A July 2009 Redux, But Notably Weaker ~ The Risk Averse Alert

Wednesday, August 25, 2010

A July 2009 Redux, But Notably Weaker

Noted yesterday was still positively trending momentum. This condition supports the likelihood of an upcoming bounce.


Looking back to the late-2008, early-2009 period we see a similar momentum configuration (MACD) had developed going into early-July, 2009. As it turned out, a third wave [higher] in the market's counter-trend rally off March '09 bottom subsequently unfolded.

I bring this up because a "third wave" in the market's counter-trend rally since late-May 2010 could be on the verge of developing...


It's the old a-b-c-x-a-b-c subdivision of wave (b) of B of (B).

Wave c — a "third wave" — of (b) could unfold during the market's prospective bounce upcoming.

If you look closely at MACD on the first chart above plotting the S&P 500 over the past two years, you will notice momentum's acceleration during advancing periods since March '09 bottom persistently faded — a condition continuing right up to the present moment. So, just how "powerful" might be wave c of (b) upcoming could prove rather faint.

Curiously enough, too, the S&P 500's price action during each successive advance since late-May bottom subtly reveals a similar degradation of upward acceleration. Each successive advancing period has taken more time to complete. So, you have to wonder whether any upcoming bounce might extend into October.

If you didn't catch the first five minutes of tonight's Fast Money, check it out because, listening to the observations of traders on the desk, you get the sense that, desire to put money to work is meeting what are thought favorable conditions. Absent any financial basket case dropping dead, the animal spirits seemingly present on the desk might make for suitable conditions for raising capital among those moribund white shoes who simply cannot gut government revenue streams fast enough.

Fast Money
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