Dire Warning Under Cover ~ The Risk Averse Alert

Wednesday, March 28, 2012

Dire Warning Under Cover

By some measures it looks a bit like late-April 2010...

$NYAD 10-day v 200-day

This is the 10-day moving average of the NYSE advance-decline differential (blue line) versus the same measure's 200-day moving average (red line). By both measures the market presently is seen having weaker underpinnings than in April 2010, yet relative to its position back then the NYSE Composite index today trades higher.

So, given ample technical evidence long indicating a hard turn south is at increasing risk of developing, here we have indication a sharp reversal could come at any minute.

Still, the art of levitating garbage on the back of a diminishing pack of darlings being the well-established result of a hyperinflation-induced technical trade, how many days more this could persist is anyone's guess really. Judging by this year's levitation whose tendency has kept the above measure likewise levitated (notwithstanding its persistent divergence as the market has moved higher), there's just no telling when increasing underlying technical weakness will win the day and subsequently sink the market. Yet by the above measure, too, there's reason to fear the moment of truth could be at hand.

Fast Money
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