Suckers Finally Increase Appetite for Dead Equity ~ The Risk Averse Alert

Wednesday, March 17, 2010

Suckers Finally Increase Appetite for Dead Equity

Given the market's extended advance since early-February, it seems reasonable to suspect that, the fifth and final wave up from March '09 bottom is unfolding. Indeed, a five-wave channel containing the advance from early-February could be thought forming.

However I remain inclined to suppose the current leg higher is but part of the corrective wave (i.e. wave 4) preceding the fifth and final wave up from March '09 bottom...


Volume accompanying the advance since early-February better supports the a-b-c wave count you see above, rather than a prospective five waves up contained within the channel drawn. The first sign of any notable volume increase came during formation of the third wave of wave c, as would be expected.

This week, then, appears to have brought the fifth wave of wave c, which move likely will complete by the end of the week at the latest.

Supporting the view that, more time to offload dead equity has been bought with the advance off early-February bottom is an increase in the number of listed issues on both the NYSE and NASDAQ joining major indexes at new 52-week highs...


It seems last year's extraordinary demonstration of the art of the short squeeze is finally paying off. An expanding number of issues on both exchanges are at last registering new 52-week highs.

Yet look which exchange, under the covers, still is leading the charge higher. The NYSE? It appears animal spirits necessary to sustain the advance off March '09 bottom, making that low like those registered in 1932 and 1974, remain absent.

Likewise, let's not forget that a record number of issues were registering new 52-week lows during the latter half of 2008. Then, following a near doubling of both the NYSE and NASDAQ Composite indexes off March '09 bottom we find a relatively narrow band of listed issues registering new 52-week highs? Such a state of things below the surface reveals that, by no stretch of the imagination has all returned to normal. Indeed, evidence indicating "something's not right" is, in fact, well-provided here. This perspective is bolstered all the more seeing how few issues (on both exchanges) continued registering new 52-week highs when the market was under pressure late-January, early-February. Were there in fact any substantive leadership, no slight, market-wide sell-off would have so completely subdued their collective, continued advance into new high ground.

Still, there is no denying strong hands finally have that greater abundance of suckers among us right where they want them. Conditions conducive to prolonging distribution of a decade-long (and running) transfer of shares affecting an ever-increasing number of listed issues appear to be in place. That some further, significant upside surprise is not threatening should become rather evident in but a matter of days.

Fast Money
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