The Risk Averse Alert

Maybe, then, the real issue is the fact the EMU is unsalvageable. There simply can be no serious effort to save it, as capital backing the European banking system's piece of Adam Smith's Leveraged Ponzi Scheme is saddled with confidence issues born of an unrepaired, fraud-riddled credit system whose virtually unregulated recklessness over decades wrought this mess in the first place. Indeed, were there any serious intention to sustain the euro, then aggressive prosecution of mortgage-backed securities fraud, say, might have been a lot more politically fashionable these past few years. That such otherwise constructive action likely would prove a catch-22 to a highly leveraged banking system but reveals the system in fact is unsustainable. Indeed, judging by the rate at which the euro-zone periphery is collapsing, this conclusion is fast becoming common knowledge.

So, the real war playing out in Europe right now rather is better seen against fantasy debt claims (particularly the mountain amassed subsequent to Greenspan's 1996 "irrational exuberance" warning, the likes of which backs the euro to the effect of more or less insuring a dubious piece of scrip is doomed to become one giant swindle) and in the cross hairs are dreamers calling for yet more hyperinflation to make these [illegitimate] claims appear real. Contrarily, increasing calls for restoration of Glass-Steagall coming in the wake of FDIC-insured JPM's fall from the fee gravy train running through the OTC derivatives market in fact suggests awareness of our frightfully vulnerable reality [lawfully] is becoming acute.

All told, trillions pledged in bailout are proving for naught. Confidence remains shot. So, there should be no doubt "look out below" is not the scream of a deranged psychotic...




A calamitous, 5-wave decline forming the first wave (i.e. wave a) of an a-b-c "zig zag" down — technically rationalized by way of the Elliott Wave Principle in "Sell the Pops to 2021" — could develop along lines indicated above, and even blow out March '09 low before November's U.S. elections. Indeed, should the EMU collapse (as well as the securities-based Ponzi scheme on which it is built), long-lasting aftereffects could translate into a prolonged period during which March '09 levels could become wishfully prized by those holding out for the market to recover, this while it persistently sinks gradually lower over the years following its upcoming gassing (going into, say, 2021).

At this early hour, however, probably the best place to focus is on the first wave down, because even a 38.2% drop from May 1st peak could find the market still in a position to recover...




The main takeaway above is that, the counter-trend rally off March '09 bottom (now thought to be forming wave x of an a-b-c-x-a-b-c complex Elliott corrective wave unfolding since Y2k) could still have legs if, somehow, the euro-zone is "saved." Let's just say I am not optimistic.

In light of this alternate possibility, though, the line of support joining June 2010 and October 2011 bottoms might prove analytically valuable. Rather, once this line becomes "resistance" will its value be proven. Should resistance hold, then elevated will be risk the market is in the midst of a 5-wave collapse, as depicted in the first $SPX weekly chart above.

Germany will be worth watching here, particularly for the sake of confirming its intention to wreck the EMU. Pressure on Germany to sign on to the euro bond hyperinflationary scheme no doubt will intensify as the European banking system craters over days and weeks ahead. Being that Germany, too, is entering a national election season, Team Fraud really has its work cut out for it convincing the German political establishment national suicide at the alter of the bankrupt casino that is the trans-Atlantic banking system it would commit backing euro bonds is in the German national interest. I cannot help but think an hour marking increase in brutality aiming to impose a policy direction virtually codifying sacrifice and want is arrived.