Still Garbage All the Same ~ The Risk Averse Alert

Tuesday, September 18, 2012

Still Garbage All the Same

Closer inspection of raw NYSE advance-decline data underlying the McClellan Oscillator presented yesterday certainly substantiates that "something's not right" character typical of Elliott "b" waves. Specifically, wave b of (b) thought forming since early October 2011 finds coincident NYSE advance-decline readings confirming that, fading conviction in fact is underlying the market's continued levitation.

We see this going into March 2012 peak, as well as over the duration of the market's advance since late July. Thus, massive short squeezes of October 2011 and June 2012 are better seen for what they are: trapped weak hands exploiting well-established means for buying time and slowly dripping their garbage to a segment of vested interests (mutual fund managers, pension managers, etc.) whose imperative is to put cash to work. From now until completion of an a-b-c Elliott "zig-zag" up from March '09 bottom occurring sometime over the next few years we are likely to see this same dynamic play out again and again.

Just to confirm we are dealing with garbage slowly but surely being distributed from weak hands to suckers (be they witting or just mandated via a fund prospectus as such), the market's ever so slight pullback of the past couple days should not be having such a profound impact on those issues leading the market's levitation. Were stocks instead being accumulated, it's unlikely those issues leading the market's advance would so decidedly become soft in unison.

So, underlying the market's continued levitation is the same old, same old contrived rally founded on weak hands holding onto their garbage for dear life, mindful how any serious break in the market might sooner bring their literal extinction.Thus, when wave c of (b) unfolds sometime over coming months and sinks major indexes below respective 2011 lows, we should be prepared for a "God, save our sinking ship" short squeeze making last October's look like child's play.

Fast Money
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