The Lug Nuts Loosen ~ The Risk Averse Alert

Friday, January 13, 2012

The Lug Nuts Loosen

Were this morning's market setback on "rumors" of European sovereign debt downgrades likely to prove the kickoff to events leading to breakup of the EMU (as well as wave (3) of C targeting levels last seen in the 1987-1994 period), then odds are spot gold would have surged higher enroute to tracing its anticipated, final parabolic surge (this prior to collapsing along with everything else), rather than falling back in unison with stocks, as occurred.

This intra-day first sense of the market's near-term prospect was bolstered after the close by a CBOE Put/Call ratio indicating that, although wave (2) of C is nearing completion, there's probably some days more in store extending the market's dull levitation so far in 2012 before the hedged, short equities position building is likely to begin working. Typically, the put/call ratio will begin turning higher (diverging at the market's peak) once it is time for the market to begin turning down. So, another few days more levitating can be anticipated per this perspective.

Add the fact that, the NYSE McClellan Oscillator is displaying but first signs of weakness coinciding with the market's advance since mid-December (notwithstanding more glaring weakness at present in contrast to this measure's position in October) and appearing in order are a few days more defending 2012's CME-driven surge out of the gate.

SPX 5-min

Some perspective here. Outside the first few minutes of trading in 2012 the S&P 500 has gone nowhere. Relatively speaking, this is about the best to be expected over the hours remaining before wave (2) of C completes and the lug nuts fall off the trans-Atlantic banking system.

Fast Money
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