Tuesday, November 16, 2010

Are We At A Heightened Risk Of A Financial Crash?

A month ago we showed an intraday look at how advancing volume data collapsed after the September 21st turn date while the market continued higher.  This dynamic has continued since September 21st  in a typical blow off pattern.  This blow off was consistent across all financial markets -   gold, commodities, stocks, emerging markets, developed economies, you name it.   Yet this at a time when Wall Street is more bullish than at any time since the 2007 market peak. 

On here we have shown a few ways I slice volume.  Below is one of three unique volume algorithms I use in an attempt to understand if the market is rising on futures-driven manipulation, fundamental money flows or a few other dynamics I prefer not to discuss.  Sometimes these algorithms have something to say and sometimes they don’t.    They have much to say in today’s world.  The S&P has blown up to the April-May 2010 high on fumes.  In a healthy market, this algorithm would be making new highs comparative to the April-May 2010 top.  Instead, it is close to the lows made in August-September.  And as we said about a month ago, that means prices could easily blow downward very rapidly.  I believe we could drop back to the July lows within a matter of weeks under the right conditions.   This is not a statement of fact but of risk. 

This risk is in lieu of seasonality factors over the last one hundred years or quantitative easing or any other ruse used by opinionators.  

Today,  2010, is not the last one hundred years.  Those factors no longer apply.  A new normal is still developing right before our eyes.  And that means the statistical probabilities of November and December rallies of yesteryear are but a fantasy.  Statistics, when used improperly, are not science but instead voodoo.  And so is the bullishness of the delusional status quo who remains enamored with the past while continuing their incessant bloviating on political nothingness and con games of the corrupt.  The world is on fire while bureaucrats do what they do best.  Talk.  

2010-11-15_2057

posted by TimingLogic at 8:37 AM

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