A Haunted House & Coffin Nails ~ The Risk Averse Alert

Monday, July 09, 2012

A Haunted House & Coffin Nails

The ghost town called the New York Stock Exchange is a haunted house of Head & Shoulders coffin nails...


Good lord, even one of the most rudimentary technical formations agrees. Evil spirits are lurking! Look at that thing. Head-and-shoulders tops everywhere.

The makings of a head-and-shoulders top are seen in formation of the left shoulder of the larger head-and-shoulders top unfolding since August 2009. There is a head-and-shoulders top capping the head last year. And again, another head-and-shoulders top marks this year's right shoulder peak (whose downside now is in progress).

Volume is textbook. That accompanying the right shoulder's upside is markedly diminished from that during the head's upside, this pretty much across-the-board, occurring in every top formation.

All the more do momentum observations made here late last year and earlier this year — these noting ominous differences in the market's recovery following its August 2011 throttling versus its recovery following the flash crash (May 6, 2010) and its aftermath — likewise substantiate qualitative matters that go toward confirming prospect that, a large head-and-shoulders top has been forming since approximately August 2009. To wit from a "God Save Our Sinking Ship" beginning of the right shoulder's formation (early-October 2011) — itself producing a negative momentum divergence — yet further, negative momentum divergence then registered as the right shoulder peaked earlier this year (this in relation to late-October 2011), while during the right shoulder's downside so far this year, momentum has degraded, then recovered, to a point where now the NYSE Composite Index appears in fine position for an imminent neckline penetration.

So the many, many fundamental and technical reasons to be extraordinarily bearish at this moment in history discover here yet another nail in the market's coffin. Correction. With so many head-and-shoulders tops appearing these past few years over ghost town U.S.A. (the NYSE), let's make that nails...

Fast Money
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