Divergent Indicators

Technically, when a bellwether blue chip, like GE, diverges with aggregate indices, it indicates a bearish trend. It is usually a positive correlation, being good because it reduces uncertainty — but not the actual risk.

In a previous article I noted that despite record levels on the DOW there are technical indicators of falling relative strength despite a rising RSI oscillator. There is a good probability the bull will break down, and the correlation between GE and the aggregate price of its index supports that hypothesis.

Technicians have been predicting a breakdown, quarter after quarter, but the bull keeps on running. More significant than the divergence of the actual with the indicator is the unwillingness to express why the divergence keeps having a positive correlation (the more it diverges the more the bull runs, chasing yield). The divergence is because the risk has been consolidated (with measurable, low volatility at present value), but technicians are not willing to express that because it is not what their masters want us to hear.

Consolidation of the risk breaks down the legitimate, on-demand dimension of free-market mechanics. If we have “free-market Capitalism” then it is necessary to confirm that the risk is not consolidated. It must be deconsolidated, making capitalists subordinate to the risk on demand. The two critical values (the operation of the free market and capitalism) are, indeed, divergent… and it’s time to start talking about it, on both the left and the right, being then obliged (like Kant said) to the natural alternative, always existing (obtaining), now, on demand!

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About griffithlighton

musician-composer, artist, writer, philosopher and political economist (M.A.)
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