There is no discussion of the endgame wherein the physical economy is sure to grind to a standstill on account of gutted margins, whose consequence eventually will expose the financial economy to a revulsion making 2008 look like a church picnic. Meanwhile the feckless Fed busies itself conjuring new sophistries pretending its intentions are honorable, while its political motives are entirely overlooked as though its "independence" were doubtlessly unimpeachable. Yet you can be sure of this: today's additional $45 billion a month banking system subsidy could not wait until January. Not with capital gains taxes poised to increase back up to 20% from today's 15% should the Tax Relief Act of 2010 not be extended before Congress adjourns for the holiday next Friday.
So there you have it. Whether the market's throttling occurs before the end of the year—whether a run on bonds pressuring interest rates higher immediately commences—or is delayed until January probably largely depends on whether capital gains tax rates are set to irrevocably increase. As nothing is likely to be resolved before the 113th Congress is seated in January, a "better safe than sorry" sentiment very well could sweep over the market over coming days. (As far as an agreement on cutting the federal budget by $1.2 trillion over the next ten years being sealed before the 112th Congress adjourns, this is motivated by the Budget Control Act of 2011—the law serving the "Satan sandwich"—that the federal debt ceiling be automatically raised by $1.2 trillion without any further haggling. Sans this agreement, the debt ceiling will come into play again in February.)
Not once today—not once!—did the NYSE's advance-decline differential exceed yesterday's best. This is despite the NYSE Composite Index yet again gapping higher at the open, as well as more than doubling its gain following Capo Confetti's double down on the banking system's monthly subsidy. Furthermore, all of 20 more NYSE-listed issues were added to the new 52-week high-low differential today versus yesterday. This measure still is well-short of where it stood mid-October and a mile-and-a-half from its mid-September peak.
Seeing how sickly things are under the covers, I'm ready to name the NYSE "The New NASDAQ." We got the pump, now bring on the dump...
Still waiting for the 10-day moving average of the NYSE advance-decline differential to fall decidedly below its 200-day moving average. Once this occurs an avalanche of selling could quickly materialize, even before the end of the year. A negative reversal seeing major indexes closing 2012 lower than 2011 still remains a credible possibility.
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