Micro Capitulation, Macro Panic ~ The Risk Averse Alert

Thursday, June 23, 2011

Micro Capitulation, Macro Panic

Huge save today. Per technical negatives detailed here the past two days, it is well enough that, at this late hour in the game of let's pretend the banking system isn't doomed to a chain reaction collapse the fullest measure of underlying weakness is being evidenced following months and months of much the same, this as the market approaches a major turning point from which it is slated to endure the horror of discovering Adam Smith's Leveraged Ponzi Scheme is dead.

SPX 5-min

In other words, today's dive at the open rather appears a capitulation by the last of sellers for the moment.

No doubt, the setup leading into trading today was quite similar to that preceding the market's gassing on Friday, June 10th. First, was weakening relative strength as the market reached toward its peak from mid-day Tuesday through yesterday afternoon (up to the final ninety minutes of trading). Then was weakness going into yesterday's close whose result dragged relative strength to the sell-side of its range (below 50). Both these conditions likewise had developed on Thursday, June 9th.

Yet selling during yesterday's final twenty minutes produced one subtle difference from that into June 9th's close. Relative strength yesterday was decidedly more biased to the sell-side, finishing just above 20, whereas upon June 9th's close relative strength had settled only slightly below mid-range.

Yesterday's considerable imbalance of sellers going into the close followed by a still greater imbalance of sellers at today's open presents evidence that, a capitulation has transpired. This evidence is bolstered by today's recovery. Nothing quite so positively impactful on relative strength occurred on Friday, June 10th. All the more convincing is the fact that, the market settled today very near its high for the day. Not so June 10th.

So, for now Thursday, June 16th, appears to mark the end of wave 4 of (c), and the final leg of the market's advance off late-June 2010 bottom (and March '09 bottom before that) apparently is underway.

Now, how about that strategic petroleum reserve announcement today! Apparently, military vets McCain and Kerry in the Senate did not provide enough cover for the President to dodge impeachment for his so-called humanitarian intrusion in Libya that some are claiming an action in flagrant violation of the U.S. Constitution. Well, with gasoline already down to $3.83 at the pump here in these parts (whoopie!), there should be no confusing the President's humanitarian intentions with today's record SPR release, sans a crisis justifying its necessity. Lord knows (apparently Mark Fisher didn't get the message) that, with the free market rid of swindlers ever since our new and not-so-improved Richard Nixon signed Dodd-Frank into law, everyone stands to benefit with the increased supply of crude oil so magnanimously provided at a time of already considerable weakness in energy markets.

Seriously, who in their right mind thinks increasing signs of panic at the top make for stable financial markets?

Fast Money
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