Nose to the Ceiling ~ The Risk Averse Alert

Monday, August 03, 2009

Nose to the Ceiling

Just so you are aware ... I am away from the office this week ... helping a dear friend around her home ... so I might be a little slower than my usual slow posting my daily insights. Likewise, I am not watching minute-by-minute trading, so I probably will be giving Mr. Market Twitter a rest, too.

First reaction, post-market, today was, "Good God." Complacency continues...


I don't buy the "summer doldrums" thesis used to explain diminished activity, claiming traders are on vacation. Not in the electronic age when I could trade from anywhere on earth. Likewise, I strongly doubt anyone with significant vested interest is going off to Gilligan's Island and leaving the world behind.

So, what I see in the volume of shares exchanged is three months now where the message plainly is "no fear." A most ill-advised sentiment, I believe.


Five waves up from July's low appear nearly complete. Typical of fourth and fifth waves, underlying technical conditions are beginning to deteriorate. Such is the story told by the NYSE Advance-Decline Differential.

NYSE 5-min

Over the course of the market's advance since July's low we have seen several instances where 5-minute RSI reached buy-side extremes (i.e. above 80). Normally, this would result in choppy trading (at best) subsequently. However this has not been the case in the current instance.

What this means is five waves up from July's low probably are forming a C wave of an A-B-C, counter-trend rally off March '09 bottom. C waves are third waves, which typically are the most dynamic Elliott waves. 5-minute RSI behavior of late characterizes this dynamism.

Nothing game changing about this view. The end of the market's counter-trend rally is drawing near. Then it's raw egg for Shempy and the endless sea of Monetarist Monkeys who make their home on CNBC.

Fast Money
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