Lame Legs ~ The Risk Averse Alert

Monday, October 18, 2010

Lame Legs

Pathetic were today's internals. There is no getting around increasing underlying weakness. Skillfully, those aware a big MBS thud looms push the foreclosure "technicalities" line, and a decided majority take the bait. Not so much with buying. Rather with their selling restrained.

Now, everyone knows the buy low and sell high mantra. So then, if this really were a bull market, and were "foreclosuregate" likely to be a "temporary blip," would not fear be promoted in the hope of driving stocks lower?

Certainly, there would be no need to worry about weak hands suddenly joining the selling. These mightily have proven themselves complacent this past year as the market has drifted sideways (and become technically weaker). Certainly, too, were strong hands behind the market's advance since late-June, our still-fragile backdrop would make for opportunity to play up a "temporary blip" as though a tempest loomed. The fright of last week's clubbing of banks and financials would be dramatized to the hilt.

However the drama appears quite real. Shhh. Go ahead, bite the big Apple.

As far as I am concerned, the market's resiliency demonstrates the character of an Elliott third wave — typically the most dynamic — in this case a "c" wave (from late-August bottom). Likewise, that many technical measures — deteriorating, no doubt — remain to the positive side of their respective balances further substantiates this Elliott Wave view.

With plenty of technical weakness continuing to build it is safe to say there probably are no more than a few days remaining before the market hits a wall. Then, another Elliott third wave [down] and a whole lot of something nasty.

Fast Money
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