The Pump at the Dump ~ The Risk Averse Alert

Tuesday, February 07, 2012

The Pump at the Dump

If sometime over weeks ahead a blow-off top develops, NASDAQ-listed issues joining along likely will be from among a shrinking list of candidates...


Bear in mind NASDAQ's Bullish Percent Index of 61.82% compares to NYSE's 75.65%, and yet NASDAQ's Composite outpaces the NYSE's, having reached new high ground, post-March '09 bottom. Considered separately and together a mark of undue hope gains physical evidence in increasing restraint exercised toward the growing pack of dogs lagging the leaders.

You really get a feel for the smokescreen put up these past couple years, both in comparisons across exchanges, as well as via technical divergences coinciding with successive NASDAQ peaks...


The period following collapse of Adam Smith's Leveraged Ponzi Scheme has been all about buying time whose clock is set to expire the minute a weak link in a game of extortion breaks. Could be Greece following a forever long weekend. Could be mortgage-backed securities investors following another backdoor bank bailout masquerading as fraud settlement. Could be a geo-political head fake venturing hysteria for war.

Bottom line all is not well, no matter how good folks are at faking it.

Per prospect of any upcoming blow-off top carrying the NASDAQ Composite still higher, its probability will be thought increased should overhead resistance be breached...

NASDAQ Composite monthly

Just like the Dow Jones Industrials Average, the NASDAQ Composite's long-term relative strength remains positive, and this despite weakening (apparently proceeding to turning over). So, things could go either way at this point.

Yet seeing relative strength depths reached 2008-2009 being immediately followed by strength absent any indication of trepidation (such as would pin RSI below 50) is but another revelation of weak hands in command. Strong hands would not so decidedly tip their hand following such weakness as has developed over the past 10+ years: weakness recently only the more confirmed (2008). It is unclear, though, whether weak hands in command have shot their wad, and so, are incapable of mounting a blow-off top.

Fast Money
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