United Brethren of Weak Hands ~ The Risk Averse Alert

Wednesday, January 02, 2013

United Brethren of Weak Hands

Before thinking Uncle Sam would be sending the trans-Atlantic banking system over the fiscal cliff, as appeared likely late last week, we probably should have seen coming the increasing likelihood the president might play his trusty Club Senate card to bash into submission those Austrian fascists masquerading as Republicans who make up the majority in the House of Representatives. A variation of this procedural tactic certainly worked like a charm when healthcare reform was rammed through Congress a few years back.

Now despite the sequestration component of the fiscal cliff being removed from the deal worked out in the Senate early in the morning on New Years Day causing considerable consternation among House Republicans, their approximate 2-1 margin voting against the bill was not enough to prevent the bill's passage in the House last night. We have all been served a valuable lesson in political maneuvering.

Apparently, the president's posturing for a "grand bargain" involving deep cuts in federal spending has been so much hot air. In hand now as a result of the fiscal cliff fiasco is tax policy more or less in line with what the president has been advocating since running for office. Very slick.

With sequestration mandated by the Budget Control Act of 2011 delayed two months it will be interesting to see what further maneuvering develops as the debt ceiling is approached. As there is no credible threat of the U.S. Treasury defaulting on its obligations—this per the 14th amendment to the U.S. Constitution—and as federal debt service costs positively must continue their decades-running contraction relative to overall debt outstanding—this lest a hopelessly insolvent banking system be thrown into profound crisis—the manner in which Congress moves to ensure the U.S. Treasury's solvency could prove a harbinger of an anticipated, decisive break from the post-2008 parallel to the Japanese experience of the past 20+ years.

Technically speaking, a fairly disruptive political climate upsetting fortunes at the bottom rung of the capital structure rather appears imminently in store in fact...

$NYAD 10-day vs. 200-day

Already having been anticipating follow-through to the year-end fake icing an entire year whose technical underpinnings were, hands down, predominantly fake (or, more aptly, reflective of trapped weak hands desperately hanging on for dear life), and this prospectively setting up similarly to the period leading up to the May 6, 2010 flash crash, we now find fundamental basis for profound financial disruption in the possibility of political maneuvering whose consequence could bring dozens of House Republicans to co-sponsor H.R. 1489—the bill to reinstate Glass-Steagall—and so join dozens of House Democrats already co-sponsoring this critical piece of legislation. Keep a close eye on this one, as Rep. Walter Jones (R-NC) is H.R. 1489's original co-sponsor, along with Rep. Marcy Kaptur (D-OH). Jones has become an outspoken critic of the friend of al Qaeda in the White House whose imperial machinations vis-a-vis Syria are rankling House members in no mood for a repeat of the administration's unconstitutional Libya fiasco. Among these is Rep. Charlie Rangel (D-NY) whose purging from the House Ways and Means Committee in a political operation run by friends of Attilos further raises the prospect of an epic political battle promptly unfolding.

We would be remiss not to technically substantiate "fake" as reflected by the fast-fading and barely positive 200-day moving average of the NYSE Advance-Decline differential above (red line). The reality of an underlying sickness like that reflected by Dr. Copper simply cannot be ignored. Those who wish to believe "price tells all" soon could be choking on these words, as the reason why negative price action soon might come to dominate is very well-spoken above.


Yeah, so much for optimism over a fiscal cliff "deal." The CBOE Put/Call Ratio's positively trending momentum (bottom panel) positively bodes ill for the market.


Ditto the Volatility Index.

Quite the collapse in premiums today! Although not directly related, the NASDAQ Composite's 5% rise over the past two days in a rising tax rate environment (bottom line) rather suggests suckers are all in now. There is just nowhere but up for this measure to go. Likewise seeing VIX's momentum decidedly positive here, thus are back-to-back days producing 90% up volume in all probability representing reality that, at best, should the market come under pressure, suckers will be compelled to double down at precisely the wrong moment, much as they have been compelled to jump in with both feet.

90% up volume going into a technology sector whose upside participation over the interim since March '09 bottom has been positively abysmal (as evidenced by NASDAQ's cumulative advance-decline line), and likewise lighting up the most hopelessly insolvent of corporate enterprises (Banks, Financials and Broker/Dealers) is no sign of market strength. Rather this is confirmation trapped weak hands have offloaded some small portion of their wildly over-priced garbage to the most frightfully clueless among their brethren of weak hands.

Word on the Street
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