Volatility Breakout ~ The Risk Averse Alert

Wednesday, June 26, 2013

Volatility Breakout

Has anyone noticed the Volatility Index is precariously levitating above its 200-day moving average, and so prospectively indicating a heightened risk the market not only could face additional pressure, but, indeed, significantly come unglued over coming weeks and months?

May 2013 peak could prove a lot like May 2011 peak, at least to the relevant degree the way to an upcoming, significant market decline appears to be similarly paved. Near-term (looking to the July-August period), presently heightened volatility more or less could persist, only to culminate in the market's worst decline since March '09 bottom, this tentatively developing in the September-October time frame.

This appears a good time, then, to again consider a view put forward here a couple weeks ago...

That line connecting the S&P 500's lows of 2010 and 2011 represents a critical point of analysis. Present technical circumstance substantiating risk of further, upcoming weakness first raises the very prospect this line very well could be approached over coming months.

Sufficient for the moment this heightened likelihood is on the radar. May's peak might just mark 2013's high, while prospect of a relatively range-bound trade over the next month or two subsequently followed by the biggest scare since '09 bottom presents a general backdrop whose consequence could make the above Elliott wave view fairly more compelling.

Necessary transition to a credit-based global banking system anchored by sovereign national banks is open to occur under a framework making last weekend's BIS twist no less another stepping stone toward this end than the very bombshell whose detonation hastens its inevitable fruition. In other words, dynamics invariably advising concerted movement toward a major reform of the global banking system more effectively securing it do not preclude circumstance whose unfolding could coincide with the market progressing in a manner more or less like that indicated above.

We might suppose, however, the introduction of new elements indicative of movement in the necessary direction toward facilitating the means of securing both existing and newly created financial claims likely will coincide with the expression of functional mechanics underlying today's framework in a manner generating significant volatility in both directions at certain discrete moments over coming months and years. This is also to suggest a hyperinflationary blowout of what amounts to unproductive credit need not be the driver precipitating wave (c) of B higher. The institutional framework facilitating sovereign credit systems by and large could be established over the interim wave (c) of B unfolds, while subsequent formation of wave C down could coincide with an imperative to deploy this new system with abandon, as leverage dynamics transition from today's trap driven toward increasing scarcity to tomorrow's better promise securing wealth employing proven means—credit—for tapping into nature's abundance.

Word on the Street
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