The Last Hurrah At The Dawn of Doom ~ The Risk Averse Alert

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.


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).


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...


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
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