Levitating Folly ~ The Risk Averse Alert

Friday, November 12, 2010

Levitating Folly

Yesterday's case extending levitation finds another Elliott wave view supporting this possibility...


Here we see more typical, coincident RSI as five waves up from late-August (forming wave c) have unfolded. This is particularly so on two counts: first, that peak RSI readings occur during formation of wave 3, and now during formation of wave 4 RSI is falling below that registered during formation of wave 2.

Curiously, too, every fifth wave has coincided with an RSI peak. We see this in formation of wave v of 1, wave 5 of iii of 3, and wave v of 3. We probably had better expect this again during formation of wave 5 of c ahead (that is once wave 4 is completed).

Supporting this wave count is the fact that, RSI as well as MACD remain on the positive side of their respective ranges. Indeed, momentum-wise, last Thursday's rocket higher was a huge save, and so bolsters this Elliott wave view.


Today's pickup in put option volume indicates long equity interest is stepping up to protect its exposure. This sets up, then, for wave 5 of c.

Yet before this prospective, final move higher commences, some days (and possibly weeks) might pass before wave 4 of c is completed. This conclusion is arrived at on account of the fact that, wave 3 of c unfolded notably more slowly than did wave 1 of c. Thus, the process of completing waves 4 and 5 of c might involve a slower development of any further gains remaining in a one-year-and-running levitation that has utterly failed to cultivate a broader and expanding long interest.

This latter, indisputable fact inevitably will make for a panic dwarfing May 6th's "flash crash." One might question why this is being delayed were not truth of persistently diminishing upside volume since March '09 bottom indicating that, hope waxes eternal among those majority long interests holding their positions rather than increasingly offering these up for sale. This is occurring amidst a physical and financial economy condemned to contract on account of a hyperinflationary deluge whose impact is collapsing margins. This on top of a dizzying spiral of vulnerabilities ranging from municipal finance to sovereign debt to MBS absent the critical "M" (leaving truth — BS — in its wake) exposes a measure of folly one would be hard-pressed to find precedent.

Fast Money
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