Sucker Heaven ~ The Risk Averse Alert

Thursday, July 07, 2011

Sucker Heaven

Just a friendly reminder that, back in 2000 and in 2007 — both major market turning points — leading U.S. indexes did not peak simultaneously. Thus, presently, in some instances an a-b-c corrective wave up from March '09 bottom is seen already completing on May 1st, 2011 and in others the end appears near at hand.

Today's extension of NASDAQ leadership over the past eight days advises this small tweak in perspective. Still, technical underpinnings remain unanimously supportive of a bearish outlook whose rapid decline's portent threatens to make 2008's appear tame in comparison. The market's dead cat circle jerk since June 23rd, force-feeding risk at higher prices commanded at the CME, changes nothing.

(Speaking of which, one wonders how much of a curiously elevated CBOE Put/Call Ratio of late is hedging long S&P futures, these being employed to prop up the market for another six days, that capital raised abusing weak hands might forestall margin calls surely threatening somewhere in the "terribly opaque and gravely exposed to an imploding euro-zone," trans-Atlantic financial system. Goldman is dreaming. There is every reason to expect European contagion to blow up the financial system, as imbalance between finance, and physical-economy-collapsed, being further widened presently at the euro-zone periphery, only the more guarantees a dizzying tailspin into the abyss of a hyperinflationary breakdown spreading throughout the trans-Atlantic. This inevitable end has Ponzi finance earned ... and if ever in history it were otherwise, then the "P" between "David" and "Goldman" would not ironically be thought Pollyanna.)


Chances are fast approaching is another Glass-Steagall moment like that precipitating the "flash crash" of May 6th 2010. Momentum degradation (bottom panel) preceding the NASDAQ Composite's present surge higher to challenge its May 1st peak (which today in the NASDAQ 100 was exceeded) finds precedent prior to $COMPQ's final lift into April 2010 peak.

Duly note that, here in these parts, those positive momentum divergences developing in the late-2008, early-2009 period, and again in the June-August 2010 period, were recognized as indicating a floor under the market likely leading to an advance. That said, momentum's degradation flashes a clear warning. Two-plus years of this registering as NASDAQ extended higher is but more "something's not right" evidence fitting an a-b-c counter-trend rally forming wave B of a major, a-b-c corrective wave whose ultimate objective targets levels last seen in the 1987-1994 period.

NASDAQ's current leadership higher versus the NYSE (since March '09 and presently) deserves revisiting a prior, similar instance that, curiously preceded the market's 2008 collapse. It has been some time since commenting on post-March '09 developments in this frame of reference where NASDAQ leadership rather demonstrated complacency — fearlessness — blind to any risk of being punished: risk that, indeed, materialized in spades...

NASDAQ weekly
NYSE weekly

Consider the market's decline from May-July 2008 as being relatively like that from late-2007 peak to March '09 bottom. Then, the market's counter-trend rally to late-August '08 as being like the same since March '09. Now, like then, NASDAQ's leadership in counter-trend might represent the fuller measure of fearless complacency generally typical just prior to collapse.

The relative likeness of the highlighted, 2008 declining period with the market's decline from 2007 top to 2009 bottom is furthered by how each index behaved in relation to a prior, significant bottom. The 2002 low in the larger frame of reference here is like the low in March 2008, as each index has behaved in like fashion relative to both prior lows: the NYSE in both instances exceeding the respective, prior low and NASDAQ holding above each. This dynamic in setting up NASDAQ's counter-trend out-performance, itself, might be better judged establishing the presence of ill-placed certainty that, a lasting bottom is in.


Reality that technical underpinnings are entirely suspect finds NYSE leadership lagging despite the NYSE Composite Index trading nearly 8% higher now versus early-November and early-December 2010...


Never mind the fact that, underlying NASDAQ's present leadership higher are less than half the number of new 52-week highs minus lows...


All the more is a deep, abiding complacency revealed. Thus, the market's advance these past eight days is best judged but more of the same, contrived, "something's not right" variety, much as has been an overriding theme for well over a year now.

You can see with your own eyes, too, Sucker Heaven has no shortage of patron saints...

Fast Money
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