked today a cruel joke is about to be played on the more responsible lenders in the banking community, all for the benefit of the creative geniuses whose structured finance built El Swindle Grande.

Most interesting is what all this might be leading to...


Consider how the five waves forming the yet completed wave (1) might unfold similarly to the five waves forming wave 1. As you can see, March '09 bottom might be retested sooner than most presently imagine.

Do you remember what happened during the formation of wave v of 1 last March (2008)?

Why yes! It was the Bear Stearns take down.

So, the question naturally becomes whose goose is about to be cooked?

There's no such thing as a sure thing, but come May 4th odds are high some institution with a long and storied history might be sacrificed to the gods of reckless, wildcat, securities-based finance.

Being that El Swindle Grande [obviously] is built on an active volcano, the hope remains that, by throwing good money after bad, a catastrophic eruption might be delayed.

But entirely avoided? Not while President Obama continues regaling us with his best Herbert Hoover imitation.

Add the pending dismantling of the auto industry and one wonders why anyone with his head on straight would anticipate anything other than a pending tectonic shift in the financial/economic geology supporting the stock market.

All technical reasons for heightened concern recently raised here appear to be meeting rude fundamental facts exposing a truly unstable investment landscape. Again, I do not anticipate imminent collapse. Nevertheless, favorable near-term trade opportunities appear to be in store. Foremost, better days for exiting long ETF positions are clearly on the radar...

Fast Money
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Paul Davis said...

Great analysis, but I wonder if Naz will make it back to gap around 1900-2000. In many ways this seems more plausible from a Grande Swindle standpoint - scare 'em off, steal their shares, suck 'em back in, then take a big dump on 'em. And the chart would be a nice looking W.Could this happen via my long-awaited 4-5 day rocket ride up?

TC said...

No doubt, Paul, COMP could make it back to the area of its gap. Like I always say, nothing about my analysis is set in stone. Yet if indicated wave count off March '09 bottom proves correct, then COMP's 200-day moving average could become a formidable technical barrier. Likewise, it's probably safe to assume there are a number of mechanical trading systems keying off the 200-day moving average, so just how trading might develop once it is approached remains an open question.

All this notwithstanding, though, there's no reason why 1900 could not be reached. To be honest 2000 seems a stretch if the Elliott Wave count I have indicated is legitimate.

Finally, if a retest of March '09 bottom is approaching, followed by something similar to last year's advance from 3.17.08 - 5.19.08, then there's plenty of time for more swindling. Over the interim (both down and then back up) there should be a number of low-risk trade opportunities.