A GDP Groundhog Day Lacking Bid Productivity ~ The Risk Averse Alert

Thursday, November 05, 2009

A GDP Groundhog Day Lacking Bid Productivity

If the bad boys about to be spanked should first require conviction, today delivered all the dirt any decent observer could ask for. Yet rallying stocks for productivity gains realized as a consequence of a deepening entrenchment of an arguably fascist labor policy is more than just poor taste. It rather aptly displays arrogant confidence emblematic of blindness to the fact that no productivity gain can offset the financial system's loss of capacity to inflate credit securities ad infinitum.

The name of the game every step of the way higher these past twenty years or so was "Inflate or Die." The game seemed pleasant during its rise, when turtle turd could be securitized and sold to unsuspected saps in Iceland for a nice fee. Yet now in the fall comes fantasy the game should be changed to one called "Controlled Disintegration?" Sorry, but that will be impossible!

You see, unchecked leverage brings its own unique problems. By its destabilizing impact the worst in humanity is encouraged. Today's celebration reveals this tendency in a rather insidious way (with folly made vogue but icing on the cake). Still our crisis is barely begun.

Forget not how a prior day's fright, momentarily brought delight, still is vulnerable to a bigger scare still. This, my friend, is the trend, now applying to both the short- and intermediate-term...

NYSE McClellan

NASDAQ McClellan

My how quickly yesterday's oversold has become a precarious technical balance. Alas, this also is occuring on the decided sell-side of various McClellan measures ... following a period during which momentum markedly weakened.

Duly note, too, NASDAQ's leadership into the negative. NASDAQ's McClellan Oscillator already has taken out its March '09 low and its Summation Index continues diving deeper under water.

NYSE and NASDAQ McClellan measures, considered seperately and together, reveal technical conditions just as you might expect them prior to the stock market's gassing.


Faith waxes eternal in the Dow 30, supporting the Industrials Average like a champion. Funny how since top these select issues compared to the broader market should be judged relatively more desirable, and held more tightly rather than sold in equal proportion. This holding to the widely held suggests there is a cautiously bullish consensus wary of taking excessive risk.

Now, what do you suppose might become of this consensus were unceasingly building technical weakness across the broad market — weakness still growing — suddenly (and at last!) threatening a nasty bout of price pain? Why I think said consensus wary of taking excessive risk might cause an avalanche!

SPX 5-min

Standing out today is RSI divergence from yesterday's a.m. peak. Today's monster 15 points in 15 minutes $SPX short squeeze out of the gate failed to generate any significant relative strength follow-through. Oddly enough, too, today's trade seen in relation to its coincident RSI performance bears significant similarity to last Thursday's GDP celebration, this by way RSI held to the buy-side all day.


Yet note how today's volume was lighter than last Thursday's. How can this be? Improving GDP, and now productivity, and this is met with fewer bids? Seems today's reinforcement of last week's positive should have brought greater interest in stocks, not less.

If money talks, then there appears little left to keep the stock market levitated much longer than another minute or two.

Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!