Held Up By Facebook ~ The Risk Averse Alert

Friday, April 13, 2012

Held Up By Facebook

Diverging slightly from the view presented here yesterday, there's a couple reasons to think the market's projected sinking might be delayed about a month. First is Facebook's mid-May IPO. Second is a bullish consensus of only 28.1% among individual investors polled this week by the American Association of Individual Investors (while 41.6% of those polled are bearish).

Assuming yesterday's broad outlook proves the way forward, externalities potentially threatening Facebook's IPO seem more likely to be kept in check. In other words, with the market's counter-trend rally off March '09 bottom appearing far from over (notwithstanding significant weakness still in store) tangential confirmation of this outlook will have the Facebook IPO succeeding. Once this long-anticipated event is out of the way, market weakness founded on decidedly suspect technical underpinnings (born of hyperinflationary breakdown) then could develop and send major indexes into a tailspin.


So, given this slight tweak, the next few weeks could prove fairly range bound, during which time wave 4 of c of (b) of B should complete its formation, then be followed by wave 5 leading into Facebook's IPO. All manner of technical weakness presently suggesting wave c of (b) of B might have completed on April 1st could yet again prove but a foretaste of further technical weakness still to come as the market's levitation continues over the next month or so.

Confirmation that wave c of (b) of B is some weeks from completing should come next week with the market regaining its legs in a bid eventually to challenge its April 1st peak.

It is worth stressing that, the market's underlying technical weakness in all probability will not be forever defied. Yet, still, although weakness has been building for a long time, the market has remained buoyant. Given this dual reality, then, the view put forward yesterday is further substantiated. In other words, in spite of a severe bout of selling appearing in store and likely producing technical damage only the more revealing increasing underlying weakness, the market still might be able to recover once more.

Look for further development of this new view tomorrow (Saturday, April 14, 2012). Obviously, its possibility represents a significant turn from what to now has been supposed imminent prospect of a setback sinking major indexes to levels last seen in the 1987-1994 period. The case for this alternate view forward, indeed, is rather compelling. Notwithstanding its suggesting that, March '09 lows will hold up some years longer, though, basis for supposing a significant setback, first, near-term (culminating early summer 2012), then some years from now returning major indexes to levels last seen in the 1987-1994 period (minimally) remains entirely intact.

Fast Money
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