Strength in Numbers (of Hopelessly Insolvent Banks) ~ The Risk Averse Alert

Friday, April 01, 2011

Strength in Numbers (of Hopelessly Insolvent Banks)

Stupid me. I ignored Saudi Prince Alwaleed's oil money bubbling to be burned. There has to be at least another 1000 "cheap" Citigroups worth scooping up across the trans-Atlantic.


Let me guess. The best of these skanks, I mean banks, are domiciled in Germany. Amazing what a little "extend and pretend" given Ireland will do.

Yet these wild swings in the DAX from despair to hope are rather an eye opener to say the least! Sure looks like something is about to go belly up. Hard to imagine a "currency" with backing from neither a treasury (possessing taxing power), nor a nuclear arsenal (instilling order) wouldn't be among the candidates for demise at a time when enough bad paper choking the banking system to make John Law blush is the dominating "fundamental" ignored by those calling equity "undervalued" and "attractive."

No measure of denial wrapped in sophistry calling this problem a "sovereign debt crisis" can forever extend the present day's culling of suckers, either.

NYSE McClellan

Now, if the view that, a "rising wedge" off late-June 2010 bottom is better abandoned with today's lift in the Dow Jones Industrials Average above its 2/18, intra-day high, then where do things stand? What is to be made of "ill-placed" technical strength following months and months and months of persistent degradation coinciding with the markets rise into 2/18 top?

Again, present "ill-placed" technical strength is all the more conspicuous by its having developed without any indication whatsoever of a floor offering support having been established. Typically, technical divergences, or at least some measure of improvement will register when a bottom is being formed. None of this was evidenced at March 16th bottom. Instead, since this bottom the McClellan Oscillator has launched straight to the upper end of its range over the past year (doing so without ever looking back, too — sick!).

Considering how I use technical measures like the McClellan Oscillator to help substantiate an Elliott wave count, then given what has developed, I am not willing to suppose that, unfolding since March 16th bottom is the fifth wave of five waves up from late-August 2010. These five waves would be supposed forming wave 3 of fives waves up from late-June 2010 bottom (which [five wave] advance still is seen forming wave (c) of an a-b-c up from March '09 ... albeit thought less likely forming a "rising wedge" following today's advance).

The problem I have with this possibility is that, the weakest McClellan Oscillator readings would be seen registering during formation of wave iii of 3 of (c) as it unfolded from late-November 2010 through February 18, 2011. Third waves, according to the Elliott Wave Principle, typically are the most "dynamic." It hardly seems fitting that, the weakest McClellan Oscillator readings would coincide with a "third wave of a third wave of a third wave," such as this [unlikely] wave count would have it. Refutation of this prospective wave count is only bolstered by the McClellan Oscillator's extraordinary strength registered off March 16th bottom (presumably accompanying wave v of 3).

So, what's going on here?

Well, there is a view of today's "rising wedge" deal breaker that even puts top to the five wave advance off late-June 2010 bottom nearly at hand (if not already in place following today's peak)...


An "expanding triangle" [with an upward bias] forming in the fourth wave position could be seen ending on March 16th. Considering this possibility from the perspective of the McClellan Oscillator's performance over the interim, the measure's increasing weakness certainly "fits" a fourth wave's character. Interestingly enough, too, relative strength's performance (top panel) confirms each component wave forming this prospective wave 4.

So, if we go with this view, what more might we conclude given the McClellan Oscillator's current strength?

Well, for one, given where the oscillator peaked during formation of waves 1 and 3, it probably is about as high as it is likely to go.

Yet could the market move still higher while the McClellan Oscillator begins to deteriorate? Are you kidding? Given the trend these past two years, the answer seems almost a no brainer.

But then again, with Germany ever the target of Her Majesty of Britain and aristocratic play things in the City of London ... and given their mighty trap laid via the Euro scrip ... well, wild swings in the German DAX index suggest everything trans-Atlantic could blow out any minute now.

Bottom line, the stock market is about to crash. Teflon will prove no match to forces unleashed in the present unwind of Adam Smith's leveraged Ponzi scheme whose build out found its most witting and treasonous promoter in one Sir Alan Greenspan.

And if by chance Saudi Prince Alwaleed is a reader, let me be so kind to offer my view on the future of that bank whose stock he has ridden down like a cheetah on a gisel...

company chart (C)

My target is circled.

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