Monday, October 31, 2011

A Revolving Door of Insane MFers


Better late than never: Is MF Global a Canary in the Coal Mine?

Reported to be levered 40-1, a quick check of the calendar starkly reveals the Wall Street - Washington revolving door but a gateway connecting two wings of an insane asylum. Indeed, if there was a shred of honesty in Washington, they'd have declared moral bankruptcy this afternoon.


company chart (MF)

After closing at $1.20 on Friday, the only thing left now is a gas-filled coal mine. This just in from the North Pole: Santa was spotted inside doing his banks and financials Christmas shopping. Rumor has it Santa knows how to read a chart. Peering into the mine's depths he sees a lot of naughty MFers among banks and financials whose recent months' stock performance is just as sickly. Regrettably, a dead canary now leaves him with but one fitting gift to give the group: a pack of matches.

Learning late today the reason why MF Global filed for bankruptcy, such increasing systemic risk as is emanating from Europe now finds added cause to fear a collapse in confidence with wonder over how many other über leveraged pigs are dipping into customer accounts to plug holes whose hyperinflationary filling is no longer politically possible.

At this rate we might expect the Federal Reserve to announce tomorrow that the number of Fed regional banks will increase from 12 to 120, if only to notch up the number of lunatics clamoring for QE. Even if the Fed could, however, further quantitative easing would not matter one wit if confidence is collapsing. In such a climate the Fed's panic would but likely accelerate the same in the market.


Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


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Friday, October 28, 2011

Trade War in the Electronic Age


Here at the dawn of the inescapable demise of core "assets" accumulated during the build out of Adam Smith's Leveraged Ponzi Scheme — an era in which its principle promoter exercised a bit of "CYA" in citing the risk of "irrational exuberance," a risk whose consequence, in fact, presently is being born out in spades — we arrive at a critical moment where rapidly developing is likely to be a scramble to deal with systemic risk heightened by this week's so-called "solution" to euro-zone indebtedness whose largely unspoken effect serves to smash the Holy Grail of Hyperinflationary Bailout (namely, avoiding write downs of core debt securities).

It's bad enough Team Fraud could not buy time enough to somehow reverse July's agreed upon, 21% haircut of Greek sovereign debt with their alternate plan to lever up the EFSF to the "Geithner Minimum." Indeed, to make matters worse following the snub European oligarchs gave their American counterparts whose bought-and-paid-for Treasury Secretary was rudely shown the door during his intervention at a meeting of EU finance ministers a few weeks back while attempting to win support for his plan (an act plainly revealing the depth of panic being felt by junior partners on this side of the Atlantic), the real pigs of the EMU have moved to hasten a chaotic unraveling of the trans-Atlantic banking system with agreement to slash Greek sovereign debt by 50%. That Eurogarchs clearly graduated summa cum-laude from the Alan Greenspan School of CYA with a degree in Deception is revealed by effort made to abide the ruse that, the write down of Greek debt is not a "credit event," while at the same time promoting the lie that, their "solution" addresses solvency problems threatening the European banking system. The furor this action is likely to create, and so precipitate chaos-creating counteractions, offers cover to hide the fact that, by ushering in an era of core asset write downs Eurofascists are aiming to bring down the United States Treasury whose "plan" to buy time was given news this week that, time has expired.

So, the race to pillage banking systems on both sides of the Atlantic is on. As a result, then, expect a pickup in clamoring inside the U.S. calling for legislation allowing corporations to repatriate foreign earnings tax free. Were such a bill to pass, the euro-zone's banking system could collapse instantly. Have no doubt: an electronic age dominated by financial chicanery passing for "economy" makes for trade war at the speed of light.


$SPX

If a nasty downturn like that depicted above comes to pass early next week — indeed, even gets underway as soon as Monday — well, now you know what probably is behind such an unexpected shock. The world at large will be surprised. You, on the other hand, will not.

* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


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Thursday, October 27, 2011

The Last Hurrah At The Dawn of Doom


It's a panic. The need for capital to maintain the appearance of the viability of today's capital structure must be excruciating. Too bad the bulk of the effort now requires steep mark downs ever nearer the capital structure's apex. This, a seminal event, not a crisis-ending fix, is a problem for which an Elliott third wave of a third wave lower, indeed, was made to correspond.

Each new "solution" imposed on an insolvent banking system only further exposes systemic rot whose common thread throughout has been, and remains, swindle. Those first abused are now in the streets. Add presently those bamboozled in the EMU's "voluntary" haircut (CDS buyers) who join other former benefactors of Adam Smith's Leveraged Ponzi Scheme now its [insert structured product acronym here] victims, whose list will only grow, for the Holy Grail of Hyperinflationary Bailout — avoiding at all costs, no matter how irrational, write downs of core assets — is being smashed. In other words, the can Team Fraud has been kicking just ran out of road. That's reality.

Today's massive demonstration of a broken market pricing mechanism might keep suckers biting a few more days as "profit taking" — at least that's what they'll call it — invariably sets in. Truth is, though, today for all intents and purposes likely completed the market's last hurrah before 99% of the 1% fall. The technical case I have made here to this moment remains rock solid. Today again in agreement did the shiny relic nod.


$SPX

Amazing the similarities of first and second waves unfolding thus far since early-July peak.

That today's advance completed five waves up from October 4th bottom — these forming wave c of (2) — is confirmed by a NYSE Advance-Decline differential that, today fell shy of its best earlier this month, indicating today's was a fifth wave following a more dynamic third wave a couple weeks back. All the more is today's fifth wave confirmed by the day's surge being the largest one-day move yet in formation of wave c of (2), and this despite evidence of diminishing upside participation (albeit slight, relatively speaking — see red line drawn below).


$NYAD

Stepping back a bit to assess the larger picture (specifically, the relative advance-decline configuration accompanying formation of the first and second waves down from early-July 2011 peak) we find none other than confirmation whose names are check and checkmate.

Wave (1) down finds the worst NYSE Advance-Decline differential than any since March '09 bottom. That's check.

Wave (2) up finds an Advance-Decline differential consistently superior than any during formation of wave (c) of B from late-June 2010 to early-July 2011. Textbook Elliott Wave Principle. Elliott second waves typically are accompanied by technical conditions superior to those existing during the lead up to the preceding first wave. That's checkmate.

Don't look now, but the game killer is ready to move...


$CPC

Aside from demonstration today that, hedged shorts who established positions last Friday were less emboldened today — consistently is this a good sign the market is about to turn their way — there is the absolute measure of this apparent positioning whose message reveals that, hedged shorts possess no unduly biased confidence whatsoever in their position (which is a lot more than you can objectively say about today's longs). In fact you would be hard pressed to find in this particular circumstance a more suitable state of affairs just prior to an anticipated bloodbath.

Honestly, there is no reason not to think things could turn ugly fast. Wounded sharks perceiving waters only more poisoned with evolution of an ongoing breakdown crisis make for outliers born of unintended consequences...


Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


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Wednesday, October 26, 2011

On the Eve of 99% of the 1% Joining the 99.9%


Fourteen seconds is all it takes to a summarize the disposition of weak hands amidst a persistent stream of vague "news" from Europe by whose sound alone its audience seems ever more captivated...




We have sick debt farmers turned desperate wards of the state, lulled to sleep in their own school, while every word from a distant continent, discernible or otherwise, invariably spells doom. Hey sleepy, wake up! There is no middle ground on which to rest, let alone snooze.

Not that I am an island in arriving at this conclusion, as the yellow metal, indeed, is beginning to concur with possible resumption this week of its parabolic advance (much as anticipated).


SPX 1-min

It might not be until next Monday (10/31) that the above, prospective wave count supposing wave (2) of C completed this past Monday (10/24) is confirmed.

In other words, wave (3) of C — likely to be the most dynamic (and devastating) to develop over the course of the market's anticipated collapse to levels last seen in the 1987-1994 period — could, indeed, be underway.

That's not to say full manifestation of the market's upcoming collapse is unlikely to be delayed for as long as humanly possible. After all, 99% of analysts appearing on CNBC are rather confident this year's 4th quarter will deliver banner results. If any of these have a dime, they'll likely be bled somehow. This much seems sure.

All the more is near-term resistance to collapse made likely by technical repair achieved this month. So, time to bleed dimes, at least for another day or two, seems likely.

Yet that this might be what a dangerously entangled 1% is reduced to also suggests the 99% really have no monopoly on misery. Such is inescapable fate in the midst of the breakdown phase located at the tail-end of an era of global hyperinflation whose beginning traces back to the early 1970s. Look for #OWS to be taking to the roof tops, then, as the 1% join their number while at the same time leaving open the option to jump...


(4:00 a.m. update: looks like wave c of (2) of C is yet to complete, judging by European euphoria over the prospect that a new era of debt haircuts and credit events was ushered in overnight...)


Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


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Tuesday, October 25, 2011

Contrasting Trepidation and Fearlessness


That an unduly fearless, bullish consensus has developed during this month's spectacular advance — revealed yesterday via the NYSE McClellan Oscillator — is an inescapable conclusion but furthered by the NYSE Bullish Percent Index.

What's more, this technical measure also provides insight into such underlying trepidation in the face of an advancing market as I indicated yesterday is presently absent, but otherwise should be displayed were risk of the market's further collapse thought diminished or passed.


$BPNYA

We'll be contrasting coincident behavior of the NYSE Bullish Percent Index during the initial, mid-year 2010 recovery following the May 6th, 2010 "flash crash" and its aftermath with the same during this month's recovery. As you will see, the green lines drawn above distinguish undue fearlessness from a healthy trepidation.


$NYA

Last year, despite the NYSE Composite Index having in early-August repaired to a level exceeding its May 6, 2010 close, the NYSE Bullish Percent Index fell well-short of its May 6th reading. That's trepidation. This paved the way for the market's recovery of its April-May 2010 loss, and then some.

However, presently, we see the NYSE Composite Index nowhere near recovering ground it lost since its mid-stream bottom in June, yet the NYSE Bullish Percent Index now exceeds its reading at that time. No matter what issue one might raise pertaining to differences in magnitude this year's decline and recovery present in contrast with last year's, the Bullish Percent Index still very much supports the idea that, undue fearlessness currently is being displayed. Indeed, that the Bullish Percent Index confirmed the NYSE Composite Index's break to a new low earlier this month only the more suggests that, the present moment's apparent fearlessness is, first, conspicuous and, foremost, entirely ill-founded from an objective, technical perspective.

Despite the NYSE Composite Index's late-June 2010 bottom likewise being confirmed by the Bullish Percent Index, the market's subsequent recovery into early-August 2010 at least found a discernible lack of conviction in prospect that, the market's further recovery would broaden. Today the NYSE Bullish Percent Index rather suggests that, recovery of the market's losses since July is thought likely, if not certain. Thus does a contrary outlook anticipating the market's impending collapse gain substantiation.

Prospect of this end being reached sooner rather than later likewise is substantiated by the NYSE Bullish Percent Index's coincident behavior in relation to the NYSE Composite Index's performance, contrasting early-October 2011 bottom with that reached late-June 2010. As you can see, there has been a marked increase in underlying weakness (as measured by $BPNYA), and this despite the NYSE Composite Index so far this year remaining above its May-June 2010 lows. With fewer NYSE-listed issues effectively supporting the market, this year's already greater measure of selling, then, is well-poised to turn into an avalanche. Although it is too early to say whether this began today, its apparent inevitability appears more or less certain.


Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


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Monday, October 24, 2011

Time to Pull the Plug


What's the difference between Netflix and the trans-Atlantic banking system?

Netflix assets being more transparent, its after-hours hit today could prove mild in comparison to what's coming to those paragons of tyranny otherwise called "too big to fail" (bringing to mind spectacular declines in the shares of Bear Stearns and Lehman Brothers leading to the lip of their respective graves, whose most vicious moments followed many months of stock price softness, much as we see among the likes presently).

Next VIX trip above 40, chances are it's game over. Indeed, this appears a high probability, as technically there presently is a July-like contextual similarity conspicuously suggesting that, even as soon as over the next few weeks could the market collapse and take major indexes well below respective March '09 lows.

Before we take an inside look, though, let's talk about "sentiment." Should we be surprised at this pre-collapse moment there would be observers who would cite negative sentiment as a "contrary" measure, mistakenly assuming the moment a bull market, rather than the bear market it is? Never mind one must look at today's supposedly negative sentiment through rose colored glasses diffusing the light of fires everywhere. Recall sentiment was terrible in the August-September '08 period, too. This did not stop the market from collapsing in October.

Which begs the question: if the Treasury Secretary says there will be no new Lehman, what weapons does he possess to deal with the prospect of the EU's imminent disintegration ... outside of drones? I bring this up because no one expected Lehman to be thrown to the wolves. Ditto Europe presently ... which consideration begs another question: could the two, major EMU protagonists — both with long histories of treachery involving Great Britain — currently be playing "good cop / bad cop" in a bid to drop some bombshell?

There is nothing "magnanimous" about the market's patience for more bailout, particularly not in the context of EMU political leadership being vividly shown the moment's true colors by way of last week's treachery in Libya. These and points east, I am certain, received the message.

So what's the best weapon Europe possesses if it wishes to avoid yet another devastating war on the continent? Make way for the financial system's chaotic collapse. Should Europe look east and recall the military consequence of the Soviet Union's demise, next up could be the U.S.A., upon whose similar geo-political diminution the larger part of the globe might again become the uncontested playground of Europe's assorted oligarchs and fascists (much as the globalization regime always has ventured). The worst of it is that, by his every action throughout his career in Washington D.C. the President has appeared rather easily duped into playing a tragic role whose consequence reasonably is thought hastening this end. Indeed, given the man, the moment — both on the political calendar, as well as in a still unfolding economic breakdown — and a long-promoted, [anti-government] free market will to destroy the global influence of a once great nation, sadly, it is hard to imagine a more favorable moment to get 'er done. Right on cue do the Brits signal to the continent it's time to pull the plug.

Thus does the present moment's technical similarity to July find fundamental circumstance likewise suggesting collapse could be imminent...


NYSE McClellan

The NYSE McClellan Oscillator (as well as the 5% and 10% indexes) rather suggest the market's counter-trend rally has shot its wad. The message delivered in present similarity to July is that, a market going relatively nowhere requiring a hefty measure of net advancing issues over the interim amounts to time bought forestalling the market's further collapse. That collapse is assured is revealed by the relative extreme to which net advancing issues have lifted the McClellan Oscillator, demonstrating a more fearless consensus, such as typically exists just prior to disaster.

Not until this measure displays underlying trepidation in the face of an advancing market will the risk of further collapse be thought to have passed.


$NYAD 10-day vs. 200-day

Another view of NYSE advancers versus decliners, this contrasting the 10- and 200-day moving averages of the NYSE Advance-Decline Differential. If ever someone develops a dictionary of common phrases and wishes a picture to accompany the phrase "weak hands," the above presents a solid two years of weak hands at work on the NYSE.

Clearly.


$SPX weekly

And just to confirm that recent years' domination by weak hands makes the present moment quite foreboding, the S&P 500's relative strength (top panel) and momentum (bottom panel) measured at weekly intervals both are not only more negatively poised than at any time over the past two years, but also are a long way from challenging 2008's late-year extremes.

Yet challenge and, indeed, exceed 2008's extremes is not unlikely, as the market's pending decline to levels last seen in the 1987-1994 period should reveal accompanying technical character as dynamically weaker than that during 2008's throttling.


Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


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Friday, October 21, 2011

Open Season: The Short and Not So Sweet


With time running out on insolvent fee junkies throughout the trans-Atlantic currently pinning all hope of remaining going concerns on another tranche of hyperinflationary bailout of euro-zone victims of Adam Smith's Leveraged Ponzi Scheme, it appears voracious capital needs not about to be met via swindle of European taxpayers are ready to be satisfied hitting up the stock market...


$CPC

Weak hands' burgeoning portfolios of wildly overvalued equities, well-hedged(?) with put options — venturing to put a floor under any pending market decline — apparently were supplemented today with hedged shorts positioned to become capital fonts as approaching EMU failure to meet "the Geithner Minimum" becomes a cause célèbre for toilet papering Wall Street.

This just in from North Africa: when a dictator recently coddled is terminated without judicial proceeding, it's open season for blood in the streets.

That for now is the short and not so sweet of it here at the intersection of Desperation Drive and Redrum Road...

* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


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Thursday, October 20, 2011

EU PU: Are Weak Hands Hedged Enough?


No doubt, a herculean effort appears necessary to sustain some semblance of a floor under the market...


$CPC

Make no mistake, however. Elevated put option hedging of long equity stakes is not supporting strong hands with deep pockets. This fact was well-established not long after the market's counter-trend rally off March '09 bottom got underway.

Strong hands will manage their exposure taking profits as the market rises, while at the same time appropriately increasing their stake as the market's advance further develops. Such activity is reflected by an expanding volume of shares exchanged over the duration of a sustained market advance.

Contrarily, weak hands hold to their precious little gems in the face of rising prices, lacking both the wherewithal to increase their exposure, as well as the wisdom to increase the rate at which paper profits are booked. A market dominated by weak hands is revealed by a contracting volume of shares over a sustained market advance's duration. This, of course, precisely describes today's situation.

So, weak hands are behind the elevated measure of put option hedging seen over recent months, as well as currently. Their posture is not so disposed on account of an intention to drive the market higher with a fresh supply of capital which to bid prices up. Being still over-leveraged and flush with "assets" at grave risk of severe markdown, the best these weak hands can hope for is that their hedges will be sufficient enough to put a floor under the market should a bout of weakness develop from a growing need to raise capital.

Given the morally bankrupt, media-driven, psychological operation to which we among the fleas in the investment community are presently being treated with regard to a hopelessly insolvent trans-Atlantic banking system, the question of the sufficiency of hedging among weak hands is a very, very relevant consideration at the present moment...



Now, who was it that said for the market's advance off October 4th bottom to be sustained for as long as possible, the upcoming EU meeting might need be delayed? Oh yeah, it was me.

Am I alone in thinking appearances have been geared toward making a leveraged euro-zone bailout facility seem a sound preventative measure implemented as a precaution against potential contagion from a widening euro-zone debt crisis, rather than a swindle, a la 2008's TARP?

Apparently, then, judging by reality beyond the rumors, the memory of a terrible, hyperinflationary breakdown and its ensuing political chaos is not easily erased by what otherwise is increasingly perceived a wolf in sheep's clothing. One might suppose Germany also understands that, a beast with a voracious hunger for capital left unfed will be made weaker.

So, again, the question of whether today's weak hands are sufficiently hedged appears a most relevant one. Reiterating a point of view long ago put forward here, as the market craters and sinks indexes to levels last seen in the 1987-1994 period, the CBOE Put/Call Ratio is likely to see readings inversely proportional to those seen over the decades leading to the market's 2007 peak. A put/call ratio of 2-1 or more is not out of the question, and probably will be seen on more than one occasion — both during the market's pending steep fall, as well as during its initial turnaround.


Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


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Wednesday, October 19, 2011

When a Barbaric Relic Goes Parabolic


While captains of finance and their failing political tools whittle away their final hours pretending yet another round of hyperinflationary bailout will put the hopelessly insolvent trans-Atlantic banking system back on solid footing, let's update the view toward a barbaric relic's measure of "no confidence" in the current state of affairs. There has been a decided change in "the market's" fundamental disposition reflected in spot gold's most recent parabolic rise, one whose reappearance is likely once a consensus deems continuing attempts to sustain the unsustainable an exercise in futility...


$GOLD

Technically speaking, all remains very much positively disposed. Spot gold's relative strength (top panel) and momentum (bottom panel) measured at weekly intervals both continue to suggest the buy-side remains in command.

Yet it is spot gold's parabolic rise in the July-August period that, today, invites closer scrutiny. What was the stock market doing during this same period? Why, it was collapsing. How about the U.S. Treasury market? Why, money was flowing into Treasuries like iron to a magnet.

Thus, with spot gold's forecast advance to a price prospectively 20-30% greater than was reached in August — an advance slated to register negative technical divergences at weekly intervals, much like occurred as the NASDAQ Composite reached its zenith in Y2k — the next leg of the stock market's collapse is thought likely to coincide.

Bear in mind, though, this prospective spot gold - stock market correlation is likely a "first wave" phenomena in the context of the stock market's projected five waves down from July 2011 top. So, during formation of wave 1 of (3) of C upcoming, we're likely to see spot gold top out. Yet once wave 3 of (3) of C develops and further roils the stock market, spot gold likely will be throttled too, along with every other financial asset finding liquid markets in which capital can be raised. This, of course (and probably most emphatically), would include U.S. Treasuries...


Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


There's an easy way to boost your investment discipline...

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Tuesday, October 18, 2011

Financial Bankruptcy Feeding Moral Bankruptcy


If you had any doubt there's panic in them thar streets, today's final hour should allay all uncertainty. A story from the London Guardian (appearing just prior to the print edition being put to bed) announcing unconfirmed rumors on an agreement between France and Germany to leverage the EFSF to $2 trillion euros — "The Geithner Minimum" — lit the short squeeze fuse to boost the hopelessly insolvent 5-6%, and the rest was, as they say, history.

These folks might better have hired sky writers to paint "We're F'ed!" It's that obvious. Fitting, though, a third wave of a prospective rising wedge (indicating underlying exhaustion) forming the fifth wave of five waves up from Tuesday, October 4th bottom...


SPX 5-min

Of course, this is but one prospective view. Yet with deadline fast approaching for a new "plan" to pretend the trans-Atlantic banking system is solvent, and subsequent letdown quite likely, the above possibility seems reasonable enough.

Add no essential change in the disposition of portfolio insurers (see $CPC and $VIX), and this amidst what readily appears a voracious need to raise capital (evidenced by extraordinary daily market swings), and there's every reason to believe chaos looms.

As for there being no shortage of analysts who look toward common stocks and call them "cheap," virtually none questions why this is so. The banking system is insolvent, and amidst a mountain of [unpayable] debt accumulated in the build out of a private sector credit creating machine equipped with an infinite multiplier — Adam Smith's Leveraged Ponzi Scheme (a.k.a. "structured finance") — stocks are toilet paper.

So, for your edification the role played today by a media whose moral bankruptcy is on par with the financial condition of institutions who help it meet its payroll...


Guardian: France & Germany Agree to Hike Fund



Not So Fast on Euro Bailout, Guardian: Hobbs



Markets Stage Late Day Rally



EFSF Fund & Europe's Bailout



Stocks Gain on Euro Zone Rescue Fund



Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


There's an easy way to boost your investment discipline...

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Monday, October 17, 2011

Milking Cows After Killing Puppies and Kittens


Plainly, Pisani is not a reader. Otherwise he would know, "Prices can fall of their own weight, but it takes buying to put them up."

That said, though, it nevertheless appears more time might still be bought...


SPX 5-min

Friday's relative strength resurgence following Thursday's first sign of underlying weakness suggests the fourth wave of five waves up from Tuesday, October 4th bottom might still be forming. Should this prove the case, then there also is a case for supposing that, a "rising wedge" might form in the fifth wave position. If ever there was a move that went "too far, too fast" (as typically occurs prior to formation of a rising wedge), the market's advance off October 4th bottom abundantly qualifies.

Completion of the market's counter-trend rally off October 4th bottom could consume much of this week's trading. However, this will leave plenty of time for October to become the S&P 500's sixth straight month down.

Finally, Shemp's consternation over Angela Merkel is odd considering that, even ratings agency Fitch apparently understands big haircuts are in the works (suggesting Germany's demand that, private investors be forced to swallow Greek sovereign debt losses is a likely near-term outcome). Thus, I wonder whether Cramer's exercise in playing dumb could be driven by a reality in which not even puppies and kittens are safe...





Fast Money
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© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


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Friday, October 14, 2011

Right Back At Ya


Call me an overly imaginative paranoid, but this week's volume appears to be sending a message...


$SPX

FU too, Team Fraud! What is this early-July? Or has Columbus pirated the booty?

Hey, how's all that hot money feeling about the sudden, growing dissent taking to the streets? Could the fear of litigation risk be more powerfully confirmed a legitimate concern? In another case of bad timing this month ... suddenly, imagination fails me.

But seriously folks: "Prices can fall of their own weight, but it takes buying to put them up."

Buying time is the exercise here, and this will not do. August was this truth's first statement following two-and-a-half years buying time straight to the precipice of either hyperinflationary blowout or deflationary collapse. There simply is no middle ground, as streets ready to explode amply demonstrate.

So, with this reasonable context in mind let's see if the right group of cows were milked this week...


NYSE 15-min
NASDAQ 15-min

Look who suddenly is leading the charge after lagging off bottom: The Chip Dillers of Y2k chasing tech dreams on NASDAQ. Right on cue.

And, yes, you may have another. Right after the likely excitement Monday morning pressing the CME grease for a run at a buy-side extreme fitting a moment just prior a ruinous collapse. Were this outcome unlikely, then it's unlikely eight days and an hour would bring a monstrous 15% gain amidst a sea of negative developments that would better be used driving the market lower by those apparently cocksure good news awaits.

No! The market is sick. Since July have been the body convulsions forecasting the coming puke. Should October finish an outside month closing to the downside, look out.

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© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


There's an easy way to boost your investment discipline...

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Thursday, October 13, 2011

Here Comes the Weak End


Might the market's advance off last Tuesday's bottom (10/4) peak sometime tomorrow, then be followed by a throttling into close giving back all of this week's gains?

Each of the past three weeks has concluded with some notable measure of weakness, with last week's lift occurring on the back of fairly even weekly advancers versus decliners on both the NYSE and NASDAQ. So, we're due for a letdown, particularly given what's ahead.


SPX 5-min

If this morning's low marked the end of wave 4 of c (per yesterday's slightly revised wave count), then an additional sign of increasing underlying weakness might appear by way of a fifth wave failure, as wave 5 of c completes tomorrow morning. Already, a first sign of weakness appears by way of fading relative strength over the duration since last Tuesday's wave b bottom. Today's RSI dip to a fair sell-side extreme at 5-minute intervals furthermore heralds approaching trouble.


SPX 1-hr

At 1-hour intervals is confirmation of the wave count applied to wave c up from last Tuesday. Likewise is the dynamism of an Elliott third wave shown with the buy-side firmly in command over the entire duration of wave c's unfolding.

So, with the gamut of assorted technical measures regularly detailed in these parts currently at relatively favorable, prospective turning points, keep an eye out tomorrow for a dose of weakness yet further belying the market's advance over the past seven days and an hour.


Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


There's an easy way to boost your investment discipline...

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Wednesday, October 12, 2011

A Bear Led By Broken Fee Junkies


Here in the final hours of the first meaningful upside panic of several panics since August a slightly altered view fitting a moment when the only thing the hopelessly insolvent can buy is time finds the outlook very much unchanged...


$SPX

Several times the past two days I have heard talk of October setting up to be an "outside month," wherein the month's high and low exceeds September's, while the S&P 500 closes out the month above September's high. A rare occurrence and wishful thinking appropriate the moment, as well. However if October proves an "outside month," better expect it negative rather than positive.

With a major G-20 flop slated for early-November as the plan to bailout insolvent trans-Atlantic banks currently being planned meets the same old unworkable fate, the only hope for the market is the meeting is delayed.

It's not like I am the first person in the world to figure this out...


company chart (JPM)
company chart (MS)
company chart (GS)
company chart (C)
company chart (BAC)

These pigs are broken for a reason, and it's not bullish.


Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.


There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!