Bounce or Not, More Weakness Ahead ~ The Risk Averse Alert

Monday, May 23, 2011

Bounce or Not, More Weakness Ahead

With today's thud one might conclude that, the risk of disarray crippling Team Fraud following the arrest of the IMF's alleged Jacques the Raper is beginning to sink in. In a climate marked by razor thin confidence the take down of a major Team Fraud player is no trivial matter. The bailout/austerity regime appears to be under an intensifying siege, and crooks let off the hook via this insane scheme eventually will start taking notice.

Thus, takers of toilet paper might not be so easy to come by in the near future. So, better trim exposure at any price than mount a serious bid at establishing a bottom...


As soon as the pricks step up and hedge their wildly overvalued equity inventory with a show of commitment demonstrating seriousness, then will the market's turn lower from its May Day peak likely be completed. Until then, southbound the market likely will remain.

Which is not to say that, a further move lower probably will unfold immediately (although it most certainly could). In fact, a fairly decent bounce might rather develop prior to the well-hedged bottom I am anticipating being in place.


Today's move lower from May 1st peak was confirmed both by relative strength (top panel) and momentum (bottom panel). Thus is there additional evidence that, a further move lower could be in store.

No doubt the same could have been concluded at mid-March bottom (and here most certainly was on account of having supposed a "rising wedge" had unfolded from late-June 2010 bottom to mid-February 2011 top to form wave (c) , thereby completing an a-b-c corrective wave up from March '09 bottom). Yet "once bitten, twice shy" will not discourage this reasonable conclusion, particularly with so much underlying technical weakness being present, having accumulated for many months now.

Two bounces we have seen since May 1st might light the way to a third upcoming, only to be followed by a further throttling worse than today's. The end result should be an additional increase in underlying technical weakness again confirming that, an historic financial collapse lies fixed on the horizon, quite likely awaiting but the demise of a Lehman among sovereigns...

Fast Money
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