Refining Physical Breakdown ~ The Risk Averse Alert

Thursday, April 05, 2012

Refining Physical Breakdown

Some interesting energy market developments. How much longer before shuttering of refineries is perceived a consequence of hyperinflationary bailout of hopelessly insolvent "assets" burdening the trans-Atlantic banking system? We're just not quite making this recognition yet...

Could not a state bank make idled refineries valuable public assets? While probably requiring an increase in state excise taxes to finance such acquisitions, states effectively could cap gasoline prices via supply their refineries more reliably provide. If today's unprecedented global imbalance upsetting both physical and financial economy ever is to be righted, stable energy prices will be prerequisite. So, if Delta Airlines can buy a refinery, then why not the state of Pennsylvania through its own bank? After all, banks providing a stable anchor on which economies can grow are sorely needed to counterbalance the asset-stripping behemoths whose collapse only the more appears inevitable with the physical economy's accelerating shutdown proceeding in lockstep with hyperinflationary overkill prescribed by central banks on both sides of the Atlantic.

Still, in the midst of accelerating breakdown of the physical economy the U.S. stock market soldiers on. Although technical weakness revealed under the covers is matched by disparities among indexes, there's enough reason to believe a hard turn south could be delayed, at least some days if not a few weeks. Some further indication of weakness still could develop — this while the market's levitation is sustained — before the lug nuts come off.


With the S&P 500 (above) still holding up relatively better than the NYSE Composite (below), confirmed is sense there's time remaining to levitate the market. Yet one first-sign of added weakness to precede the market's upcoming throttling might find leaders topping out earlier than laggards. Considering such prospect, then, the S&P 500 might sooner reach its peak. Thus, the labeling of wave b above could prove justified (a 3-3-5 flat developing in a simple-to-complex manner). Five waves presently forming wave c find technical justification for supposing their unfolding could continue, as both RSI and MACD remain on the positive side of their respective ranges, while recently preceding divergences in these measures have presaged only the mild consolidation of the past couple weeks.


Somewhat further along in its technical breakdown, the NYSE Composite Index nevertheless might be seen having more time remaining in forming its wave c and completing an a-b-c wave up from early-October 2011 bottom. In light of this any weakening of today's leaders thought possible once top is reached might prove rather subtle.

Obviously, the performance disparity between the S&P 500 and the NYSE Composite largely is driven by the manner in which each index is calculated. Still, its presence confirms everything revealed under the covers, as well as conclusion that, the stock market is firmly in the grips of weak hands whose continued survival depends on a technical trade whose indefinite perpetuation is a physical impossibility.

Fast Money
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