The Risk Averse Alert

Well, the money lifted from Japan and Europe had to go somewhere, huh? The poor U.S. dollar remains moribund nevertheless. Now the even bigger problem. Central banks are desperately trapped and in fact already hopelessly insolvent. I don't know what Yves Smith is talking about. Central banks either hyperinflate or they die. Either way, rates are going up and the contraction of the global physical economy will continue unabated until some political contingent subdues Team Fraud demanding nationalization of central banks aiming to effectively create Hamiltonian-modeled, sovereign-driven, credit creating machines financing the build out of a physical economic platform worthy the 21st century. Save that, contraction of the physical and, most emphatically, the financial economy is the name of the game (it's the only game imperialists know) and "value" assigned to financial claims is doomed to adjust [downward] accordingly, all in due time, of course—fast approaching.

Prior to an inescapable wave of central bank nationalizations breaking, though, Team Fraud is likely to be cursed by an increasing sovereign tendency to impose currency controls, quite possibly beginning with Japan, but more likely the euro-zone. Countdown to these rumors hitting the tape in 3, 2, 1...

Here and now, the S&P 500's 50-day moving average still looks very, very vulnerable. Its imminent downside break is foretold by a market trying to bottom, but likely doing so prematurely.



First, we have yet to see the full measure of garbage dumping that has become a well-established trend over the duration of the market's advance this year. There's more to come. Below, you will see why this is likely.

Above, I have noted today's advance in contrast to mid-April. We have previously observed here that, over the duration of the market's counter-trend advance off March '09 bottom reversals higher following periods the market was under pressure have been signaled by days like today, and mid-April prior. It's the "God save our sinking ship" in a sea of liquidity trade (a sea of liquidity that, evidently is becoming much more turbulent, as Larry McDonald noted during tonight's "Fast Money").

Now, as you will see below, there is a good chance one final flush will materialize before a run up toward May's peak subsequently develops (this likely continuing formation of an Elliott corrective wave off that peak).



Oh boy, look at the NYSE Composite index's negative RSI (top panel) and momentum (bottom). No less fearsome today than yesterday in fact. We see how mid-April's notable spike in the NYSE's advance-decline differential was followed by the market's further decline into April bottom. Thus, the NYSE's present, decidedly negative RSI and MACD strongly suggest the same outcome likely is pending, following today's A-D differential spike.

$VIX and $CPC momentum (see bottom panel of both charts) likewise concur more weakness very well could be in store here. Yet though we might assume a near-term bottom was signaled today, we could find index 200-day moving averages challenged before bottom to the market's decline from May peak in fact is in.



© 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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