Between a Crock and a Hard About-Face ~ The Risk Averse Alert

Friday, April 15, 2011

Between a Crock and a Hard About-Face

With its voracious appetite for capital increasingly being satisfied extorting the physical economy via energy markets, Team Fraud this week demonstrated an astonishing degree of complacency toward the Fed's apparently unchallenged capacity to facilitate this robbery with its QE policy luring the U.S. Treasury into a debt trap even deeper than that burying the private sector. So, any aggressive dumping of equities finds restraint in capacity to further entice BRIC nations into the Fed's hyperinflationary scheme. Thus does Team Fraud's road show baiting the global sucker gain what probably is its most relevant context (how ever vain such enticement appears at this very late hour).

Appearances of stability whose credibility grows more strained by the day no doubt explains why animal spirits remain dead. To this end David Goldman likewise agrees. Yet per the fix Goldman advocates, the task of "[convincing] investors that their bonds are safe" will require more than the Fed ceasing to wave its magic money wand. What's really needed is distinction between productive debt well-positioned to increase the wealth of nations versus speculative claims presently paralyzing confidence throughout the trans-Atlantic financial system. Among other things, this will require an honest accounting of "the MBS documentation disaster" likely some double-digit multiple greater than what Goldman thinks is in the offing.

So, with complacency deepening amidst a fragile commitment toward common stocks (this being revealed on several fronts over many months now), the market's further levitation is likely to find increasing challenge until, at last, it finally collapses sometime over months ahead ... which eventuality, too, might even begin promptly, if the recent rally off March 16th low should in fact complete five waves up from late-June 2010 bottom, and thereby end the market's counter-trend rally since March '09. (Just throwing this out as food for thought right now...)

NYSE McClellan

The NYSE McClellan Summation Index leaves open the possibility that, presently forming still might be the fourth wave of five waves up from late-June 2010. Typically, an Elliott fourth wave (within a five-wave advance) will see technical measures weakening relative to worst readings registered during formation of the preceding second wave. We have not seen this yet via the Summation Index. Everywhere else, though, we have.

Given the market's persistent resilience in the midst of increasing underlying technical weakness (even everywhere else but the NYSE McClellan Summation Index), as hard to swallow as levitation's continuance sometimes is, its further possibility nevertheless remains alive, and yet only all the more unlikely would this serve to avoid a train wreck so terrible that, its approach has been heard by discerning ears from many miles away.

Make no mistake, in the hearing is no echo of the wreck of '08. Rather, consistently increasing underlying technical weakness (leaving divergences galore) reveals disaster is heading this way.

NASDAQ McClellan

Here again, a tale of two cities. First (and foremost), the greater measure of technical weakness accompanying NASDAQ's advance since late-June 2010 again confirms absent, such animal spirits as are necessary for sustaining the stock market's advance ... that is if risk of terrible upset is to be judged rather unlikely, which presently, late in the service at the church of Adam Smith's leveraged Ponzi scheme (est. 1971) is not the case at all. (See NASDAQ McClellan Summation Index below 0 as a case in point demonstrating animal spirits waning in the absence of that "mad money" David Goldman mentions.)

Yet here, too, there appears via the Summation Index possibility that, NASDAQ presently might be in the midst of forming but the fourth wave of five waves up from late-June 2010 bottom. Then again, just as is true with all NYSE technical measures save one, everything else NASDAQ (McClellan and otherwise) rather suggests the market could be toast from here on out.

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