When Garbage Stinks, Take It Out ~ The Risk Averse Alert

Friday, February 03, 2012

When Garbage Stinks, Take It Out

These are days made to recall the sordid details of Nazi Germany's invasion of Poland. A banking system collapse of historic proportions looms, and the only way to forestall this is stuffing the insolvent corpses of Ponzi finance with sovereign debt, tying this ever more tightly to its respective tax base, even coercing submission if need be. Thus, a dirty trick sowing seeds to be grown into a great sovereign harvest could be cultivated in pursuit of a vile, violent cause whose details are a work-in-progress in official circles where a tone deaf, uncritical media brings a free pass when a free press might prove too disruptive to seditious intrigues its ownership condones.

Deleveraging? That would be sane and the ECB, the Fed and the U.S. Treasury will have none of it. This much is plain. Still, burden placed on lenders of last resort, today and tomorrow, one day must be swept away. Yet, too, only along with the republic it seems. Sovereign destruction, not deleveraging, rather appears the larger objective every element of Team Fraud's apparatus faithfully serves (while each of these, themselves, likewise are no less expendable).

In all of American history there probably never has been a time when the imperative to resist the drive toward war has been more critical to the nation's survival, with insistence instead directed toward investment in an economic platform worthy of the 21st century (nuclear power) rather than the 12th (windmills). Let's face facts. A money system whose failure would create such a dire moment of consequence as this, indeed, is hopelessly bankrupt. For good reason, then, does the technical trade of the past three years not transform into something portending long-lasting advance in the stock market.

Yet could an extended lift — a "blow off" — rapidly develop before at last giving way to collapse? Doug Noland raised this idea tonight and there's enough reason not to discount the possibility. Yet although seeming defiance of weak technical underpinnings does not more greatly insure the same continuing, today's climate — one clearly dominated by weak hands — still might make a momentary "blow off" event possible.


To my astonishment the NASDAQ Composite has become the first major index to push into nominal new high ground, post-March '09 bottom. Yet judging from the vacillations of both its relative strength (top panel) and momentum (bottom) over the past three years, how much higher might any prospective "blow off" carry the NASDAQ Composite over days ahead? A more convincing case rather might claim NASDAQ's immediate upside appears fairly limited.

The bigger question now is whether a well-contained, underlying technical weakness might develop over weeks ahead as the market advances higher, this in keeping with circumstance demonstrated over the past few years (I have noted this via green lines drawn on the bottom panel showing prior iterations of fading momentum in the face of a persistently rising NASDAQ Composite index).

How is one anything but dubious about such prospect, though? We are going on a couple years now where each new drive higher sustaining the market's levitation is accompanied with a scream shouting, "Show me the money!" This, of course, is evidenced via persistently diminishing volume. Again, but the face of a technical trade that, more or less alone has been holding up the market these past few years. Obviously this anomaly will persist until a crush for capital again brings the garbage to fall of its own weight.

$NAAD cumulative

And lord knows, there is no shortage of trash needing to be taken out.

Now, it is true that, the Elliott wave count applied to the NASDAQ Composite is different than that applied to other major indexes. It has been this way since Y2k. Yet what clue NASDAQ's move into new high ground, post-March '09 bottom, delivers to clarify Elliott wave counts across-the-board is uncertain at the moment. At the very minimum a case for claiming that, still forming is wave B of an a-b-c down from 2007 peak is raised by NASDAQ today.

Suffice it for now that, presently unfolding across other major indexes could be an a-b-c wave down from least year's peak. This follows on an a-b-c wave up from March '09 bottom, which, itself, formed wave (a) of B. Thus, wave (b) of B presently could be unfolding — specifically, wave b of (b) of B.

Of course, wave B is the middle wave of an a-b-c wave down from the market's late-2007 peak — a point of reference worth noting here in the midst of a herculean effort being made to disguise significant downside yet to develop in completion of wave B, itself preceding wave C portending a vicious decline to follow, carrying major indexes to levels last seen in the 1987-1994 period.

Likewise, as mentioned in passing a couple weeks back, there are other wave count alternatives that potentially could be assigned to the market's counter-trend rally off March '09 bottom. Specifically, an a-b-c-x-a-b-c, "double zig-zag" variety of Elliott corrective wave might form across the board. I still think this prospect the least likely, though, as the big board's lag remains notable.

Fast Money
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