A Banner Day Baiting Suckers ~ The Risk Averse Alert

Tuesday, July 20, 2010

A Banner Day Baiting Suckers

In case you missed it, Steve Jobs during tonight's Apple conference call failed committing the firm's excess cash as seed capital for a new global banking system to replace the presently insolvent one. So, any thought supposing Apple IS the U.S. economy be gone. Absent power to revitalize commercial lending, Apple is as much at risk as the rest.

OEX 5-min

Consider today (like so many days since March '09) but another finding strong hands extending their further distribution of dead equity. After all, these too are at terrible risk of being badly crushed soon, no matter how enduring their sucker feed proves.

That is why the BP template deserves attention. Vividly demonstrated is the evolution of [failing] efforts at maintaining buoyancy being made by not insignificant players on the global financial stage whose positions are at grave risk. BP's price action since April top presents the manner in which we can expect the sucker feed to persist across the broad market over upcoming months as conditions persistently become more perilous.


The fear factor having subsided a bit more today than conditions might warrant suggests wave c of (b) down (indicated above) appears well in order.


And substantiating the view suckers, indeed, are being fed we see elevated call option buying following last week's expiration of the July front month (as expected).

This setup coincides with both yesterday's and today's intra-day bid stabilizing the market ... and suggests that, once wave (b) down completes, wave (c) up (completing? wave (2) of (C)) likely will facilitate a further attempted sucker feed such as elevates call option buying to a degree challenging best levels seen during the market's final advance into late-April top.

These purchased rights might never possess intrinsic value encouraging their exercise, though, and so no further distribution of long equity positions likely will be facilitated. Just how vexing a problem this proves should be revealed immediately thereafter.

One possibility we should remain open to is wave (2) evolving from its present "double three" (i.e. a-b-c-x-a-b-c) to a "triple three" (i.e. a-b-c-x-a-b-c-x-a-b-c) complex form. Unlike BP's second wave which recovered much of its first wave down following its April peak, the broad market's second wave from late-April peak might extend in a sideways levitation, compensating for the fact there simply is not a bid strong enough to lift major indexes in similar fashion as BP prior to its collapse.

Finally (and still), absent a sudden resurgence of systemically-threatening stress somewhere on the globe, an extended levitation — buying time and furthering distribution — ought not be thought out of the question. Indeed, this thinking remains as valid over the next several weeks as was the case early-July when a sizable bounce extending wave (2) was thought likely.

Fast Money
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