Chumming for Suckers Using Stress Test Bait ~ The Risk Averse Alert

Tuesday, November 22, 2011

Chumming for Suckers Using Stress Test Bait

Not wasting a second to deflect what is sure to be an accelerating drive to reinstate Glass-Steagall following yesterday's JSC fail, the Federal Reserve after the close of today's trading announced its Dodd-Frank mandated bank stress test of 2012. Ever behind the curve — the curse of the legacy of Alan Greenspan — the "tests" scheduled for January are to benchmark bank performance assuming market conditions following the 2008 collapse of Lehman Brothers.

Trouble is the demise of little ole Lehman is no comparison to the pending collapse of the European Monetary Union. Intrigues still festering from the detonation of a bit player are orders of magnitude more manageable than those in waiting with the EMU's imminent meltdown.

Not to ignore prospect of some days more being bought to exercise the tired fantasy of the banking system's solvency. Thus, the view forward supposing early-October lows likely will remain intact for some weeks more seems supported by the ruse the Fed's stress test is well-suited to cultivate...


This week's effort to hold down the cost of hedging (see $VIX) despite the market's decided softness probably is paving the way for a respectable bounce, as depicted above. A bit more weakness, though, might be in store tomorrow before any decided turn higher commences.

Fast Money
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