Someone Wants Out Overwhelms Everyone All In ~ The Risk Averse Alert

Wednesday, June 12, 2013

Someone Wants Out Overwhelms Everyone All In

TO READERS WITH DEPOSITS IN ANY U.S. BANK: What task must the U.S. Treasury Secretary lead, that he prove himself a leading American beyond reproach accused a Venetian mole? Simple! Guarantee not one dime of deposits are lost in any future bank recapitalization. The U.S. Treasury Secretary's sovereign power effectively can assure this guarantee likewise is easy to honor. It's backdoor Glass-Steagall a la Elizabeth Warren's S.987 gone 21st century American System, national bank and all rising to the present day's challenge to accomplish more physical work than we can shake a stick at going places no man has ever gone. El-Erian is wrong on one account. The Fed hasn't tried everything. Thus a mere foot in the door is Elizabeth Warren's bill seeking credit through the Fed's discount window to finance just one year of the Department of Education's Stafford loans. Yet that bill's passage represents one small step toward a critical leap, indeed, abundantly needed if the Fed and every other central bank on the planet are assuredly to be kept from insolvency. Warren's bill deserves unequivocal support, because if you can't put a foot in the door, you ain't goin' in. Yet go in we must if the devil is to be subdued. The European periphery's misery must be reversed lest it becomes ours, as well. (This is our fate, too, if today's hyperinflationary breakdown is left unchecked.) So, the credit creating power of the Fed must be applied to constructing an anchor in a physical economy producing a greater density of power operating at efficiencies like never before. We have the technology (and the guns to secure it). We need only apply its leap with an eye toward revolutionizing assured growth of the economy's revenue base, both the private and public sectors. The Fed's power to create credit must be ever increasingly applied toward this end: increasing the productive capacity of an evermore well-endowed—energy rich—labor force. Only then will today's financial claims have any hope of being honored someday to the effect of possessing something of real purchasing power. Without this measure—a purposeful act made uniquely possible by the American Revolution and its culminating U.S. Constitution—today otherwise remains as it was in 2008: a Ponzi scheme doomed to collapse under the weight of an unmanageable, unsustainable—illegitimate—debt.

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Today brought evidence we should expect weakness of the impending kind. Before we get to that, though, let's look a little further ahead...

If mid-November 2012 RSI and MACD lows are taken out over coming weeks, then there's a greater chance last month's S&P 500 peak will not be exceeded again in 2013. (See green line drawn in upper and lower panels)

Yet if the market decidedly turns higher prior to RSI and MACD falling below respective November 2012 lows, we more likely will see the S&P 500 rocket higher in a way similar to (and likely harmonious with) its advances during the first half of September 2012, and then again from mid-April to May peak. Indeed, technical tendencies accompanying the S&P 500's advance since early-June 2012 bottom leave us to conclude this alternative no slight probability in fact (see red lines drawn in upper and lower panels).

Either way the wind blows over the coming course of the current, unfinished pullback, the market from an Elliott perspective is seen topping here, and quite possibly ending its advance off March '09 bottom, as well. For all we know May's peak could mark top. Indeed, were the S&P to fall below its mid-September 2012 peak, then "May 2013 top" might become as commonly referenced here as March 2009 bottom has been.

Here and now, momentum's strong fade (see bottom panel) is made only the more fearsome by the fact its same fade vis-a-vis the NYSE Composite index has taken that index's momentum negative, while the more speculative NASDAQ finds its momentum rather more blissfully aloft. This sets up for heartbreak. Unjustified is greater faith in a NASDAQ still lagging the S&P 500's relative performance. The NYSE's momentum dive decidedly to the negative raises odds, then, the market's current pullback will be more pronounced than any so far this year.

In fact technicals at intra-day levels suggest the S&P 500's 50-day moving average is imminently in peril of being breached to the negative...

Come late-day Monday it was clear the market likely was poising to strongly move in either direction, this by way of technical conditions at various intra-day intervals. (I was leaning positive.)

Yesterday proved a disaster. The strong push out of the gate revealed an urgency objectively measured above by MACD (momentum) for its relatively heightened intensity. "Someone" wanted o-u-t and took it to the close.

No strength was displayed today, either. What might appear positive technical divergences as the S&P sank lower throughout the day are twice belied: with no positive indication of developing long interest the S&P 500's relative strength and momentum remained decidedly to the negative. We see this very clearly at 5-minute intervals...

"It takes buying to put [prices] up." We saw none today following an opening attempt at a CME goose. Today brought only more weakness. "Someone" still wants o-u-t. There is a good chance the S&P 500's 50-day moving average is about to succumb.

Word on the Street
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