Absent Buying to Put Them Up ~ The Risk Averse Alert

Monday, August 06, 2012

Absent Buying to Put Them Up

Yes sir, the trans-Atlantic's too big to fail titans of tyranny had better keep Knight Capital living. High frequency trading is all these have to support their sliver of equity backing a mountain of insolvent "assets" on the books. Big shock there would be an LTCM-like scramble over the weekend to save the firm. The last thing confidence underlying a badly compromised financial system needs is its further decimation at the alter of yet another exposed vulnerability. Too bad the damage already is long overdone.

Now what the hopelessly insolvent so desperately need is liquidity to feed their HFT equity levitation machine, as the volume of shares exchanged on NYSE-listed issues today but further contracted. Try as untouchable perpetrators of criminal fraud might to coax a bid on garbage at the bottom of the capital structure using tried and true means run out of Chicago, this that their participation in other rumor mill facilitated frauds might be possible (see collapsing Spanish 2-year bond yields), nothing of any lasting value is being fostered, as technical underpinnings coinciding with the market's lift since early June continue to suggest stocks are living on borrowed time. Time bought pretending the current period's "rough patch" might be overcome is by all indications, as ever, appearing entirely for naught. This is as it should be, given an impossible fundamental backdrop invariably pointing the trans-Atlantic banking system toward its inevitable collapse.


Above is one possibility detailing by way of the Elliott Wave Principle a corrective wave thought forming since early June. Whether this view holds, one point of perspective is certain: it is taking incredible selling restraint to sustain the market's levitation. Again, this is utterly necessary in a market dominated by weak hands whose position is so badly compromised that, reduced capacity to expand equities stakes is only the more exposed a pointed fact of the present day's reality revealed via still ongoing criminal incidents left unchecked (these presumably being necessary to maintain the banking system's illusion of solvency).

$NYAD 10-day v 200-day MA
NYSE Advance-Decline Differential: 10-day vs. 200-day MA

Since mid-June fewer advancing NYSE issues on average have been instrumental in sustaining the market's levitation. So, the extent to which selling restraint is an integral component of the market's continued drift higher is graphically displayed via the NYSE Advance-Decline differential's downward trending 10-day moving average (blue line).

Much the same is seen via the differential's downward trending 200-day moving average since early 2010. Now, you might be inclined to think so what. Ever fewer advancing NYSE issues on average over the past 2+ years have had no bearing on the market's continued drift higher over the interim. However, you are well-reminded that, "Prices can fall of their own weight, but it takes buying to put them up."

Buying is an entirely different animal than short squeezes followed by selling restraint encouraged by ceaseless expectations for never ending lender of last resort largesse. This distinction is particularly pointed given abundant evidence that, so called "largesse" is not at all alleviating the trans-Atlantic banking system's stress. In fact it is only accentuating it. Look no further than a euro-zone periphery whose growing difficulty is but a smaller, more advanced reflection of grave troubles afflicting the banking system's core, the likes of which for the moment is transforming sovereign nations into gutless, captive whores to a shameless, criminal con not averse to destroying lives by the millions. And for what?

It takes buying to put them up, and this simply will not be forthcoming under the present state of affairs. Today's hopelessly insolvent once created such necessary, favorable conditions when the Fuehrer's imperial debt trap was being expanded far and wide. Now, however, the trap is being shut. Thus, there simply has not been, nor will there soon be, buying to put them up. Absent buying, then, the market is doomed to collapse.

Fast Money
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