Goodbye Debbie Downer, Hello Dire Diann ~ The Risk Averse Alert

Thursday, October 24, 2013

Goodbye Debbie Downer, Hello Dire Diann

The Fed's sugar babies simply have no choice but play make believe they're solvent. This much is well-established. Yet also moving into the light of possibility, however, is a sudden catharsis—a systemically seizing, Bear Stearns, Lehman Brothers moment positively decimating the bottom of the capital structure.

Now, such an event seems unlikely to be triggered right from the market's top. If history is any guide, some insiders seeing the writing on the wall will take time to slowly drain (relatively speaking) capital from risk assets before the floor buckles and the whole shebang comes tumbling down. That's the way the end came to both Bear Stearns and Lehman Brothers back in 2008.

However, this is not 2008. Lenders of last resort are "all in." Likewise, if everyone in lower Manhattan does not know today's is a game of make believe feigning solvency, then this must be the best kept secret ever. Although once transparent capital markets have become deceptively opaque, there is one fact of our contemporary reality that simply cannot be hidden, and so just how it is today's utterly desperate situation can escape the discerning perception of insiders makes for a mystery greater than Christian faith itself! Forgive me for stating the obvious, but its presence is too greatly underplayed on a day-to-day basis. The fact is central banks are SCREAMING the banking system is hopelessly insolvent.

There is no getting around this fact. Thus, everyone in lower Manhattan knows, or should know, the evil "experiment" that is Quantitative Easing will end badly. My point here is we can throw history out the window. There is every reason to believe more possible is an unimaginable, discrete discontinuity whose devastating effect is entirely unforgiving right from the get-go. Not at all remote is the likelihood that, once top is reached the most spectacular collapse in the modern history of "capitalism" will ensue, sinking major indexes in a mere matter of weeks to levels last seen in the 1987-1994 period (capitalism is in quotes because American System capitalism since August 15, 1971 has been subverted by slavery fostering imperialism).

Not to sidetrack from our view that, some weeks likely remain before the market's ultimate top is registered. Rather, only to lay the groundwork for screams of panic likely to be heard here as top is approached. Yesterday's marked only the start of it.

Although the above measure has proven somewhat less reliable this year in signaling a market at increasing risk of coming under pressure, here we are again. Its diminished utility this year can be attributed to that typical "dynamism" associated with Elliott 3rd waves. If anything, since start of the currently unfolding Elliott 3rd wave forming off early-June 2012 bottom (i.e. wave (c) of an a-b-c corrective wave up from March 2009), the opposite end of the above measure's spectrum has indicated an imminent market turn higher. Hindsight is 20-20, as ever.

Now, given assumption an Elliott 4th wave currently is in the midst of forming (this of the same 5 waves up from early-June 2012 bottom), we have reason to look forward to the above measure decidedly taking out its low of mid-November 2012, which period marked the completion of the 2nd wave's formation. Such imminent eventuality, too, likely will provide confirmation of a most dire outlook whose unfolding, although yet some weeks from commencing, very well could bring devastation far beyond anything imaginable among the consensus of present day analysts.

The prospect of an unprecedented market swoon is neither far fetched, nor an unlikely possibility. Rather the greater bulk of circumstance, both fundamental and technically based, suggests a dire, earth shattering collapse trapping the vast majority of vested interests is anything but remotely likely to occur sometime in the not-too-distant future, say, sometime early in the new year.

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© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

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