DOW : The Great Dow Highs of Summer 2007

[chazza]

Tracing out an expanded flat right now for the 4th? If so, I guess we reached the min. of 750. If we power through 775, then maybe we are in wave a of the correction.

 

My take.

 

Hmmm, maybe McHugh's labelling of the 4th was more accurate, making this the wave a of the correction. Although 775 looked like the top before "the anouncement".

 

WHats your take DD?

[nbarter]

Hmmm, maybe McHugh's labelling of the 4th was more accurate, making this the wave a of the correction. Although 775 looked like the top before "the anouncement".

 

WHats your take DD?

 

Where does the 775 level come from?

 

In an idealised 5 wave pattern waves 1 and 4 should not overlap. Wave one ended in late Jan with a low of 804.30 as far as i can see from a quick look. The highs of yesterday were 803.04. So, very close to an overlap, but not quite there just yet. But, given how close then i guess the odds have shifted considerably in the direction of the low being in, especially if we get an overlap soon (but i am not giving up on this count just yet). I am only engaging in low risk bets at the moment, so have no position for the time being. The market should show its hand soon enough.

[chazza]

Where does the 775 level come from?

 

775= The etremity of the 4th wave of one lesser degree...no?

 

 

In an idealised 5 wave pattern waves 1 and 4 should not overlap. Wave one ended in late Jan with a low of 804.30 as far as i can see from a quick look. The highs of yesterday were 803.04. So, very close to an overlap, but not quite there just yet.

 

Very good point.

 

I guess if the count still works, then could point towards a nice double bottom, based on equality of first and fifth waves.

[drbubb]

(DD, I think you know who the trader I mention here would be):

 

"The presence of these unpredictable natural phenomena, single-handedly rubbishes the workability of Elliot Wave theory. The poor record of Elliot Wave predictions does further damage. Respected randomness practitioners, mathematicians and Harvard professors alike have proven that it has no value." (Flashman)

===== Quote: http://www.housepricecrash.co.uk/newsblog/...ounce-22461.php

 

Flashie is an idiot. I think he must good at "throwing away babies with bathwater"!

 

EWI's record is "mixed", but it sometimes makes incredible calls. To me, it has value, and I pay attention to their forecasts - and Neely has made better calls that EWI's Prechter.

 

One of GEI's posters, is off on a one year Round-the-World trip, courtesy of his trading profits in 2008, using EWI's trading signals.

 

 

Neely's method is more complex, and I am still learning about it. I plan to buy his book and study it over time. (Maybe I can even try to get him to join a future GEI conference call someday.)

 

An even more powerful combination might be to use Elliottwave in conjuction with Volume-driven signals, and astrology, as "pattern recognition expert" Larry Pesavento seems to be doing.

 

I have been making a decent living using various technical trading methods alongside my own brand of fundamental analysis. I could tell you about the details of what I have done, but it might sound too much like bragging. And I would have to leave off a rather bad year in 2008, when I failed to act on some signals that I was getting, and stayed with a large Junior portfolio, and wound up riding it down through a very nasty correction in Junior mining stocks. A nice overall gain, but with a confidence-hurting "major drawdown" in 2008.

 

As I see it: After 5-6 years of big annual profits, the Loss I made in 2008 are more of a comment on my own lack of trading discipline, than they are of failures in Elliott wave analysis or my other technical trading techniques.

 

I do hope to show people that these tools can help produce outsized returns on a consistent basis. How are the following real-life statistics as a demonstration of what can be done:

 

My "DB Portfolio" was started on the day of my Call of "the Bottom" on a GE Conference call that you can go back and listen to. It has showed:

Some decent outperfomance of the rising SPX index. My 34.2% beats the index by 21.6% !

 

The current high cash levels (55%) I'm holding may help, if we see a brief pullback now, as I expect.

 

HISTORICAL TRACK RECORD

===================

 

Date==== Portfolio Value / Cash held & (Pct.) / + Change / SPX cls. / + chg. / Outpf

======= : ========= : ============== : ====== : ===== : ===== : =====

05.Mar.09 : ..$ 237,301 .. : ..$ 000,000 (00.0%) + 00.0 % : 682.55 :

13.Mar.09 : ..$ 295,179 .. : ..$ 011,464 (03.9%) + 24.4 % : 756.55 : + 10.8 % : + 13.6 %

17.Mar.09 : ..$ 307,459 .. : ..$ 049,314 (16.0%) + 29.6 % : 778.12 : + 14.0 % : + 15.6 %

20.Mar.09 : ..$ 318,434 .. : ..$ 177,329 (55.7%) + 34.2 % : 768.54 : + 12.6 % : + 21.6 %

 

Updated details, see thread in : GEI Member's section

 

Brief. But if I can keep returns like that going, surely it demonstrates something good!

 

(note: the above was posted on GEI's Neowave Warnings thread )

[nbarter]

(DD, I think you know who the trader I mention here would be):

 

 

(note: the above was posted on GEI's Neowave Warnings thread )

 

Thanks for this, interesting. I will talk through my thoughts with you on Neely in more detail at some point.

[nbarter]

Well, I got home last night to see the markets had closed massively higher. That, I think, settles the case. The push higher yesterday moved comfortably into wave 1 down territory of January and so my hoped for one final push lower is off the table. We should now be in the early stages of a multi-month corrective rally that takes the markets considerably higher and likely will not end until quite a lot of confidence has returned to the markets, i.e expect Vix to fall back a lot and to probably below 20 etc.

 

I think it is likely that falls at least equivalent to what we have had over the last 18 months are still ahead of us, but that is for another day.

 

Hopefully we will get a pull back soon though so I can position for a 3rd wave rise (normally the strongest and longest of the impulsive waves).

[John Doe]

So this is the A of the ABC?

 

What are the potential EW levels DD?

[nbarter]

So this is the A of the ABC?

 

What are the potential EW levels DD?

 

Yes, but only part way through A. I would have thought more likely that we are probably at the end of wave 1 of a. So the bulk of wave a is still to come. Otherwise the whole correction could be over in a few weeks which seems unlikely i would have thought. I am working on the basis (unless proved otherwise) that we are correcting the whole of the falls to date from 2007; so a multi-month correction that goes far higher seems likely.

[nbarter]

I have been meaning to write down my thoughts for some time on how the world got into this mess and whether or not the actions of governments across the world are going to help pull us out and have eventually got around to it. So, i thought i would add it here in case anyone else cares to read it.

 

How did we get here, where next and will the bailouts and fiscal diarrhoea work?

 

Clearly we are in the middle of a deep recession, but how bad will it get and when will it end?

 

I suspect it will easily be the worst in the post war period, and possibly (depending on what metric is looked at) worse than the Great Depression in some countries. UK GDP in the 30s depression fell by (just) 10%, so a similar output fall this time around does not seem that far fetched. Plus, industrial output seems to be nose-diving more quickly in many places than in the 1930s.

 

As for when it will end, I think we have much further to go. I suspect the corner will not really turn for a few more years, maybe sometime in the 2011-2013 period. Even then, because of what Government are doing now (racking up huge debts), growth thereafter will be below trend for some time to come. It is also worth bearing in mind, that the 1930s US depression saw the bubble burst in 1929, but the year with the biggest GDP fall was 1932.

 

But, before the ultimate bottom in the economy I suspect we will have a false dawn, and in fact that false dawn may be here. As I have pointed out a number of times in my Elliott wave analysis, we may well be in the early stages of a multi-month stock market correction at the moment (March/April 2009) and this may well also indicate a short term turnaround in the economy ahead. But, any turnaround will likely be short lived and may not even result in positive output growth, but just a pull back from the brink as it were. Nevertheless, politicians, economists and the media will likely jump on any evidence of green shoots and prematurely declare the worse of the downturn being over.

 

However, I think the worst is to come, definitely on the economy and unemployment and probably also in the stock markets. It looks like we have ended wave 1 down in the US stock markets and at a minimum I would expect a further wave down once this correction finishes, to form a large ABC pattern. The bear market should finish, however, before the economy bottoms and stocks could bottom as soon as autumn 2010.

 

It is possible however, that things maybe somewhat gloomier than this and that the current bear market is actually an extension of the falls that started in 2000, in which case a larger degree 5 wave pattern down from 2007 would be more likely, of which we seem to have had only the first wave as of early 2009.

 

The UK FTSE, for example, never made new highs above its 1999 highs in 2007 and so this seems to be the more likely count for the UK at least. Such a count would suggest the ultimate floor to the market is even further away. But there is plenty of time to worry about that count a year or so down the line. As I think I have said elsewhere, I suspect the FTSE will probably ultimately target the 1500s area.

 

What went wrong?

 

To briefly summarise what I see as the causes of today’s problems.

 

Markets are usually efficient, but can be disrupted by speculation and government interference. Humans have a natural herding instinct and are frequently greedy - these traits come to the fore especially when people have forgotten the lessons of past crashes and so are more susceptible to greed, as was the case over the last decade or so.

 

The combination of these traits leads to bubbles forming, especially in real estate and financial products. These bubbles cause resources to be diverted away from efficient ends and so growth as a consequence will necessarily have to fall when the inevitable re-adjustment takes place. Governments frequently make matters worse too, by stepping in and intervening in markets, for whatever reason.

 

On top of the widespread bubbles caused by people’s speculative juices mentioned above, the world has also been suffering big trade imbalances for some years, aided and abetted in places by these bubbles. The combination of these has led to serious structural misalignments and resource misallocations that need correcting. Both at an intra and inter country level.

 

Consumption hungry and indebted Americans and Brits have been fuelling an export boom in Asia and to some extent in Germany. Many Asian economies (and Germany) are skewed towards export growth and many Western economies towards consumption. This situation has been made worse by Government intervention, for example, by China artificially keeping its currency weak to aid exports and the Fed cutting rates after the tech bubble which encouraged debt and over consumption.

 

The herding behaviour of humans in the US and UK has led to a mindset where running down savings and building debt (e.g, taking out loans and using houses as ATMs) has become the norm. This has been reinforced by governments. The US and UK Governments have been caught up in the same mindset, building national debt and allowing personal debt levels to explode.

 

Other countries meanwhile, notably China, Japan, and Germany have been willing partners in this by structuring their economies to take advantage of this consumption boom. Countries globally, therefore, have been willing partners in causing and encouraging these imbalances. Most have also witnessed bubbles in their own economies in real estate etc, again often actively encouraged, or at least not stopped by, their governments. These bubbles have often exacerbated the global imbalances.

 

We have had a failure of Government globally. Governments should be there to set the rules for a level playing field (by which I mean to stop such a skewed trade balance forming) and to thwart bubbles forming. This has clearly not happened.

These bubbles and imbalances cannot continue indefinitely as we have found out, and measures now attempting to thwart the necessary rebalancing of the world from taking place are doomed to fail. The US and UK and other consumer binging countries will have to rebuild their finances and hence stop importing so much. Consequently, China, Germany and Japan will have to get used to exporting less, whatever Merkel says.

 

The world needs to allow the current economic events to continue to some extent. That is, the reallocation of resources away from debt facilitating (e.g, debt finance in the West that has allowed us to suck in these imports and to buy houses we cannot afford) and toward the rest of the economy. Plus, allow the rebalancing of trade surpluses and deficits.

 

Ultimately, only if this massive misallocation of resources on a global scale is allowed to reallocate to productive and sustainable ends will the foundations be laid for future sustainable growth.

 

Thus, until these imbalances are removed and the price signals are no longer skewed the world will continue to lurch from one crisis to another; from the 1997 Asian crisis, to the 2001 post tech bubble bust, to the 2008/9 credit crunch, to the 20010/11 debt depression. Growth between these crises, where it has occurred (and where it might yet occur), has generally been of the debt building variety. Debt has expanded at ever greater rates to produce the same amount of GDP growth. That is, it is not real sustainable growth, but growth brought about by expanding the balance sheet and which will have to be repaid at some point.

 

For example, the interest rate cuts by the Fed in response to the Asian crisis in 1998 encouraged consumers to binge, using their houses as ATMs. Instead of letting the world economy adjust to a more efficient allocation of resources, our leaders ensured the price signals were not changed and encouraged this misallocation to continue. The same happened in the UK where interest rates fell 50% between October 1998 and June 1999.

 

The technology bubble grew and was left unchecked and resources were misallocated to over-expanding IT capacity. This bubble then eventually burst and interest rates were slashed to stave off the far wider resource reallocation that was needed. The ongoing debt and housing bubbles meanwhile carried on growing throughout, aided and abetted by Governments throwing fuel on the flames until finally the bubble could grow no more and the debt deflationary spiral began in 2007.

 

The Greenspan put, as it is known, has a lot to answer for. Privatising profits and socialising losses is no way to run an economy.

 

But, despite this massive debt bubble appearing to be fatally wounded and in dire need of being put to sleep, our glorious leaders are trying to resurrect it.

 

So, is spend, spend, spend the solution?

 

The best analogy I can think of for the recent attempts by central governments to pull their economies out of the dirt is: subsidising alcohol for an alcoholic. Clearly this does not sound sensible. So, why do so many believe in solutions based upon yet further excesses? I think it is because they are ignorant, or do not want the party to end and want to believe it can work. Or perhaps it is simply because politicians are generally only interested in the short term, doing long term damage to an economy is of less worry to them. Sadly, the underlying issue is not being dealt with; instead the day of reckoning is simply being put off a little. It will not make the day of reckoning go away.

 

Clearly some automatic fiscal stabilisation is necessary and inevitable – social security benefits rise in downturns as unemployment rises. Plus, ideally economies should be run by running surpluses in good times so that some additional spend on high value for money projects could potentially take place in downturns.

 

But, what is going on at the moment is nothing like this. Bailing out industries that are producing goods people no longer want or can afford is stopping the process of resource reallocation (be they banks or car makers) and misallocated resources means less than optimal growth. The G20 measures, for example, are not really about encouraging the necessary reallocation of resources and so are not going to work.

 

Further, the massive debt being run up by Governments will have two main effects, firstly to crowd out private (generally more efficient) investment and secondly, it will need to be repaid at some point. The reality of repaying the huge amounts of debt that are being taken on is higher taxes.

 

Spending may be cut in places in the future (and will likely become more publicly acceptable), but it seems highly unlikely that it will be cut by enough to offset the higher debt repayments. Thus, taxes will have to rise to fill the gap. In economic parlance, taxes are inevitably a negative supply side measure which means trend growth (the rate at which an economy can grow with no output gap and so without overheating the economy) will fall. Younger people around today and future generations will be poorer than they would have been as a result.

 

But, here is the crux. Staving off reallocation day is only delaying the inevitable. It will, therefore, simply prolong the whole process and make the amount of necessary reallocation greater. The net effect, therefore, will be to make the situation worse than it would have been. I do not think the coming economic depression can be avoided for long, and all the stimulus of the last 6 months may well only produce a very short term relative fillip.

 

It is, however, possible that whilst making the situation far worse by such huge intervention, it will be slightly smoothed out. That is to say, the acuteness of the pain at its worst maybe slightly lessened, but the total amount of pain will be far higher as the whole wealth sapping process is prolonged.

 

Finally, the longer the necessary global resource reallocation is delayed, the more time there is for politicians to give in to the popular clamour for protectionist polices and perhaps increase the chances of that ultimate protectionist policy, war.

 

Hyperinflation next?

 

As for whether we are about to embark on hyperinflation due to the huge sums being pumped into the economy by Governments, my feeling is that this is unlikely. I think deflation is more likely, at least to start with, as credit evaporates.

 

Polices will only be inflationary if they more than bridge the output gap – that is boost aggregate demand by enough to exceed aggregate supply. In a world where people and businesses are unwilling to borrow to fund increases in demand (and in fact are trying to rebuild their finances) and where the output gap (gap between trend growth rates, roughly 2.5% in the UK, and the actual rate of growth) is big and growing, then the (admittedly massive amount of stimulus) seems unlikely to lead to massive inflation.

 

A smaller example is the experience of the UK in the early 1990s when it left the ERM. Many said that devaluing the pound would only lead to inflation. But, as we saw, this was not the case. Due to the big output gap at the time (UK was in recession with high unemployment etc) there was plenty of slack in aggregate supply to soak up any inflationary pressures from the falling pound.

 

However, if deflation does take hold, as I think likely, then given that Governments have (and continue to) build up massive debts, then any fall in prices will obviously serve to increase these debts. They will get desperate, therefore, and hyperinflation further down the line cannot be ruled out.

 

Summary

 

So, this downturn will not end until there has been a real shake up of resources and the current misallocations have been reallocated and the world is more balanced. As I mentioned above, markets are generally inherently efficient and left without intervention this desperately needed reallocation process will take place quite quickly. But, governments seem intent on stopping this.

 

However, we are already seeing this rebalancing process. Finances clearly need to be re-built in the US/UK etc, at both the personal and Government level and this has already started at the personal level: “The UK household saving ratio jumped to 4.8 percent between October and December 2008, the highest since the start of 2006, from 1.7 percent in the previous quarter”. But, it has a lot further to go and will not be helped by the continuing surge in unemployment.

 

The UK Government, however, is doing the complete opposite and burying its head in the sand, seemingly intent on getting national debt to over 100% of GDP as quickly as it can. But, that route is not sustainable and it will, sooner or later, have to get real and cut debt too; the markets and electorate will demand it.

 

The upshot of all this will be lower growth for years to come and a smaller finance sector as the economy restructures away from what was often effectively pure speculation (buying housing as investment, packaging debt as ever more complex instruments, day trading by taxi drivers etc etc). This is not to say that these areas will not survive, they likely will, but just in a much smaller way and genuinely productive areas will grow to compensate. Good will come from this restructuring process, if governments just let it.

 

Even if there is a recovery of sorts over the next few months that mirrors the current upturn in stocks, I cannot see how it can last more than a matter of months. The twin bubble/imbalance problems in the world are yet to be fully resolved and so the worst is, unfortunately, likely still ahead of us.

[littledavesab]

Hey DD you are doing very well on your EWave predictions and the name of this thread is looking particulary prescient

 

Can I ask how you learned about Ewave and how long it took?

[ecoface]

I have been meaning to write down my thoughts for some time on how the world got into this mess and whether or not the actions of governments across the world are going to help pull us out and have eventually got around to it. So, i thought i would add it here in case anyone else cares to read it.

DoucheDore.

 

Thanks for posting your thoughts. A very interesting and coherent piece of work.

I concur with 99% of it. I do see inflation returning, next year or 2011, and not a Japan-style deflationary period for many years, as you forsee?

[nbarter]

Hey DD you are doing very well on your EWave predictions and the name of this thread is looking particulary prescient

 

Can I ask how you learned about Ewave and how long it took?

 

Thanks.

 

Learned it through subscribing to Prechter's thrice weekly publication which covers the main US markets and reading his books such as the 'Elliott Wave Principle'. Started this about 8 or 9 years ago i guess. But, was familiar with EW many years before this through Robert Beckman's books, but wouldn't say i was any good at it before i really spent time looking at it with Prechter's stuff.

 

I then gave up subscribing to the thrice weely analysis two or three years ago and used what i had learnt to do it myself. Doesn't need to take this long though.

[nbarter]

I have put together a chart of the MSCI World Index for the last few years. This has amazingly clear Elliott waves, see attached. You can also see the fractal nature of EWs (each large wave breaks down into 5 waves of one lesser degree). In stocks, the 3rd wave is usually the largest and most explosive wave and this shows up nicely in this chart too.

 

It was this knowledge that allowed me to call for a stock market collapse right ahead in August and September last year.

 

e.g, Sept 9th:

If the 3rd wave has started the market will likely collapse this autumn.

 

and then on Sept 24th

...if this is the 3rd of the 3rd then the Dow should soon rapidly plunge below 10,000 and the S&P to 1000 and below. The falls, if my call is right here, should be the fastest and biggest in the last decade.

 

That call was 2 days before the steepest part of the chart, the 3rd of the 3rd that really got going on the 26th Sept and took the MSCI from 1260 to 834 by the end of October (a fall of a third in 4 weeks).

 

The fact that we have had a nice 5 wave structure down since autumn 2007 is why i think we should get a multi-month correction of this now, which indeed we appear to be in the initial stages of. This agrees nicely with the count i have been discussing for months above for the US markets. The European markets may have a slightly different count, but the near term action should be the same so i won't go into that now.

 

[Catflap]

Great work DD - there's something in wave structures that does spark my interest to find out more about EW and that graph of the MSCI world index shows it clearly. Is there any good sources of information showing graphs of previous bear markets/crashes and bull markets and EW applied like in your graph - I'm interested in 1929-1932, 1987, 2000 to 2003.... guess I'm looking for a fast track basic guide to understanding EW giving examples like these.

 

So what comes after '5' - are there no smaller counts in the 3,4,5 wave and what is the ABC correction?

 

I personally think we will see a very strong rally into May and beyond that I have no idea at present - maybe a summer pause then a peak into Q3/Q4 2009 from where the grinding 2.5 to 3 year bear market really begins. Years ending in 0,1 and 2 are not that great for stockmarkets, especially after a bubble in stocks (1929 and 1999) or real estate (Japan 1989 and now).

 

ps - anyone know if there is a stockchart for the MSCI World Index?

[nbarter]

Great work DD - there's something in wave structures that does spark my interest to find out more about EW and that graph of the MSCI world index shows it clearly. Is there any good sources of information showing graphs of previous bear markets/crashes and bull markets and EW applied like in your graph - I'm interested in 1929-1932, 1987, 2000 to 2003.... guess I'm looking for a fast track basic guide to understanding EW giving examples like these.

 

So what comes after '5' - are there no smaller counts in the 3,4,5 wave and what is the ABC correction?

 

I personally think we will see a very strong rally into May and beyond that I have no idea at present - maybe a summer pause then a peak into Q3/Q4 2009 from where the grinding 2.5 to 3 year bear market really begins. Years ending in 0,1 and 2 are not that great for stockmarkets, especially after a bubble in stocks (1929 and 1999) or real estate (Japan 1989 and now).

 

ps - anyone know if there is a stockchart for the MSCI World Index?

 

Not sure i can think of any comprehensive sources off the top of my head, but Prechter's Conquer the Crash has a few and an intro to EW.

 

I am not sure i fully understand your question about what comes after 5. A set of 5 waves should be followed by a counter move correction of some kind. Whereas the impulse move is formed of 5 waves, the correction of this normally takes more of a three wave form, or an ABC move, with one wave up, second wave down and the third up. This is the simplest form, but unfortunately it does get horribly more complicated than this. Corrections are not of a 5 wave form as mentioned and so given that the current bear market appears to have taken a 5 wave form this suggests that we should get a three wave correction followed by at least another set of 5, which will then form a larger degree three wave form overall, or ABC. This is the fractal nature of these waves. Does this answer it?

 

Check out http://www.mscibarra.com/products/indices/...performance.jsp

 

or http://www.mscibarra.com/index.jsp if that doesnt work and look for the world index.

[Catflap]

Thanks - don't worry, I'll start to work it out for myself which is part of the fun.... it's difficult to explain/understand without diagrams so I'll see if there is anything on Youtube. It's certainly sparked my interest and I'm no longer skeptical - think that's just often a reaction people have to stuff they don't understand.

 

Happened to have a look at your 2007 posts on the beginners section and quite impressed - also like me, not enough time (1:15am)

[nbarter]

Well, we have had a good run up so far since the early March lows, in what I think is a multi-month correction of the 2007-2009 bear market, so it is worth being alert to any correction of this recent rise. The Dax and Cac have today made new recovery highs and the Dow and S&P did yesterday and may well do so again today when they open shortly (Dow closed at 8125). But, this pattern of higher highs has slowed - potential exhaustion. Optimism has returned to some extent, Vix, for example, has fallen nicely to levels not really seen since last autumn, just before the market crashed; it's currently 35. We also obviously have a Larry P and an Armstrong turn next week. So it seems like a good time to be alert to a possible change in trend. As we seem to be rising into these turn dates, if they work it seems logical to expect a turn down.

 

If this turn down materialises, i expect it to be a shortish term correction of the rise of recent weeks, before another leg up takes over. But, it is worth bearing in mind that the pattern in the European markets looks a little different to that in the Dow and S&P. Whereas the latter appear to have traced out a complete set of 5 waves down, the former would look better with another low first before a longer bounce. This may well not happen, but it is worth being alert to this possibility. Plus, the Nasdaq 100 didn’t make a new low in early March, unlike the other main US markets and instead looks like it has been tracing out a 4th wave from last autumn, which if true would suggest a new low ahead sooner rather than later.

 

I will have a go at catching the much flagged potential turn and extracting some points, but will not get hung up on how long it will last or what the exact next move is etc. The risk return is not normally that great part way through a correction move like I think we are now in, due to the fact that corrections can take numerous forms, whereas impulse moves only take a couple of forms. So, I will have a go at catching a move over the next few days, but beyond that will let the market show its hand more clearly over the coming weeks and maybe months.

[drbubb]

The Coming Battle between Elliott wavers and Astro cyclers?

 

If this turn down materialises, i expect it to be a shortish term correction of the rise of recent weeks, before another leg up takes over. But, it is worth bearing in mind that the pattern in the European markets looks a little different to that in the Dow and S&P. Whereas the latter appear to have traced out a complete set of 5 waves down, the former would look better with another low first before a longer bounce.

 

Both Martin Armstrong and Larry Pesavento have a TURN date early next week, so it would not be surprising to see a selloff.

And I have positioned for it by buying calls on the following "Short side instruments": SDS, FAZ, BGZ

 

However, when I look at an Elliot Wave count, I only see an A wave up, and after a B down, a higher C is likely.

 

Are we about to see a battle between the Elliottwavers, and the Astrocyclers?

 

They might both be happy to see a 2-4 week slide. But what next?

E-Wave suggests a new high, A-Cycles suggests this may be the high here.

 

A Selloff? Probably. Then What?

 

E-wavers may expect a new high (C-e), while Astro-cyclers like Martin Armstrong, may see a high Friday, or early next

week, and any rally after a B-wave selloff may be followed by a rally that FAILS to make new highs (C-a)

[nbarter]

The Coming Battle between Elliott wavers and Astro cyclers?

 

However, when I look at an Elliot Wave count, I only see an A wave up, and after a B down, a higher C is likely.

 

Are we about to see a battle between the Elliottwavers, and the Astrocyclers?

 

They might both be happy to see a 2-4 week slide. But what next?

E-Wave suggests a new high, A-Cycles suggests this may be the high here.

 

A Selloff? Probably. Then What?

 

E-wavers may expect a new high (C-e), while Astro-cyclers like Martin Armstrong, may see a high Friday, or early next

week, and any rally after a B-wave selloff may be followed by a rally that FAILS to make new highs (C-a)

 

Maybe this battle has been extended to Neely's unconventional elliott wave analysis too.

 

Thanks, for the tip. [see Neely's email on the Neely warning thread]

I wonder if we may be seeing the Turn, or at least a good sized correction starting today?

 

Hopefully. Have moved stops down to below yesterday's high so its just wait and see time now. The problem, as i have mentioned before, is that whilst EW has basically only two forms when markets are going in the direction of the main trend, corrections can take many forms, so trying to trade just a portion of a correction (as right here) is risky business.

 

Given the content of Neely's email, it looks like he is looking for a turn down anytime soon as well. However, from reading between the lines i guess he probably thinks this turn down will take us to big new lows, whereas conventional elliott wave analysis suggests we are probably only due a 'B' wave before another leg up to new recovery highs before the market embarks on its next big leg down to new lows.

[nbarter]

I posted the following in March of this Year:

 

If, or when, this wave down is complete then yes a common retracement target is a previous 4th wave. .... So, the 9,000 to 10,000 area would seem a likely first target. Given that we are currently at 6.6k then even the 9k level would be a near 40% rise and to 10k would be 50% rise. Substantial rises.

 

We should now be in the early stages of a multi-month corrective rally that takes the markets considerably higher and likely will not end until quite a lot of confidence has returned to the markets, i.e expect Vix to fall back a lot and to probably below 20 etc.

 

We have obviously had a big rise since the March lows (about 40% to 925 today in the S&P) and vix has fallen into the 20s as of today. Also, Merrill Lynch announced the results of their latest survey today - optimism about economic growth and corporate earnings surged to a 4 year high. Optimism was especially high on emerging markets and tech stocks (high beta).

 

This is quite amazing. It is only about 10 weeks or so since once of the biggest stockmarket crashes for decades temporarily ended and yet optimism has rebounded very quickly. Despite this, I suspect this correction is not yet complete, but we may soon get an interim fall back before it is complete.

 

It has currently lasted only a bit over two months which seems a bit short given that the falls it is correcting lasted about 18 months so the odds favour it lasting weeks longer, though as i said maybe after a substantial fall back first.

 

IMO the next big leg down to new lows, when it starts (probably later this year), should be spectacular, at least equalling what we saw over the last year. The economy should then quickly follow into a global depression.

 

I am off in a week on my year off, but will check up from time to time on what the markets are doing and may post a few comments occasionally.

[drbubb]

IMO the next big leg down to new lows, when it starts (probably later this year), should be spectacular, at least equalling what we saw over the last year. The economy should then quickly follow into a global depression.

 

I am off in a week on my year off, but will check up from time to time on what the markets are doing and may post a few comments occasionally.

 

Please do keep in touch while on your travels!

 

 

(from another thread):

" the correction/bear market resumption is on....happy to be corrected if wrong"

 

I reckon you are right. We do agree... a drop of several hundred Dow points may be dead-ahead

 

 

Here are my targets from the Larry P is back thread:

 

Let's look at some Fibonacci retracement points

 

Index=== March Low : May High : change / pct.... : 50% ret. : 61.8% ret. : 38.2% ret. : LP Target

Nasdaq.... : 1268.6 - : 1772.9 --- : 503.6 /+39.7% : 1520.4 -- : 1461.0 --- : 1579.8 --- : ??

INDU/dow : 6,443.27 : 8,651.51 -: 2208 / +34.3% : 7547.3 -- : 7286.7 --- : 7807.8 --- : ??

S&P 500.. : 666.79 - : 930.17 --- : 263.4/ +39.5% : 798.49 -- : 767.40 --- : 829.57 --- : ??

QQQ........ : $25.63 - : $35.34 --- : $9.71/ +37.9% : $30.49 -- : $29.34 -- : $31.63 --- : ??

 

Focussing on SPX, there's further to go, to hit key levels:

S&P 500.. : 666.79 - : 930.17 --- : 263.4/ +39.5% : 798.49 -- : 767.40 --- : 829.57 --- : ??

 

The 38.2% retracement is SPX-829.57, that's another 6.0% below Friday's close of 882.88.

 

LONGER TERM - A rally into summer, could be followed by a long drop

[No6]

I posted the following in March of this Year:

 

 

 

 

 

We have obviously had a big rise since the March lows (about 40% to 925 today in the S&P) and vix has fallen into the 20s as of today. Also, Merrill Lynch announced the results of their latest survey today - optimism about economic growth and corporate earnings surged to a 4 year high. Optimism was especially high on emerging markets and tech stocks (high beta).

 

This is quite amazing. It is only about 10 weeks or so since once of the biggest stockmarket crashes for decades temporarily ended and yet optimism has rebounded very quickly. Despite this, I suspect this correction is not yet complete, but we may soon get an interim fall back before it is complete.

 

It has currently lasted only a bit over two months which seems a bit short given that the falls it is correcting lasted about 18 months so the odds favour it lasting weeks longer, though as i said maybe after a substantial fall back first.

 

IMO the next big leg down to new lows, when it starts (probably later this year), should be spectacular, at least equalling what we saw over the last year. The economy should then quickly follow into a global depression.

 

I am off in a week on my year off, but will check up from time to time on what the markets are doing and may post a few comments occasionally.

 

I will post this on the market thread if you don't mind.

 

It would be quite interesting to know more about your travel plans, where you are going, is it a gap year or did you just decide to take a year out? Are you setting up a travel blog, or just going to enjoy the year off?

 

http://www.travelblog.org/ has some interesting life stories on it.

[drbubb]

Are you setting up a travel blog, or just going to enjoy the year off?

 

DD,

You are very welcome to set up a Travel Blog here, on GEI.

 

Even in the investment section, if you will retain an interest in investing as you travel.

 

I certainly hope you will look me up, if/when you come through HK.

Other GEI-ers come thru HK, and stop by.

 

I expect to see old friend "Bubble Pricker" here next week, on his way back from holiday in the Philippines

 

[nbarter]

DD,

You are very welcome to set up a Travel Blog here, on GEI.

 

Even in the investment section, if you will retain an interest in investing as you travel.

 

I certainly hope you will look me up, if/when you come through HK.

Other GEI-ers come thru HK, and stop by.

 

I expect to see old friend "Bubble Pricker" here next week, on his way back from holiday in the Philippines

 

and

 

No6: It would be quite interesting to know more about your travel plans, where you are going, is it a gap year or did you just decide to take a year out? Are you setting up a travel blog, or just going to enjoy the year off?

 

http://www.travelblog.org/ has some interesting life stories on it.

 

Thanks gents.

 

Taking a career break for a year. Fancied the idea for a long time and it has all come together this year. The stock market crash last year really helped fund wise. Starting off by doing a safari guide course in Kruger (SA) for a month and then another month or so in southern Africa, before going to SE Asia, a bit of Australasia and then a few months in S America. Sadly, will not be passing through HK this time Dr B. Going into Singapore and out of Bangkok instead.

 

Cheers for the travelblog link - will probably do something like that and may well do something occasionally here on GEI too - don't want to bore people here, but might post a bit and see how it goes.

[drbubb]

Cheers for the travelblog link - will probably do something like that and may well do something occasionally here on GEI too - don't want to bore people here, but might post a bit and see how it goes.

 

Sure.

Give it a try