Shakedown Awareness Day ~ The Risk Averse Alert

Tuesday, January 17, 2012

Shakedown Awareness Day

Yahoo!s talking Yang ignore at their own peril how Greece is the way. Not missing a beat at the heart of today's fantasy is belief a Greek default will be orderly. It better be, because Germany has reiterated its hardline position on [under-funded] sovereign bailout facilities.

The market's true disposition lies exposed in sentiment presented for public consumption. Were an "orderly" default on Greek sovereign debt somehow possible and the EMU's dissolution not threatened, then the talk of the town on what's going down in Greece would be anything but sanguine. That's how a climate conducive to stocks being transferred from weak hands to strong would be cultivated, and this at increasingly attractive prices. This, a subtle, yet relevant, manifestation of contrarian thinking provides a clue to the market's true position. Taken presently with declining 200-day moving averages, reports pushing belief in an orderly Greek default, indeed, evidence such complacency as is fitting a moment otherwise confirmed perilous by a wealth of technical measures.

There's no doubt persistently declining volume since March '09 bottom reveals stocks in weak hands. So, then, when was the shakedown? It was not in August, as something less than panic-stricken NYSE volume revealed stocks then simply falling of their own weight. Contrarily, if strong hands already are positioned to drive the market higher, then could NYSE volume continue diminishing with every manifestation of the market's levitation? HINT: strong hands do not risk fortunes in illiquid markets (relatively speaking), and a market rising on diminishing volume is at risk of becoming just that.

The shakedown of weak hands is a coming event slated to smash major indexes back to levels last seen in the 1987-1994 period. Just how close the market could be to a terrible fall is only further highlighted by Europe's roadblocks ahead. Do let the increasingly dire position of European banks sink in. If any of it were bullish, then my outlook would not be so far detached from the frightfully complacent consensus a successfully deceived public otherwise prominently displays.

Fast Money
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