Recipe for Facebook IPO Fail ~ The Risk Averse Alert

Tuesday, January 31, 2012

Recipe for Facebook IPO Fail

Whether through continued, concerted escalation of geo-political tensions whose intent ventures to engulf the Middle East in war, or increased legal threat implicating select Team Fraud players in mortgage-related misdeeds, a relentless drive toward conditions conducive to chaos is unmistakable these days. Were such matters of disturbing contemporary circumstance rightly perceived insane attempts at controlling the disintegration of Team Fraud's financial, economic and political architecture, then just how fragile is the facade masking a hopelessly insolvent banking system lies exposed for anyone with eyes to see.

Most telling is a growing lack of willingness among certain key players to go along with the various promoted agendas risking chaos. Per the Middle East, there's Russia and China resisting regime change a la Libya. Per mortgage fraud there's Beau Biden (and other state Attorneys General) fighting for comprehensive discovery of crimes committed in creation of the largest financial bubble in U.S. history. And let's not forget Germany whose hardline stance toward the EMU threatens an extinction event. Never shy to demonstrate its mastery in the art of lucid dreaming, though, Bloomberg reports Portugal a sound credit (notwithstanding its collapsing debt trading on secondary markets).

So, there's no mystery behind the sudden rush to bring Facebook's IPO to market. Yet I am probably quite alone in thinking the blessed event might not even get off the ground.


In the NYSE Composite index we have the leading laggard of all the majors. This is worth pointing out because the excitement today about the S&P 500's "Golden Cross" needs tempering. This follows on the Dow Jones Industrials achieving the same feat exactly one month ago. As you can see, though, the broad market has yet to accomplish this (notwithstanding solid internals — i.e. advances-declines, new 52-week highs-lows). Likewise has the NASDAQ Composite yet to register a golden cross.

Most interesting, though, is the two major indexes now celebrating a "Golden Cross" have seen their respective momentum most negatively affected this week (see MACD, bottom panel). The market's advance since mid-December might be broadening, but it is doing so in a climate finding leaders being trimmed. This is not necessarily foreboding, yet added to volume making fairly plain the fact that, stocks are not being accumulated by strong hands, the hit on leadership offers further evidence a turn lower is drawing near.

Which makes last year's head and shoulders neckline a potential line of resistance to any further advance.

Two things I would like to add about that head and shoulders. First, its minimal objective was met during August's undressing, and second, distribution its appearance suggests remains noteworthy, even following the market's recovery since October. The broad market's lag in the face of this recovery simply the more reveals an advance whose legs are weak (since we're talking body parts).

If you missed John Bollinger's remarks on the "Golden Cross," as well as the "January Effect," here's the clip:

Fast Money
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