A Major Turn Confirmed on a Chessboard ~ The Risk Averse Alert

Thursday, June 16, 2011

A Major Turn Confirmed on a Chessboard

Forget about Greece. And while you're at it, forget about the euro-zone. Never mind, too, the opaque domain of credit default swaps that, in reality are nothing more than icing on a multi-layered cake of mis-priced risk. The blowup of all these things more or less is assured.

Rather, think about the game of chess currently playing out now involving an encirclement of Team Fraud's man in the White House. Not only are prospects for policies extending bailout dim, but a growing, bi-partisan consensus is acting inclined to ultimately impeach the President over his failure to obtain a congressional declaration of war prior to military actions being launched against Libya in March.

Now, in considering the matter of a constitutional challenge of the President's authority to continue waging war in Libya it seems naive to think the present turn of events was believed by the White House unlikely. More probable was congressional action anticipated. What, then, might be the next move?

Concede? Not likely.

Provoke support necessary to defend and, indeed, extend a detested enterprise? I do believe the trend is your friend, but short of acts of war, the will to tolerate further accommodation seems weak.

Thus is danger forming on a chessboard. Yet a four-move checkmate requires but speed against a vulnerable opponent. One thing is sure: current events appear in alignment with a major turn in the market.

SPX 15-min

Above you see the kind of follow-through following last Friday's gassing (at the open) in keeping with original expectations. Tuesday's strength proved only part of the process of establishing a bottom.

Now awaits increase in buy-side relative strength, subsequently defended, enough to make today's bottom stick. However, there is reason to believe [wave 4 of (c)] bottom has not yet been reached...

SPX 1-hr

At hourly increments there has yet to materialize any buy-side relative strength of any consequence. Once this occurs bottom more likely will have been established, and a rapid advance forming wave 5 of (c) could subsequently develop.

Indeed, the heightened probability of a rapid advance upcoming is substantiated by the Elliott Wave Principle in describing typical market behavior following formation of a corrective triangle (which wave 4 of (c) is thought to be). Thus is yet more earthly evidence that, the major market turning point believed upcoming could arrive in but a few short weeks.

Fast Money
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