Friday, April 29, 2011

Serving Humble Pie


If past is prologue, then, truth be told, a heaping helping of humble pie could be served up to this giant bear, if, as the final leg of the market's counter-trend rally off March '09 low unfolds, the trend of developments over the past year persists...


$OEX

First, both relative strength (top panel) and momentum (bottom) confirm the market's lift above its early-April peak. So, given that both measures already have registered prolonged bouts of levitation over the past six months — moving more or less sideways while the market lifted higher — (this, too, extending a long-enduring trend since March '09 bottom finding momentum persistently weakening), prospect is raised that, the upper end of the channel containing five waves up from late-June 2010 bottom could be reached straight ahead.

It seems this prospective, extended move higher completing the fifth and final wave of wave (c) of an a-b-c corrective wave up from March '09 bottom might largely be driven by the kind of sucker convinced the end of the Fed's QE Happy Meal will crush U.S. Treasuries (not likely, as a mountain of lesser credits are much closer to the grinder). Treasury's demise rather more likely awaits QE to infinity and beyond (an eventuality likely precipitated by default at the Euro periphery?).

Considering again the recently noted manner of alternation demonstrated between second and fourth waves since March '09 bottom, there seems a good chance more of the same could be upcoming. So, once wave iii of 5 is complete, wave iv likely will have an upward bias. (Of course, this assumes wave ii of 5 is complete and wave iii of 5, indeed, presently is unfolding.)

So, heads up. All told, the dying days of credibility given a hopelessly imbalanced — hopelessly insolvent — trans-Atlantic debt trap nevertheless should continue finding the stock market's further rally accompanied by technical divergences extending the market's poor underlying state of many, many months now.

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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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Thursday, April 28, 2011

Consolidation in Coming Fresh Capital Scarcity


Two things apparently are being accomplished in conjunction with completion of the final leg of the market's counter-trend rally off March '09 bottom. Both combine to project a negative turn upcoming...


$NYA
$NYHL

First, in the aggregate capital continues being raised in equity markets, slowly but surely, rather than spread across a broadening swath of listed-issues. This the NYSE 52-week high-low differential has been consistently revealing over the past six months in particular.

Yet as this weak underlying condition persists amidst a rising market, circumstance allowing for acquisition of relatively cheaper put option protection also is being effected...


$CPC
$VIX

Considering a decades-and-running drive toward radical consolidation of physical capacity providing goods and services of every type — this facilitated by the creation of a monstrous mountain of mis-priced risk — here at a point where continuation of this scheme is no longer possible (due to collapse of the shadow banking system and its infinite multiplier), the former, marginally disruptive manifestation of this drive toward consolidation now is on course to occurring with increasingly chaotic consequence. Yet the role equities likely will play in this should be no different than in 2008, namely as battering rams forcing capacity consolidation at panic-driven prices.

Judging by recent months' relative increase in put option demand at a time when it is as clear as day stocks are not being accumulated, what is being effected rather appears an effort to strengthen the floor under the market, that upcoming weakness might afford opportunity to gain the desired objective — capacity consolidation — in a climate conducive to amassing capital necessary to getting the job done. Of course, any floor's strengthening will require bolstering on the way down. As has been previously suggested (it has been a while, though) a put-call ratio of 2-1 or more likely will coincide with future efforts at putting a solid floor under the market.

If there is a forest not to be lost for the trees, it is movement toward creation of multi-national conglomerates capable of holding even sovereign governments hostage. The extent to which this arrangement's capacity as such has been demonstrated since 2008, particularly in the financial sector, is unprecedented. This trend is no anomaly. Rather, it is intended. Its wildcat effect on aggregate financial fortunes — via bouts of extraordinary boom and bust — appears of less material concern than is the ultimate objective of consolidating resources and physical capacity over these, increasing virtual slavery of an absolute majority of trusting bystanders sold for decades on the wonders of the free market.

Any honest assessment of the post-Bretton Woods period logically would reach this conclusion, particularly following the past few years. Rampant fraud exposed at every layer of the trans-Atlantic financial system likewise provides ample evidence suggesting the low man on the capital structure totem pole — equity — might as well be toilet paper.

What are becoming obvious conclusions, then, about the present, dire moment in the life of Adam Smith's leveraged Ponzi scheme suggest that, Glass-Steagall reform of the U.S. and global banking system could be poured forth sooner than President Spongebob seems built to absorb. Think about it. Restructuring — whether half-baked or well-done — is a likely phase 2 financial crisis upcoming candidate. Might this be what those raising capital and increasing protection likewise are seeing?


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, April 27, 2011

Whose Deflation Does the Fed Fear?


If the Fed chairman's greatest fear is deflation, then riddle me this: whose? It is not that of an absolute majority of Americans (let alone world citizens). Their savings depleted over decades, their homes looted recently, their cost of living now shooting through the roof, and Ben Bernanke assures the world that, the Fed is ever vigilant to prevent higher commodity prices from having an inflationary effect on wages. His words, not mine.

In other words, Fed policy is committed to ensuring the majority's purchasing power is gutted. Calling this "desirable inflation," however, does not alter the fact that, given a still unsustainable debt existing atop a physical economy already proven (2008) incapable of keeping its debt service current through the economy's productive functioning, the shedding of demand as a result of the Fed's hyperinflationary policy can only hasten that which the Fed chairman says he is venturing to avoid.

Further dislocation is assured. Shutdown of economic capacity euphemistically called "excess" is an accelerating risk. So what if a massive debt burden momentarily is being managed with reckless monetary machinations making the hopelessly insolvent appear well-capitalized! What good is this when increasing pressure to shut down economic capacity is being hastened? What practical difference has this inevitable outcome to deflation Bernanke claims to fear?

Whether Bernanke's view toward the "transitory" nature of commodity price increases is credible remains to be seen. No doubt further significant debt deflation remains in store, hastening another rush for liquid capital, consolidation of physical capacity, as well as portfolio risk readjustment, much like occurred in '08. Yet given that, huge wads of liquidity intending to forestall a chain-reaction financial collapse are a well-ingrained expectation, and so, a likely policy response, all things paper (equities and bonds) seem at greatest risk, while "things" (commodities) rather than being sold (as occurred in '08) might be aggressively bid up. So, the Fed's "transitory" view on commodity price increases could be in for serious challenge.

Believing that fundamental problems besetting the physical economy are beyond the Federal Reserve's power to positively effect either of its two so-called mandates, its failure as an institution exerting influence over financial markets more or less seems assured. In fact, given the trend toward increasing transparency at the Fed, you might rightly conclude that, its credibility already is on the down slope, and closer than most imagine to being destroyed. Sophistry the Fed chairman employs in his view toward the U.S. dollar only confirms this...




Inflation Mr. Bernanke claims to be keeping in check, thus making dollar-denominated investments "attractive," defies the experience of nations providing the U.S. critical capital inflows (without which Team Fraud would be ruined).

In fact, the misery proceeding from the Fed and Treasury's hyperinflationary policy must be rather profound, seeing the Brazilian Finance Minister casting aside typical diplomatic protocol employing measured language, while phrases like "currency war" apparently are necessary and proper characterization of the Brazilian experience...




One supposes that, such is the face of building inflationary pressures the Fed chairman claims is restraining any further quantitative easing beyond June. Trouble is a Ponzi scheme built on a mountain of mis-priced risk requires ever more capital to sustain it. Thus, QE's end means another round of debt deflation all too likely lurks around the corner.

Given grossly inadequate investment in physical economy — several trillion per year are needed, yet finance unwisely is not forthcoming — how ever can a debt bubble be infinitely inflated, let alone forever imposed? One might suppose deeper involvement in hopeless wars an effective means of furthering our securities-based Ponzi scheme (that is by projecting force), that the nation's moral and financial bankruptcy might be irreversibly sealed. One easily imagines "1939: Poland invades Germany" provocations venturing this. Just a passing thought.

No one asked Captain Bernanke about his MBS book: what stresses it faces given real estate's "depressed" state. Everyone instead remained politely unchallenging toward the Fed's ridiculous machinations whose human cost is widely believed denied an honest accounting in official channels. The Fed's transparency could grow old real fast.


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, April 26, 2011

A Complex-to-Simple Case For Collapse


Believe it or not, there is widely accepted, sound technical basis for supposing that, the year 2011 remains poised to become the worst in the recorded history of the stock market. This prospect in fact is founded on the Elliott Wave Principle's alternation guideline (which in my 6th edition was called "the rule of alternation").

To wit, in formation of complex corrective waves, component waves most often will trend either in a simple-to-complex, or complex-to-simple fashion.

Since Y2k top — this to a 5-wave advance from 1932 — a complex corrective wave is seen forming in complex-to-simple fashion. The final component wave forming this complex corrective wave is due to form wave C in a simple, 5-wave decline carrying major indexes to levels last seen in the 1987-1994 period...


OEX weekly

Particularly interesting are those well-known fundamentals underlying development of this complex corrective wave since Y2k. The story this wave count recalls is devolution of the church of Adam Smith's leveraged Ponzi scheme, first at the close of the era of Pastor Ayn Greenspan, and now under Bishop "Bottomless Pockets" Bernanke, America's Rudolf von Havenstein clone. The story's title is, "Securities-Based Finance Swansong: From Sub-Prime Fraud to Treasury Swindle, A Due Diligence Dereliction of American System Principles."

The one thing I would impress upon you is the speed at which the market's pending unraveling is likely to develop. Consider the moment as being similar to August 2008. Trouble's warning, already amply given, likewise finds momentary disbelief in anything that would diminish deeply seeded promise rooted in the 1995-2000 experience, when "buy the dips" became an oft-cited mantra whose utility was proven over several decades. Despite years now spent challenging this sentiment, many still keep to its promise even in the face of extraordinary acts of desperation at the heart of the operation animating it.

Thus once again to the dismay of a disbelieving consensus, trouble's warning (now only louder) sets the stage for a terrible throttling whose rapid unfolding could make 2011 the worst year in the stock market's history. Easily.


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.


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

Get Real-Time Trade Notification!

Monday, April 25, 2011

A Parrot on a Pirate Will Answer No Questions


In his much anticipated press conference this coming Wednesday Fed Chairman Ben Bernanke would do the United States and the world a big favor if at the very start, the bearded one asks the press corp to watch the following video, promising a brief statement at its conclusion...



... following which Captain Hyperinflation announces to his stunned audience his immediate resignation from the Federal Reserve, this, of course, on account of the fact a New Great Depression has been averted, and confidence in the American miracle restored...


$IRX

Not!

Forgive my wishful thinking, as wishful thinkers naively backing the Fed's insane QE policy deserve forgiveness, too. These are not to be confused with the Fed's fascist protagonists who keep the likes of a Bernanke playing the part of a parrot perched on the pirate his promoters in fact are.

Yet plunderers of the wealth of nations, who in the grand scheme make Somalians appear Goliath, really are no match to the good ship Glass-Steagall sailing in the parrot Fed's direction through a fog only slightly obscuring its time of arrival....


$OEX

If she isn't here already, she will be very soon. Indeed, her arrival might be the only thing you can confidently take to the bank these days...


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!

Friday, April 22, 2011

Because a Crisis is a Terrible Thing to Waste


"Before we close this dark chapter of banking history, it is worth looking back at Ferdinand Pecora. In 1933, this Italian immigrant was put in charge of the Levin commission of his day – an inquiry into the causes of the 1929 crash.

"Its findings of banks’ abusive practices and conflicts of interest led to the creation of the Securities and Exchange Commission and the passage of the Glass-Steagall Act separating commercial and investment banking. The half a century that followed was among the most stable in US banking history.

"Levin, Dodd, Frank and Vickers should have striven for the same level of ambition, if not the same solutions, as Pecora, Glass and Steagall.

"A crisis is a terrible thing to waste."

Francesco Guerrera, Financial Times’s Finance Editor, 4/18/2011

Not to worry. The crisis has only begun. Thus, common knowledge that, Goldman Sachs deceived customers probably will prove a more abiding memory than any Justice Department inclined to respond with a weak wink and a smile, today, tomorrow or any other day forward. In fact, given fast approaching hyperinflationary breakdown the firm might sooner wish Washington were not so bloated with jellyfish, that a decent burial rather than a violent one might more likely be accommodated.

Will those many representatives ensuring domestic tranquility be so brave to seize this moment, that all decency as was imposed upon the American nation's opening salvo might prove alive and well-poised for a good shine this moment in time finding an eternal tormentor — a Declaration's bulls eye — insolvent? Is the body politic keen on preventing yet another torching of Washington with equal due diligence as likewise guides German abhorrence toward its Weimar experience?

With these questions in mind did I write my congresswoman...
Dear Rep. Buerkle:

For you to become a cosponsor of H.R. 1489 — Return to Prudent Banking Act of 2011 — about how many constituent signatures on a petition imploring this might it take to make your decision a no brainer?

Here's what you should know about why this bill is believed the most important piece of legislation currently before Congress:

http://stock-index-options-alert.blogspot.com/2011/04/stock-index-options-alert-apr-19-2011.html

The average investor well-served, one also imagines that, some thousand public servants here in NY25 could be rallied to clearly understanding it is Glass-Steagall or Die: their service, more likely, yet even the nation.

Respectfully,
TC

* * * * *

© 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!

Thursday, April 21, 2011

What Wealth-Killing Evil Pushes on a String?


This week's lift raises probability that, the market's counter-trend rally off March '09 bottom is not yet complete. Still, with an extraordinarily poor technical backdrop accompanying the market's continuing levitation there really is little else to say than, oh, that tricky Fed. In other words, only fools are being deceived.

Sure, creating technical demand for financial assets has been one consequence of the Fed's liquidity backstop whose provision substitutes for credit no longer forthcoming from a [collapsed] shadow banking system. However, this provision cannot last. Absent that bottomless pit of "valuable" securities possessing AAA ratings assigned by partners in fraud among bond rating agencies — criminals still on the loose, aiding and abetting cohorts in Congress — the Fed's gusher increasingly must go into highly liquid and leverageable "things" (commodities), as well as the safest securities (Treasuries). Such is the consequence of collapsed confidence in Adam Smith's leveraged Ponzi scheme.

More critically, with honest admission that, Team Fraud is pushing on a string, one is left with possibility that, financial matters these days play second fiddle to a much more insidious end. To wit, with unprecedented institutional aid given to fascists among the trans-Atlantic community largely poising to cement a decades-long drive to consolidate physical capacity, while at the same time standing largely depleted, if not destroyed, is investment facilitating creativity essential to ensuring robust economic growth (think infrastructure of every sort: both material and human), one might reasonably conclude that, nearer is a moment when overthrow of the great republican experiment begun in 1776 becomes an increasing risk. Naturally, no one thinks in these terms, yet are not institutions allowing profound fraud to become the "new normal" tempting their own destruction, standing prostrate to the Frankenstein they created? Might not their usefulness likely be approaching its "best if used by" date, considering Standard & Poor's threat this week thinly disguised as a credible(!) warning? Again, this argument hinges on honest admission that, Team Fraud and its Fed are pushing on a string.


$OEX

One might find objectionable the above Elliott wave count applied to the market's 5-wave advance off late-June 2010 bottom. However, beyond the fact that no Elliott Wave Principle rules are violated, there are a couple good reasons for accepting this wave count's validity.

First has been a well-established tendency since March '09 bottom for second and fourth wave alternation to develop in precisely the fashion seen above. When one corrective wave has unfolded with a sideways-to-down bias, the other has unfolded with an upward bias. You might recall this dynamic being noted here many moons ago (late-2009, early-2010-ish). It really comes as little surprise, then, this unique manner of alternation should persist over the entire duration of the market's counter-trend rally since March '09.

Recently noted, too, is the manner in which relative strength (top panel) confirms the component waves of wave 4, as well as how increasing technical weakness typical in formation of a fourth wave (versus its preceding second wave) indeed registered as wave e of 4 unfolded.

Next, consider the technical backdrop accompanying the market's advance off late-June 2010 bottom — a configuration that, only until recently was seen justifying the case for a "rising wedge" forming into February 18th top. The transition to the above wave count in fact is no great leap in the realm of possibility giving form to the final leg of a counter-trend rally in a market vanquished of animal spirits...


$NYHL

Over the course of the market's 5-wave advance since late-June 2010 the worst reading on the NYSE 52-week high-low differential still accompanies wave 4 — in the revised wave count, specifically, wave c of 4 (November 2010).

Just as was the case when a "rising wedge" was thought unfolding off late-June 2010 bottom (in forming wave (c) of an a-b-c corrective wave up from March '09), the technical backdrop accompanying formation of wave 4 of (c) in the revised view above still reveals deterioration — increasing technical weakness — in relation to wave 2 of (c) (August 2010). This, of course, is typical.

Interestingly enough, too, during formation of both corrective waves (i.e. waves 2 and 4) the worst reading on the NYSE 52-week high-low differential was registered during formation of wave c (a "c" wave being an Elliott corrective wave's third wave, which typically is the most dynamic Elliott wave).

No doubt, the NYSE 52-week high-low differential since late-November 2010 certainly reveals just how lame has been the effect of the Fed's liquidity gusher. Despite major indexes moving into new high ground, post-March '09 bottom, early in December, 2010, the love driving the market's lift has been directed toward a diminishing number of issues. Thus, too, is the full measure of complacency underlying the market's advance revealed, as laggards are held rather than increasingly dumped (as wisdom born of a technical backdrop whose weakness grows otherwise advises they should be).

The revised fourth wave's upward bias notwithstanding, the technical backdrop revealed by the NYSE 52-week high-low differential both substantiates the revised wave count since late-June 2010 bottom, as well as lends caution toward what further advance might lie in store as wave 5 of (c) unfolds. It stands to reason that, thinning leadership might be putting in a rather low ceiling on what advance still remains before the market's counter-trend rally off March '09 bottom at last is completed.

This week's mixed results (per indexes reaching new counter-trend rally highs) suggests the market's levitation likely will persist over weeks ahead. Nevertheless, no matter what form wave 5 of (c) takes, the year 2011 still is poised to become the worst in the recorded history of the stock market. The Fed is pushing on a string, allowing a bull trap to be built by its fascist protagonists, that radical consolidation of material wealth might be most rapidly achieved. Thus, the most relevant question an investor must answer is whether there can be a bull market in the riskiest financial asset of all in the face of conditions conducive to creation of a huge pool of slave labor? Because that's where we are heading if Glass-Steagall is not immediately restored...


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!

Wednesday, April 20, 2011

Debunking the Myth Volume Does Not Matter


Word has it that, the trend toward a lower volume of shares exchanged does not matter. Yet how strange is this conclusion when the Dow Jones Industrials Average is leading the market higher!

You mean to say that, an underlying current of fear displayed by a bid focused on the top heavy paragons of corporate America — so loaded with dead wood that, smoking is no longer allowed on the premises — should not find some measure of the same fear displayed by increased exchange of issues not so well-positioned to profit from globalization? Being not so attractively disposed, shouldn't these issues experience increased selling pressure?

Were we in the midst of a bull market, then right fear underlying today's bid on slow moving Titanics should bring increased selling of these, as well as the many smaller ships in the ocean, and yet despite this, still find all boats rising. None of this healthy dynamic has existed since March '09 bottom. Not even the Dow 30 has seen an increase in shares exchanged as the index has risen over the past two years. Rather, here and everywhere else is utter complacency being revealed by diminishing volume of shares exchanged as the market continues its advance.

Holding complacency in place has been the CME-manufactured bid — a dynamic whose persistent unleashing over the past two years brings neither increasing demand, nor increasing fear. Something of the character of this dynamic was revealed today. We saw no follow-through to today's strong, CME-driven open, nor was any fear registered amidst increasing confirmation that, margins are collapsing. That complacency lives is the only thing one can rightly conclude.

Volume matters. Its decreasing trend since March '09 bottom rather suggests that, the largest holders of equity are weak hands, no doubt massively over-leveraged, whose position presently is being given a pass, yet whose posterity is entirely in doubt, as capacity to sustain fictional values on equity capital backing leverage meets collapsing margins brought about by insane policies venturing to back a mountain of mis-priced risk with but more mis-priced risk issued by lenders of last resort.

Promoters of such sophistry as in the recent past explained rising values of assets of all sorts by citing anything but an unsustainable credit bubble blown in the church of Adam Smith's leveraged Ponzi scheme are, of course, proven prone to fantasy such as would claim that, declining volume of shares exchanged while stock prices advance is circumstance possessing no foreboding consequence. The likes would better consider what might happen when power to extend the pass presently being given what effectively are insolvent zombies is no longer possible. A proper conclusion would justify prospect for a spectacular avalanche of selling — relentless, as well — given today's plain lack of expanding interest in the riskiest financial asset of all.

Indeed, the persistence of diminishing volume of shares exchanged as the market's levitation has extended more likely suggests the market's collapse will be nothing short of devastating...


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!

Tuesday, April 19, 2011

Why Demand Glass-Steagall Now


Here at the crossroad of imminent 1923 Weimar Germany hyperinflationary breakdown of the physical and financial economy and urgent need to restore the 1933 Glass-Steagall reform of the banking system, but one thing now (as then) will bring a turn in the right direction: overcoming "the political difficulty of deflating."

We stand at a moment when financial wealth accumulated over several generations is on a fast track to being obliterated. This is on account of unwillingness among the political class to distinguish productive debt well-positioned to increase the wealth of nations from mere speculative claims. This latter category is dominated (hands down, no contest) by so-called "derivative" securities whose ultra-thin backing now reaches deeply into the U.S. Treasury. Severing this connection is the proper objective restoration of the 1933 Banking Act (a.k.a. Glass-Steagall) would achieve.

Cut through the sophistry rationalizing most speculative claims (these generally center on "liquidity enhancement") and a cancer is exposed. The cure is Glass-Steagall. Reconnect finance to its most stable foundation, where increasing mastery over physical processes facilitating commerce in productivity-enhancing goods and services is most effectively assured, and a shred of hope for anyone with financial wealth tied up in speculative claims will be gained. Without this, wages and savings will continue being robbed, accumulated financial wealth will evaporate, and physical assets will further consolidate into fewer hands. This same outcome became the German experience in the early 20th century. There is no reason to believe it will not be our experience, too. We are moving down the same misguided path where the mere provision of money increasingly must substitute for sound finance (this because the notion of sound finance bounded by physical constraints on its productive investment has been obscured for many decades in the church of Adam Smith's leveraged Ponzi scheme).

One way or another, "the political difficulty of deflating" will be overcome. The only thing in doubt is whether this will occur as a result to tens of millions more being financially wiped out in an orgy of hyperinflation like that which occurred in Weimar Germany from 1922-1923 (effectively "deflating" the wealth of the German nation), or whether the prospect of such unimaginable, mass demoralization will be avoided by a political consensus to restore Glass-Steagall, and stat.

Not to diminish one's desire to overcome exigencies that largely lie outside one's control, for this is why some intelligible discernment of the stock market's state is of interest, that one's ability to thrive might be secured no matter what curve ball life throws. Nevertheless, what good will one's thriving bring when abounding all around are many millions made destitute through no fault of their own? Have no doubt. This, today, is the "best case" future one faces if Bernanke is allowed to continue a hyperinflationary policy whose precedent in Weimar Germany qualifies such policy as nothing but an insane act of treason against the founding principles that, institutions of the U.S. government are charged to uphold. One's thriving amidst a sea of destitution likely will prove little consolation, in fact.

So, that is why immediate restoration of Glass-Steagall is critical, and why to my American readers the following is directed...

On April 12, 2011 H.R. 1489Return to Prudent Banking Act of 2011 — was introduced by Rep. Marcy Kaptur (D-OH9) in the U.S. House of Representatives. The bill has but two cosponsors: Rep. Walter Jones (R-NC3) and Rep. James Moran (D-VA8). Dozens more cosponsors might better assure H.R. 1489 moves forward to a vote on the floor of the House of Representatives.

First order of business, then, is writing your representative and imploring them to become a cosponsor. (Simply enter your zip code in the field located at the top of the web page, click "Go" and a link to the web page of your representative in the House will be returned.)

You might direct your representative's attention to the Societe Generale report whose link appeared at the top of this post:
Popular Delusions: Some useful things I've learned about Germany's hyperinflation
(www.sgresearch.com/publication/en/5A67873C6778E721C12576D60038C599.pub)

Also, an excellent review of the physical processes leading to the hyperinflationary blowout of Weimar Germany is presented in the following video production. One cannot help but see today's parallel in a United States whose physical economy has been driven into the ground, that Adam Smith's leveraged Ponzi scheme — the abomination that, the Fed and U.S. Treasury are mightily straining to keep alive — might flourish in its stead:
Fed Copies Weimar Hyperinflation
(http://www.youtube.com/watch?v=AMY3aJwhfqg)

Representatives in Congress should be under no illusion that, somehow, this time is different. Your voice given to confirming this outlook can only raise their awareness that, many fortunes stand to be told (as well their own) depending on how quickly H.R. 1489 is moved to a vote on the floor of the U.S. House of Representatives.


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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Monday, April 18, 2011

S&P Implores Congress: Restore Glass-Steagall


Say it isn't so! A bond rating agency complicit in the perpetuation of a magnificent swindle? Forty years too late — the minute Nixon trashed Bretton Woods should have come downgrade of Standard & Poors' outlook on U.S. Treasury debt — today's brazen proclamation from an entirely discredited industry represents but a more insidious facet of the fantasy presently binding the trans-Atlantic financial system.

Let's think about this. The U.S. Treasury's solvency is being called at risk, that tribute to a fraud-rife Ponzi scheme it increasingly supports might not be crowded out by obligations falling into the so-called "entitlements" camp? That's the impression you get anyway from most every tool making his or her way onto the airwaves.

Yet do any of these folks think about to whom these so-called entitlements largely are directed? Why it's the Vietnam generation.

Those behind today's S&P move could not have found a worse moment in the nation's history to expose their insolvency. What might rather gather from here is a large captive audience chanting in unison a simple call like, "Glass-Steagall Now!" How effectively might a mass swansong be inspired by swindlers venturing war on that fuller measure of human dignity won by representatives of the many parents and grandparents of those from the dissenting '60s generation. We could be looking at a very hot summer.

Meanwhile back at the ranch, all appears still very complacent. The question is to whose benefit?


$CPC

Today's market dive took major indexes (save those BRIC faves of the DJIA) below respective 50-day moving averages, and this from day's start to finish, no less. Yet neither speculative fervor, nor fearful, long-equity hedging lit up the CBOE trade in put options. Hmmm.

Then, the matter of modest increase in put option trading since the market's April 8th top at premiums seemingly oblivious to the market's softness...


$VIX

Could this be something manufactured by interests possessing considerable power to drive the market lower? Might relative increase in put option buying be positioning for a pending market swoon?

This sort of thing would be in keeping with mechanics employed during the market's counter-trend rally off March '09 bottom. Over the duration call options were written, that long equity positions could be trimmed — transferred to those call option buyers who exercised their right following CME-driven short squeezes whose effect gave call options intrinsic value.

So, the question, presently, is whether the same interest finds such great urgency to raise capital that, time has come to cast all caution to the wind.

No doubt, anyone who is not a sucker for days of old — days of ease not soon to return — is keeping an eye on the exit. And as the radical reallocation of wealth higher up in the capital structure since the '08 disaster confirms, non-suckers are a considerable force. Among these, of course, are interests thought to have been paring long equity positions over the past two years, as just described, writing [covered] call options. Might these be risking a mad rush for the exits in an apparent turn of strategy now venturing to drive the market lower, such as the recent, relative increase in put option buying suggests is possibly a new turn of affairs in the making, this at the crossroad of Glass-Steagall and Weimar Germany, 1923?


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, April 15, 2011

Between a Crock and a Hard About-Face


With its voracious appetite for capital increasingly being satisfied extorting the physical economy via energy markets, Team Fraud this week demonstrated an astonishing degree of complacency toward the Fed's apparently unchallenged capacity to facilitate this robbery with its QE policy luring the U.S. Treasury into a debt trap even deeper than that burying the private sector. So, any aggressive dumping of equities finds restraint in capacity to further entice BRIC nations into the Fed's hyperinflationary scheme. Thus does Team Fraud's road show baiting the global sucker gain what probably is its most relevant context (how ever vain such enticement appears at this very late hour).

Appearances of stability whose credibility grows more strained by the day no doubt explains why animal spirits remain dead. To this end David Goldman likewise agrees. Yet per the fix Goldman advocates, the task of "[convincing] investors that their bonds are safe" will require more than the Fed ceasing to wave its magic money wand. What's really needed is distinction between productive debt well-positioned to increase the wealth of nations versus speculative claims presently paralyzing confidence throughout the trans-Atlantic financial system. Among other things, this will require an honest accounting of "the MBS documentation disaster" likely some double-digit multiple greater than what Goldman thinks is in the offing.

So, with complacency deepening amidst a fragile commitment toward common stocks (this being revealed on several fronts over many months now), the market's further levitation is likely to find increasing challenge until, at last, it finally collapses sometime over months ahead ... which eventuality, too, might even begin promptly, if the recent rally off March 16th low should in fact complete five waves up from late-June 2010 bottom, and thereby end the market's counter-trend rally since March '09. (Just throwing this out as food for thought right now...)


NYSE McClellan

The NYSE McClellan Summation Index leaves open the possibility that, presently forming still might be the fourth wave of five waves up from late-June 2010. Typically, an Elliott fourth wave (within a five-wave advance) will see technical measures weakening relative to worst readings registered during formation of the preceding second wave. We have not seen this yet via the Summation Index. Everywhere else, though, we have.

Given the market's persistent resilience in the midst of increasing underlying technical weakness (even everywhere else but the NYSE McClellan Summation Index), as hard to swallow as levitation's continuance sometimes is, its further possibility nevertheless remains alive, and yet only all the more unlikely would this serve to avoid a train wreck so terrible that, its approach has been heard by discerning ears from many miles away.

Make no mistake, in the hearing is no echo of the wreck of '08. Rather, consistently increasing underlying technical weakness (leaving divergences galore) reveals disaster is heading this way.


NASDAQ McClellan

Here again, a tale of two cities. First (and foremost), the greater measure of technical weakness accompanying NASDAQ's advance since late-June 2010 again confirms absent, such animal spirits as are necessary for sustaining the stock market's advance ... that is if risk of terrible upset is to be judged rather unlikely, which presently, late in the service at the church of Adam Smith's leveraged Ponzi scheme (est. 1971) is not the case at all. (See NASDAQ McClellan Summation Index below 0 as a case in point demonstrating animal spirits waning in the absence of that "mad money" David Goldman mentions.)

Yet here, too, there appears via the Summation Index possibility that, NASDAQ presently might be in the midst of forming but the fourth wave of five waves up from late-June 2010 bottom. Then again, just as is true with all NYSE technical measures save one, everything else NASDAQ (McClellan and otherwise) rather suggests the market could be toast from here on 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.


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Thursday, April 14, 2011

Joe Battipaglia as Metaphor to a Bull Trap for the Ages


With complacency amidst growing bankruptcy well-established, what else need be said? Technical weakness abounds. What awful thing lies ahead — ever the more appearing inescapable — today finds metaphor in the passing of a man...




Farewell Joey B: paragon of humility; of all talking heads, a well-tempered student of Y2k's New Era once it became the same old, same old reservoir filled with shattered dreams.

May the end of your legacy in financial lore be metaphor vindicating the bear you have taken to the grave: striking with the same, sudden ferocity, as surely deserves fearing despite scarcely a soul believing such horror even a remote possibility.

No doubt is today's A+ bid under the 30-year better seen lighting the way...


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!

Wednesday, April 13, 2011

A Complacency on CME Fail Sandwich Feeds a Riot


Nothing like another slice of CME fail to top the past two days' complacency, which, themselves, rest atop last Friday's fat piece of CME fail. The stock market here in the United States is in a toe-to-toe, popularity race with Osama bin Laden. The bankrupt pricks sparsely can come up with the margin to coax a leveraged bid with more than five minutes of staying power. Thus, too, is the decrease in JPM's loan loss reserves better judged by its falling stock price today. What's that? No significant increase in the loan book? No new added leverage? Buh-bye stock market.

And then not one word from our fascist-in-chief this afternoon addressing the tens of trillions of dollars of liabilities backed by the U.S. Treasury whose creation involved no small measure of fraud, evolved even to become the face of treason. Not one word. Let the rioting begin.




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, April 12, 2011

Complacency Thickens


Apparently, yesterday's coat of red applied with a big complacency brush was not enough to cover the wall with the global recovery story written all over it.


$CPC

Weakness enough to accelerate long equity hedging was today's, no doubt.


$VIX

Yet at hardly any increase in cost apparently, as no cause for fear evidently exists. Apparently, everyone who needs to believe the trans-Atlantic is solvent does. Time for a wake up call...


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, April 11, 2011

Complacency in a Crowded Trade


Well, it appears the town was painted red today with a nice, thick coat of complacency...


$CPC

Seeing the CBOE Put/Call Ratio rising 9% is more than mildly curious when the price for such protection, rather than increasing with the market's weakness, instead was falling...


$VIX

And fairly sharply at that. Yet whether this measure of complacency will lead to but more of the same before the lug nuts fall off this bull trap is at this point, of course, a rather natural suspicion.

Still, fearlessness displayed here is fitting a market believed on the verge of collapse. All the more conspicuous, though, is this complacency following Friday's whipsaw (whose high and low set the high and low mark for the entire week)...


NYSE 5-min

One rather large CME jam gone bad was Friday. Just how little buying interest existed was starkly revealed just prior to the final hour's save: one whose follow-through this morning brought only further weakness, the likes of which found each new low today confirmed by still weaker relative strength.

So, might complacency be badly misplaced here? It rather appears so.

Then what might a bull counting on some manageable measure of inflation be missing?




Let your thinking begin with the poll cited at the conclusion of "A Bear Case Made in an Animal Spirits Graveyard."

Per "the best investment going forward this year," we had the inflation trade (stocks + commodities) at 77% and the deflation trade (bonds + cash) at 22%.

Mr. Dremon's, no doubt, is the crowded trade. Yet matters go from bad to worse when you add to the mix physical breakdown induced by wild swings from debt collapse to hyperinflationary bailout. The 1970s "stagflation" will prove paradise in comparison.


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!

Friday, April 08, 2011

Fear Subdued Exposes Deer in Headlights


Suckers with more irrational hope than money are a dime a dozen these days. Benefactors of increasing selling restraint allowing the market to be pushed higher on the back of a fair handful of issues, the likes are destined to become that trusted interest who will offer their supply only when stocks in fact are cheap. This was their mark late-2008, early-2009, and it will be so again because all the credit in the world aiming to lift credit gone bad is failing to restore confidence necessary to incite animal spirits that alone can sustain increasing stock prices.

No additional pressing of bets so far is proving capable of overcoming subverted market forces. Nor does growing global unrest suggest these pressed, tax payer-backed bets even capable of holding in check extreme imbalances these otherwise aim to support.

Widespread denial of this (even resting in hope) is but first fantasy feeding those many others claiming common stocks are undervalued.


$NYA
$NYAD

Selling restraint enough to allow an increasingly diminishing portion of advancing shares to push the market higher since late-June 2010 bottom is evidenced above. Manifestation of this off March 16th bottom is particularly stark. Not at all suggestive of healthy underlying conditions. Not at all indicative of a market driven by deep pockets filled with animal spirits.

Selling appears effectively restrained with tribute enough to encourage an unsuspecting deer in the headlights posture throughout the herd. To what part are the CME and high frequency trading employed to the end of confusing those whose lack of company with deep pockets might otherwise be raising fear finds no shortage of evidence on this account over the past eighteen months and more. To the effect a bid appears to be under the market, then, yield hungry suckers all the more are being convinced to remain long.

It's probably a safe bet some among game masters see this as well, and will have no choice but pull the plug when the call for capital preservation resounds. Pick a vulnerability shifting today's fragile systemic landscape. The trip to levels last seen in the 1987-1994 period is likely to be extraordinarily swift once the first step in this direction commences.

No delay yet toward this still apparently inevitable end is proving even remotely perplexing. The "extend and pretend" approach taken to the trans-Atlantic financial system rather clearly finds in the stock market underlying behavior confirming that, adults are quite capable of discerning reality from make believe. Thus, are animal spirits subdued.

Just how much longer the adults will play along is made a little uncertain by possibility that, levitation of the sort seen since early-November 2010 peak might continue (this only to the effect of further weakening underlying technical conditions before top to the market's advance off late-June 2010 bottom at last is reached). Then again, the durability of German and Japanese acquiescence to a bankrupt albatross compromising their export-oriented economies still appears in considerable doubt. Likewise, a certain measure of panic displayed via ill-placed technical strength coinciding with the market's advance off March 16th bottom is not going unnoticed. The market's collapse could commence at any moment.

* * * * *

© 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!