Nasty Lives Just Around the Corner ~ The Risk Averse Alert

Thursday, February 02, 2012

Nasty Lives Just Around the Corner

For the first time in over a year an index price peak has been reached while both its relative strength and momentum coincidentally diverged...


Very subtle. Yet a sign of weakness nevertheless. Add this to the wealth of bearish underlying technical conditions detailed here of late, and the long weekend in Greece might cease with the financial hurricane long looming off the coast finally reaching shore.

Who knows, maybe the HMS Dauntless will "disappear," say, in the Bermuda Triangle. Not a long shot, really, as the City of London essentially announced today the illusion of its solvency cannot be sustained much past Spring, and the drive for expanding war is not unrelated, so this might be a good time, as well, to expect the unexpected.


For what it's worth there is a case to be made that, strong hands have been fairly aggressively hedging short equities positions over the past few months, meaning the plug could be pulled any minute now.

Aside from March '09 bottom (a time when the team really came together knowing what everyone had to do, including raise capital, and so the initial squeeze higher possibly was made sweeter via call options, an act which in light of things preceding and since cannot be perceived out of character, notwithstanding its illegitimacy in the spirit of free and fair markets), instances when the CBOE put/call ratio's momentum fell to a deep extreme, this coinciding with increase in call option activity hedging short equities stakes, the market soon afterward became vulnerable and succumbed. Red dots in the bottom, MACD panel are my points of reference.

All the more did the market fall once the put/call ratio's momentum turned positive. Itself now being in a position similar to late-April 2010, one rightly wonders, then, whether something nasty is just around the corner.

Fast Money
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