Signs Point to Modern Manson Family Market Slaying ~ The Risk Averse Alert

Friday, January 04, 2013

Signs Point to Modern Manson Family Market Slaying

Right on cue Goldman Sachs appears ready to do God's work, today warning clients hiding out in bond funds their portfolios could lose 25% or more in the period ahead. No doubt this warning is being given in obedience to the 11th commandment: "Thou shalt not fight the Fed." As I suggested yesterday, increasing dissension among Fed governors could be signalling a contractionary phase necessary to take the shine off a certain segment of wildly mis-priced garbage, thus paving the way for maintaining the delicate balance between consolidation of physical and financial assets, and the hyperinflationary wall of money needed to maintain appearances of the banking system's solvency, all this without causing an out-of-control spiral into Weimar-mania.

First came periphery euro-tomb sovereign debt, and now possibly entering the Weimar School slaughterhouse could be high-yield corporate debt. You know, it could be dissenters among Fed prisoners clearly see no possibility of Capo Confetti's employment targets ever being met. I know I don't, not even if the accelerating trend of discouraged job seekers dropping off the statistical roles continues.


So, what to make of capital gains taxes increasing as of the start of the New Year, and this as reason to buy like its early-October 2011? The weird thing is unlike every other instance when over the interim since March '09 the NYSE advance-decline differential spiked higher in a panicked fit, there actually was reason to panic. There had been a protracted price contraction preceding the panicked bid.

Are we to think bond investors fearing [purchasing power] marginalization at the alter of Capo Confetti's hyperinflationary happiness infinitely applied now are persuaded to risk their fortunes at the bottom of the capital structure? When margins are only the more sure to come under pressure and interest costs on an expanded debt burden only the more likely to grow richer? Well, criminal might be easy to cover when the DOJ is bought-and-paid-for, but who will mask insane? Cramer? I don't think so.

In other words let's defer to likelihood the more proactive among trapped weak hands are offloading to the clueless of their brethren who haven't seen a wall of liquidity they didn't like. Not that they're jumping out of their seats to snap up "bargains" driven higher by a broken price discovery mechanism, however, as still diminishing volume screams loud and clear.

Now, I did recently present a view via the NYSE Composite Index wherein an a-b-c "zig-zag" up from early-October 2011 bottom might be thought forming, where the middle, "b" wave was seen taking the form of a contracting triangle with an upward bias completing mid-November 2012. It could be January 2nd's NYSE advance-decline differential spike is confirming formation of that zig-zag's "c" wave.

Yet there's also possibility a "c" wave of a "b" wave up from mid-November 2012 (or even from early-June 2012) could be forming. This would mean a "c" wave down is near unfolding. As indicated recently, there's plenty of technical evidence supporting the likelihood the market is about to dive. Maybe, too, is this being signaled via the raw NYSE advance-decline differential data above.

Key in on the two periods I have highlighted. Now, these NYSE advance-decline differential spikes in fact occurred in the midst of a decided market downdraft, as I indicated above. Likewise, previously noted here, too, is how these spikes have signaled the market's imminent reversal higher. Yet notwithstanding this, in both instances noted above the market's downdraft continued prior to its reversal higher ensuing. In some similar fashion, then, could January 2nd's A-D spike be signaling the market's downdraft continuing, this forming a "c" wave of a "flat" unfolding from mid-September 2012 peak or possibly even mid-March 2012 peak.


But more evidence a broken price discovery mechanism is lighting up a diminishing portion of the trash heap weak hands are choking on. The above noted NYSE advance-decline differential's disparity really stands out here. Likewise is sight lent, too, to prospect a "c" wave down might be imminently unfolding, this completing an a-b-c corrective wave since March 2012.

And what's a bearish near-term forecast in the face of Capo Confetti's unprecedented largess "managed" by the firm doing God's work without some fitting mood music...

I don't know about you, but that song always makes me think of a mass murderer of yesteryear.

You know, one bad acid trip might have made the difference between the life Charles Manson will forever be known by and his becoming Fed chairman. Otherwise the only other difference distinguishing him from Bernanke is his courage (notwithstanding the insanity of it) to tattoo on the center of his forehead the symbol of a harmonious conviction shared with the Fed chairman. Apparently Satan works in mysterious ways, too...

Word on the Street
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