Two Market Leaders Poised for a Death Cross ~ The Risk Averse Alert

Monday, December 10, 2012

Two Market Leaders Poised for a Death Cross

Does not the lesson of Spain this year suggest that, if central banks are unable/unwilling to buy up sovereign debt, then investors necessarily must step up if a systemically threatening panic is to be avoided? Call it a hunch, but once Operation Twist expires at the end of the month the Fed really has no reason to expand its Treasury securities holdings in addition to its $40 billion monthly subsidy bailing out the banking system's insolvent mortgage backed securities. Art Cashin more or less hinted so much being a concern on the mind of investors today.

Likewise, the Fed's "good cop, bad cop" routine for the moment might be signaling the central bank's intention is to force the market to increase its share of the U.S. Treasury's burden. Having admitted, too, there's only so much the Fed can do, Capo Confetti evidently fathoms the hyperinflationary fire he has been stoking. So, with their effort to resurrect the shadow banking system's credit creating machine equipped with an infinite multiplier still defying market confidence, the continued necessity to buy more time could be pressing the Fed into a game of chicken forcing the market to scrape up capital needed to support the trans-Atlantic banking system's core.

As I have said before, there simply is no middle ground. It's hyperinflate or die for trapped lenders of last resort. So, the imminent threat of a hyperinflationary blowout might leave the Fed with no other choice than risk death in the expectation those most vulnerable will act to save themselves for as long as possible. It's probably a safe bet, too, that with the banking system's reserves through the roof and no one in the mood to point out the emperor has no clothes (i.e. the true value of the banking system's so called "assets," which in fact already are indicted "overvalued" by representative stock prices stubbornly failing to recognize the claimed "book value" of many a hopelessly insolvent albatross), there's time to pursue that fascist imperial agenda likely to make Kudlow one happy man (albeit a lot poorer) in a regime whose agenda in both the public and private sectors will implore each and all to cut, cut, cut to the bone.

So, I agree with Art Cashin. Wednesday's Fed powwow could prove a letdown for bailout junkies.


And wouldn't you know it. Another market leader is about to make its "death cross." Both the NASDAQ Composite's RSI (top panel) and MACD (bottom) are just perfectly poised for pending heartbreak, too.

The total fake that has been 2012 finds the moment quite ripe for exposing a much less generous truth than has been spun this year in many a fanciful rumor supposing lenders of last resort are anything but trapped fighting a losing battle...

Word on the Street
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