All Eyes on the Exits ~ The Risk Averse Alert

Thursday, January 19, 2012

All Eyes on the Exits

You know what they say: one man's trash is another man's treasure. And so it is with this market, as the NYSE's new 52-week high-low differential rather decidedly suggests (this over the past two years, as well as the past two weeks). Plainly, the future of hyperinflationary bailout is grim. This even for the likes of IBM whose Q4 2011 revenue is reported tonight coming in. Eventually there will be no more subcontractors for large, multi-national corporations to trim and reduce expenses, leaving in the balance physical breakdown induced by hyperinflationary pressure on input costs and promises of dozens more Kodaks entering chapter 11.

Of course, those whose livelihoods hang in the balance are bound to think otherwise until there's no choice but give in. These are marks for an approaching shakedown, apparently failing to fathom how so-called "regulators" are only further stacking the deck against their interests — weak hands whose supply stands to be swept away in a river of tears. The targets of distribution whose greater bulk ended many months ago now are better seen as kindling for the torching still to come. Trouble arriving in 2008: but a bomb hollowing a fire pit filled further with paper fuel perilously close to being totally engulfed. So many facets of systemic stress piling one upon the other for months on end entirely support this outlook.


Now, the tendency toward levitating the market in the face of fading momentum (bottom panel) has been the dominating characteristic of the so-called technical trade born of hyperinflationary bailout of insolvent credit securities over the past three years. The current iteration, however, finds coinciding relative strength (top panel) decidedly more strained. It is taking some time for relative strength to reach its upper extreme. Thus further exposed is a market whose interests are thought eying the exits with a panic-stricken sense of what's to come.

As ever has been the case since March '09 bottom, the market's lift since early-October is occurring in the midst of persistently fading volume. Yet selling restraint exercised by long weak hands is failing to incite a bid whose effect ramps relative strength in a more decided fashion similar to that prior to last year's top. Don't get me wrong. Were we in the midst of a sustained move higher (rather than a transitory, "corrective" lift, as is thought), the otherwise constructive balance between the buy- and sell-side displayed by relative strength's slow ascent would be a positive. However, in the grand scheme of a technical trade born of hyperinflationary bailout instead revealed here is apparent understanding of the undesirable effect of this policy. This understanding likewise is displayed via the NYSE's new 52-week high-low differential noted at the start. Subtle though these observations might seem, technical circumstance thus is seen supporting a view that, all eyes on the exits have never been more intense at any time over the past three years.

Fast Money
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