Transitioning to Expanded Physical Chaos ~ The Risk Averse Alert

Friday, September 14, 2012

Transitioning to Expanded Physical Chaos

There's no shortage of technical evidence suggesting the Fed's just ventured counter-balance to doomed banking system assets at grave risk of sinking all too likely will be but short time bought before promised action is forced into overdrive, Wiemar 1923. Through a tearing eye behind the present day's wink and a smile does technical evidence reveal a perceived change coming, this exposed in truth finding still fewer who with their wallets are buying into belief the efficacy of the Fed's new, open-ended "commitment" will be proven rewarding to equities. Chances are we are likely to be hearing growing concern about the Fed's increasing insolvency risk, as those not yet convinced find religion in an endless flood's destructive promise. Implicitly, this concern has been raised with today's Egan-Jones downgrade of U.S. Treasury debt.

The world as we have known it is being forced to change in ways yet unimaginable to most. The approaching, opening salvo of a dreadful normal still finds insiders freeing capital, much as the past few years, and yet also apparently well along in staking new claims in a promised central bank deluge. Such is the story of still diminishing volume. Here, the adage that, "Prices can fall of their own weight, but it takes buying to put them up" remains as relevant as ever. Wave c of (b) lower, targeting a decades-running, rising trend line very much remains on the radar.

Now, recent years' steady accumulation of physical claims on raw materials now seem a likely candidate to soon become a principal object of a new bubble driven to the heavens by the present day's accelerated version of the same old, same old central bank panic. A shakedown of weak hands via wave c of (b) down, itself, then should be seen serving notice wave (c) of B higher is at hand, this riding the same old, same old asset-backed, leveraged-enhanced euphoria and completing an a-b-c "zig-zag" up from March '09 bottom. How else will the banking system's solvency be faked but through some perversion of a dying status quo? Do not central banks reveal desperation in their venture to revive this? Food and energy inflation appear a likely means of gaining increasing cash flows needed to sustain added leverage required to keep Team Fraud's solvency dreams alive.

(All this, by the way, critically still needs an ever-greater flood of hedge-worthy credit securities: the lure of war and Treasury securities galore is no unlikely coincidence today's endless drumbeat. Thus, a frightful hit, both physically and financially, might serve to bring forth securities that are needed, while the sinking weight of wave c of (b) down upcoming might bring forth a stark, violent benchmark signaling profound changes ahead. Increasing upheaval across the globe—growing resentments among friend and foe alike— probably are a harbinger of things to come over the coming decade.)

Yet today's lender of last resort-fed bubble, too, now entering its desperation phase, most certainly will explode one day, just like all those preceding. Thus will be the moment the Fuehrer consolidates a global banking dictatorship with little resistance, paving the way for wave C down targeting major indexes to levels last seen in the 1987-1994 period and completing a large Elliott corrective wave forming since Y2k top.

Not much longer, then, will foresight likely be consumed with unrequited perception of change coming, as the Fed's physical effect, surely, will but further hasten the demise of a former status quo once backing what is now a forever lost confidence underpinning a still growing, and only but more wildly distorted credit bubble. A new dynamic surely is at hand in an age of open-ended panic.


Another variation on an a-b-c "zig-zag" up from early-October 2011 bottom. Here, a "rising wedge" is seen forming the zig-zag's "c" wave starting from late-November 2011 bottom, with its 3rd wave just completing. The CBOE Put/Call Ratio, as well as the NYSE Bullish Percent Index decidedly confirm this view. Yet like all other technical measures, though, these simultaneously present a mixed picture characterizing the moment, this in evidence revealing fading conviction is backing the market's continued levitation. We see this above via the S&P 500's momentum off its October 2011 bottom (bottom panel), as well as accompanying volume over the duration of the market's subsequent advance.

Per the latter, there has been a consistent pattern during advancing periods since early-October 2011. During each discrete advance over the interim diminishing volume has accompanied the greater bulk of the market's rise, only to spike when a peak was reached. Presently we see this occurring again, and this right as a dynamic line of long-established resistance is being met. Chances are the new Fed fix of endless hyperinflationary happiness more or less has run its course for the moment. Coming months should see trapped weak hands trimming stakes all across the spectrum in preparation for the sequence of events likely to mark the hyperinflationary blow out of the global physical economy.

Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!