Thursday, August 18, 2011

Unmanipulated Advance-Decline Data Approaching March 2009 Crash Lows. Will Price Ultimately Follow?

 

2011-08-15_1932 (1)

Back in April of this year we showed this graphic of the daily unmanipulated view of advance-decline data.  What has happened since April is highlighted in the blue box above comprising the rest of April through August.   We wrote that the data had been collapsing for months.  So, not only on the weekly chart did we see that, but it was even more evident on the daily chart as we noted at the time.  Using this data, does this look like a market that is having a normal correction? 

I am going to highlight much of that April 7th post in italics below.  Because we essentially forewarned of exactly what is happening today.  From April of this year:

“Since the flash crash, for the first time in modern history this data point (the unmanipulated advance-decline data) is hugely divergent from market direction and remains terribly weak.   Comparatively, the manipulated NYSE advance-decline data is making new highs.  Of course, it also was making new highs before the 2008 collapse.  The strength of the NYSE’s advance-decline data is simply a manifestation of the completely unsustainable financial freak show we see before us.  Couple that with some stocks in the Dow trading at 5x what the average stock was trading at in 1929 before the collapse into the Great Depression and one gets the sense of the scope of such unprecedented financial lunacy in our country.

In some manner, we can already state that the market has once again started a new crash as of May of 2010.  Price has yet to crash but unmanipulated data has crashed. 

To rehash some points we have made before, the most obvious conclusion I believe we can draw from this is that market direction since May of last year has been determined almost exclusively through the use of derivatives and algorithmic trading, all of which are funded by endless money at zero percent interest.   This is confirmed by the highest correlation between markets and the S&P since the 1987 crash we cited last year (derivatives trading), the countless low volatility up days with an often immeasurable average true range and the low contract futures-driven higher opens which often fall back or make no meaningful intraday advances.  Effectively, the only buyers are manipulators aka Wall Street and hedge funds.  Mind you, this dynamic also exists in commodities as we have hammered incessantly as well.  It is important for one to understand, this is exactly what happened with the mortgage trading mess.  Ultimately, Wall Street was the only buyer left as counterparties evaporated.  We have uniquely written numerous times of this dynamic coming to pass in financial markets a year before they collapsed and the commodities and equity markets over the last two years. 

Markets are permanently broken due to massive Wall Street fraud and corruption.  Wall Street is the dumb money as we have said countless times.  There are no counterparties left  and there hasn’t been since the 2000 economic collapse.  Counterparties have either been traded out of the market as we have said either has or would happen, or they are unable to participate due to economic circumstance or they are unwilling to participate because they recognize the massive financial market corruption and rigging that both the Democratic and Republican parties wholeheartedly endorse.

Wall Street has spent tens and tens of billions of dollars building this financial freak show and convincing society of its incontrovertible brilliance.  Yet for all of society’s money that was pissed away, without the consent of the governed or those who are supposed to rule this country, building this Soviet-style monolith we affectionately call Wall Street, did anyone within that massive bureaucracy tell you that their system was diverging from reality just months before it again crashed?  And for all of the tens of billions of dollars spent building this freak show, did they tell you on a free blog?  

Systemic incompetence, Soviet style.

posted by TimingLogic at 8:43 AM

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