Markets in Turmoil: How Now Dumb Cow? ~ The Risk Averse Alert

Sunday, August 07, 2011

Markets in Turmoil: How Now Dumb Cow?

Some updated remarks on recently published charts, considering the market's likely hard turn south at Monday's open...

SPX 5-min

No crash Friday also means there was no capitulation. With RSI's trough on Friday, July 28th yet challenged (if not exceeded), a ton of downside likely remains in store. A crash still remains on the radar.

Yet probably not tomorrow. Too many willing cows with milk to give. Thus, a retest of Friday's low appears in store with tomorrow's likely thud at the open. This could produce a positive RSI divergence and set the stage for a substantial, counter-trend advance.


The coincident effect on $VIX should bring in this measure in similar fashion as early-May 2010 (post-flash crash). This would set the stage nicely, then, for the market's subsequent collapse. Net net, I still expect most, if not all index gains made post-QE2 to be rapidly given back.

Still, every minute presently available to corral dumb cows is likely to be manufactured with herculean effort over coming days, and this possibly extending over the next several weeks.


The market's upcoming collapse probably will not commence until the S&P 500's 50-day moving average makes a "death cross" below its 200-day moving average ... and the S&P 500 rises to kiss it (as well as every hope-filled sucker) goodbye. This might take two tree weeks or so.

Since the euro-zone cannot be saved sans massive reorganization of the trans-Atlantic banking system, it seems interest rates for every issuer of debt including the U.S. Treasury are likely to rise. Confidence challenged higher up in the capital structure surely spells doom for equities.

All in due time. Keep your eye on cows who believe another dose of QE is a good thing, as is further pressure applied by Standard & Poor's giving Congress charge to poison the U.S. Treasury. It's shocking to see how woefully inept is understanding of dynamics at play here — self-destructive policies virtually assuring the end of the world as we know it.

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