Bad News for Lowly Equity ~ The Risk Averse Alert

Monday, November 22, 2010

Bad News for Lowly Equity

Pity the European Union has not even a shadow of the U.S. Treasury. Then, attempts to fake the solvency of the banking system within its borders might fly for a day. With no unified military force possessing a fearsome arsenal of weaponry acting as backstop of last resort, capital injected into the European banking system rather appears a naked case of throwing good money after bad.

That the fascist swarm has no choice but broaden its attack on the continent's weak periphery, the discrediting of all things E.U. (including its scrip, the Euro) can only accelerate sovereign demands that, bond holders in distressed enterprises start taking haircuts. That's bad news for lowly equity...


The marked turn down in both relative strength and momentum raised prospect that, a significant top is in. That both measures remain weak bolsters this possibility.

Now, note that momentum (bottom panel) remains positive and continues holding to its uptrend since late-May. So, that the market presently should find strength to correct its fall from top finds technical substantiation.

Relative strength's performance (top panel) — hovering at mid-range, revealing buy- and sell-side balance — supports this view that, but a corrective wave is forming following the market's initial decline from top earlier this month.

OEX 5-min

Also supporting this view is today's trip to nowhere. This more or less confirms my outlook over the holiday-shortened week.

Fast Money
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