CME Replacing CYA? ~ The Risk Averse Alert

Friday, November 06, 2009

CME Replacing CYA?

Note to self: Whenever a physical asset grab uses as currency grossly over-priced equity and finds the deal yet closed, expect every effort made to keep up appearances supporting belief the currency in question has great value.

As mentioned the other day, this thinking might go some way toward explaining BRKB's proposed 50-1 stock split. It likewise might be motivation for BRKA's scamming to buy GSE tax credits. Like I said, on the down slope in an era of unchecked leverage expect humanity's worst to shine.

(Better to discover how to make agencies profitable again than abuse their fatal weakness, I believe. That's exercising faith in America. Robbing cripples, on the other hand, is the work of a tyrannical element the likes of which America was formed to oppose. Do you understand this, Mr. Treasury Secretary?)

And this just in from the "I've fallen and I can't get up" chronicles...

Consumer Borrowing Falls $14.8 Billion in September

Can there be any mistaking the side on which the financial system's binary mantra "Inflate or Die" finds things today? So, then, is the who behind today's "CME to the rescue" any less discernible than the why? To wit: was a repeat of last week's post-GDP blood-letting not to be because the equity as currency theme is being protected by the investment banking community in a bid to replace its broke down credit-creating machine with a well-orchestrated illusion suggesting equity possesses a measure of stable value qualifying it as a medium of exchange for grabbing choice physical assets?

This seems a reasonable possibility. However there's just one problem. There are only so many choice physical assets in the U.S. worth grabbing! Forty years withholding capital investment ... forty years orchestrating the American physical economy's disintegration ... have left their mark.

Which thought leads this observer back to Mr. Buffett's BNI offer...

With the deal not slated to close until the first quarter of 2010 and with "risk the deal could fall apart" (emphasis in original) one wonders if Mr. Buffett rather is playing a trick learned at the Carl Icahn School of Business? You know the one ... where fame and fortune meet a media possessing all the power of critical analysis found in mice ... who then duly pump up the deal using the deal-maker's spoon-fed logic, and in so doing serve up power to profit at the expense of badly misguided, trusting people taking the bait, hook, line and sinker.

Now, one can respect an astute investor's capacity to offer up cash when it is badly needed, and in so doing brace the floor underneath an otherwise good business fallen on hard times. But to scam tax credits out of a broken down business being propped up with taxpayer largess (Fannie Mae)? That's another story. And it speaks very poorly of Mr. Buffett's intentions born of faith in America. Thus, today's suspicion surrounding BRKA's offer to buy out BNI. Yet were even this suspicion to prove true, shining all the more brightly would be the "equity is dead money" thesis...


In looking back at the possibility of a head-and-shoulders top whose neckline recently was shown drawn on a $SPX 10-day chart (last time was in One Completed C-Wave From a Train Wreck) I noticed an extended line of support/resistance drawn from late-September top to the present. This line closely approximates that prospective head-and-shoulders neckline.

(Per this presumed head-and-shoulders top, my interest lies in it simply being a "distribution" pattern. Its minimum downside objective already has been reached.)

Considering coincident performance of both relative strength (RSI) and momentum (MACD) over the interim this line of support/resistance has been forming, a marked deterioration in underlying technical strength is duly noted now that $SPX is pressing against apparent resistance. Likewise, both measures have decidedly moved toward the sell-side of their respective ranges. This weakened technical condition supports continued belief $SPX has already turned over and is on the verge of being violently throttled.

Today's volume is seen looking like a shriveled cherry on top of the sunken cake this week's counter-trend rally appears made of. Absolutely pathetic. Perhaps only family members of those market-makers presently choking on shares absorbed late last year and early this year have heart enough to step in and buy.

And just for the record...

Love that Elliott wave count ... RSI, MACD and volume performance quite support it.

Then, to see how compressed has been $SPX's decline over these past few weeks since top — how uncharacteristic this is of anything seen since March '09 bottom — and one is left to conclude the risk of a throttling appears elevated. Despite a gallant effort to sustain the market's drive higher following July's massive short squeeze, power to keep stocks levitated appears exhausted.

(Mr. Tea Party: a more refreshing cranky today...)

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!