The Garage Sale Market Is Nearing Its End ~ The Risk Averse Alert

Wednesday, February 20, 2013

The Garage Sale Market Is Nearing Its End

Whether the Fed slows or accelerates the rate at which it moves further into insolvency via QE is not the issue everyone, it seems, wishes to pretend it is. Their concern rather is with the currency in which their transactions are denominated. If the dollar joins the Japanese yen, and now the British pound, guess where interests rates have to go? To the moon, Alice.

Today's accelerating currency dilemma certainly suggests financial war simply is unavoidable at this point. The New York-London Axis of Fraud extortion of euro-tomb member states for the sake of promoting currency flight in support of the dollar evidently has hit a wall. I understand China has played some part in this by supporting EMU periphery sovereign debt. This would go some way, then, to explain Japan's affront—likely Axis of Fraud coerced—challenging China's export market competitiveness.

Yet sell the yen, buy the dollar apparently isn't enough. Now the British, too, evidently must supplement this effort to keep the dollar from cratering. Violence imposed through austerity, such as the U.K. already has coldly forced upon its subjects to sustain the heartbeat of the great Ponzi scheme called the lifeblood of the British economy, is sure now only to intensify. Not that the Brits care one wit about this. Yet insist upon sharing the pain is Britain's way when the rotten things she creates come uncaged. Isn't that right Herr Hitler? At some point she'll have to raise rates to defend the pound and what will Bubble Boy Ben do then?

There certainly are no shortage of traumatic events that could sweep upon the scene seemingly from out of nowhere and precipitate panic virtually overnight. Instability but growing everywhere we look is dousing the banking system's mountainous pile of Ponzi paper with gasoline. Just one spark and the whole thing goes kaboom. Likewise, we are not alone appreciating this risk, as I said yesterday and many times before, too. Thus, we might better anticipate the market's initial turn down from its ultimate peak to be ten times worse than today. Until this fast approaching moment, we probably can expect hopelessly bankrupt wards of the state to milk every last sucker for everything they've got while these still blindly believe the state has things under control. Oh boy, won't everyone be surprised when they learn the Fed has run out of weapons.

Above is a slight variation on an Elliott wave-based view presented here recently, and it is suggesting the market's counter-trend rally off March '09 bottom could be very near completing. We should expect both RSI (top panel) and MACD (bottom) to register during formation of wave 4 of (c) readings that are worse than those respectively registered during formation of wave 2 of (c).

Just to restate my Elliott wave view, awaiting completion is the second a-b-c of an a-b-c-x-a-b-c "complex" corrective wave that is taking the form of a "double zig-zag" off March '09 bottom. This is slated to complete wave B of a simple a-b-c corrective wave that has been forming in the NYSE Composite index since October 2007.

I have already pointed out the market's incredibly weak underlying technical state revealed by a notably muted NYSE advance-decline differential accompanying the market's advance over the greater duration of this year's advance. This condition, indeed, persisted right up to the NYSE Composite's assumed peak of wave 3 of (c). What a mess—indeed, a disaster in the making, objectively speaking.

It's worth noting here, too, the prospective Elliott wave count presented above is confirmed by the NYSE advance-decline differential whose best reading so far since mid-November 2012 bottom (when wave (c) began its formation) came early in the formation of wave 3 of (c) at the start of this year (indeed, on the first trading day of 2013). Just what a garbage heap we're dealing with here—just how contrived has been the market's subsequent move higher—likewise is objectively displayed by the NYSE advance-decline differential's subsequent behavior. As I said above, when this thing is ready to blow even the initial turn down could be just spectacular, dumbfounding every idiot (and future McDonalds manager) who has regaled us with their mindless, empirical observations claiming stocks are "cheap." So is everything at a garage sale. And you know where things go when they aren't sold once the garage sale is over? Same place stocks are going: in the garbage.

Word on the Street
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