Levitating Trash ~ The Risk Averse Alert

Friday, January 20, 2012

Levitating Trash

How ever will Team Fraud keep its garbage afloat when the underlying dynamics sustaining its levitation are so frightfully poor?

$NYAD cumulative

You would think by now the NYSE Composite Index would be printing somewhere in the vicinity of 15,000 judging by how far beyond its 2007 peak is the NYSE cumulative advance-decline line. It really just goes to show you that, a lot of weak hands are required to absorb the supply of relatively fewer strong hands whose shares in fact largely have been distributed (as was noted here more than six months ago).

Depressed price performance in the face of unfettered long interest is only the more conspicuous in light of the fact that, the market's advance since March '09 bottom increasingly saw selling diminish, this revealed by persistently contracting volume over the interim. Therein lies stark proof stocks rest in weak hands. Were truth otherwise, then the print on the NYSE Composite Index would be well above its 2007 peak and the volume of shares exchanged would be swelling, not shrinking.

Some are fond of saying price doesn't lie. Yet the truth price tells requires a sense of context in which it speaks. Today's read on price comes in a context all too likely to make its admirers weep.

Just how perilous is the market's current position is further revealed by the leper colony otherwise known as NASDAQ...

$NAAD cumulative

Seriously? A NASDAQ Composite falling to 300 still is very much in the cards. The handful of issues lifting this index soon enough should go the way of Netflix and the dozens of other pump and dump plays this exchange is famous for.

Were the likelihood otherwise, then there would be evidence a widening swath of NASDAQ-listed issues are being accumulated. There is nothing of the sort going on here. Indeed, selling restraint typical of weak hands is the dominant force levitating the NASDAQ Composite Index. When time comes to pull the plug (and it is fast approaching) the shock and awe likely to hit NASDAQ stands to make many a Tory warmonger blush.

Taken together, the above two measures reveal a bit more about the character of the technical trade driving the market since March '09 bottom. All told, there is nothing to be bullish about, that's for sure.

Fast Money
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