Rotting Sugarplums ~ The Risk Averse Alert

Tuesday, June 07, 2011

Rotting Sugarplums

The ugly stick taken out during the final hour of trading today simply brings closer that greater measure of technical weakness anticipated to coincide with completion of wave 4 of (c).


Momentum (bottom panel) is one technical measures whose increasing, relative weakness (contrasted to late-August 2010) stands to further confirm the above Elliott wave count.

Most other technical measures (save one) already have appropriately confirmed the market's increasing, underlying weakness during formation of wave 4 of (c), this relative to their respective worst readings registered during formation of wave 2 of (c). For example, relative strength (top panel) did so during formation of wave c of 4. Contrarily, the NYSE High-Low differential did so during formation of wave a of 4. The NYSE Advance-Decline differential likewise did so during formation of wave a of 4, and further again during formation of wave c of 4.

The one other technical measure yet to confirm the above Elliott wave count is the NYSE McClellan Summation Index...

NYSE McClellan

As you can see, it too is right on the doorstep.

Yesterday marked the fourth straight day the market has declined. Believe it or not, this has not happened since ... drum roll ... last August (when wave 2 of (c) was unfolding). Now, this might be considered further confirmation of my Elliott wave count above, subdividing wave (c) of the a-b-c corrective wave up from March '09 bottom. More to the point, however, is how the dearth of consecutive down days over the past year substantiates the kind of dynamism typically associated with Elliott third waves (of which in the realm of Elliott corrective waves a "c" wave is).

Now, about today's hotly anticipated (at least among bailout junkies) Bernanke speech, riddle me this: how does demand for crude oil increase by 14% since Y2k, yet the price you pay at the pump increase by nearly 300%?

That is a question whose answer I will present tomorrow in refutation of David Goldman's "Top 10 Reasons Not to Panic."

Fast Money
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