Fifth Wave Financial Analysis

Dow Jones Industrial Average Fibonacci Multiple Regression

2026-05-22T12:23:19.342-07:00

In addition to the exciting Mathematical Multiples that are appearing at the present time on the SPX from the March 2009 low, the Dow Jones Industrial Average is exhibiting a regression in Fibonacci Multiple Relationships.

Common Fibonacci Relationships are 38%, 50%, and 62%

As explained on the chart of the Dow Jones Industrial Average below, The relative relationship ratios between the 1932-1966 Bull Market and the 1982-2000 Bull Market, and the relationship between the 1982-2000 Bull Market and the 2000-2026 Bull Market is regressed by one Fibonacci Retracement Level. This calculation is using the 5/21/2026 closing high, and the DJIA Is making new highs as this goes to press, but due to the very long-term nature of these ratio relationships, we will allow for a slight upper margin here. This is truly a remarkable stock market juncture.

UPDATE 9/10/2026- We have exact Time symmetry between the 1982-2000 bull market and the 2009-2026 bull market. From August 12, 1982-January 14, 2000 is 6,364 days. Adding that to the March 9, 2009 low yields August 11, 2026. The recent high in the Dow Jones Industrial Average was on August 13. Considering there are federal holidays now that didn't exist in the 1980's, the dates line up exactly. This is beautiful time symmetry and suggests the Grand Supercycle top was indeed registered on August 13, 2026. The most severe bear market in U.S. should now be underway.

The Real Grand Supercycle Bear Market

2026-04-22T16:39:00.000-07:00

Many market observers and pundits have labeled the move from March 2009 a bull market, and say a generational low was registered. However, looking at the stock market in real-money terms, pricing the Dow Jones Industrial Average in Gold, tells a different story altogether. It reveals the obfuscation of the true value of U.S. corporations, which have made no net progress in a century. Robert Prechter. CEO of Elliott Wave International, has astutely pointed out, in his well-written piece viewed by Clicking Here that what appears to be growth in corporate net worth has been an illusion, as it has simply been a function of credit growth and resulting U.S. Dollar devaluation, rather than true corporate value growth.

In Real Terms, the Grand Supercycle Bear Market has been ongoing since July 1965, when the U.S went off a money standard, and on a FED Accounting Unit Standard instead. Many are familiar with the period of "stagflation" and sideways stock price fluctuation from 1966-1982. What some don't know is the stock market actually declined 96% from 1965-1980, measured in real-money terms. This certainly qualifies as a supercycle decline, and the fact that the Real-Money Dow Jones Industrial Average breached the 1932 low gives us as Elliott Wave Analysts confidence that the real-money bull market did in fact end in 1965. An Elliott Wave rule is that a Wave II cannot move below the low of the start of wave I. That happened here, telling us the Bull Market that began in 1932 ended in 1965, and was completely retraced by 1980.

Additionally, looking at the move from 2009/2011, one can clearly see the stock market priced in real-money terms has retraced only 42% of the move down from 1999, a typical bear market rally retracement, peaking in 2018. It is only in nominal U.S. Dollar terms that the stock market has gone on to register new all-time highs. This suggests that rather than authentic corporate value growth, the rally has been liquidity fueled, which has had the effect of obfuscating the truth- The Grand Supercycle Bear Market is ongoing, and, as the chart below illustrates, is entering the deepest part of the bear market, Wave III of (c) down. The ultimate target is below 1.04, the 1980 low. This chart is for structure only, and not to scale, and the Real-Money Bear Market could last considerably longer than illustrated on this chart.

There is a potential time symmetry relationship between the Dow/Gold Ratio and the Nominal Dow Jones Industrial Average. The Dow/Gold Ratio peaked in August 1999, and the Nominal DOW Peaked on October 2007. The rally in the Dow/Gold ratio off of the 2011 lows peaked in October 2018. From a time symmetry standpoint, the same duration of time between when the Dow/Gold Peaked and nominal prices peak is 8 years. Specifically, 2,968 calendar days. Should this timing hold, the nominal DOW would peak on November 16, 2026. But, given the completing Elliott Wave Structure in the Nominal stock averages, anytime in 2026 would satisfy this time symmetry. The final high in nominal equity prices appears to be imminent. And the market will probably register this top on good news, to fool the majority of investors, as it usually does.

European Markets, and even Asian Markets, are exhibiting the same major divergence in Gold terms when compared to Nominal Prices.

All of these charts are telling the true story- Corporate net worth, around the world, when measured in honest money, Gold, is collapsing in a large degree bear market; a bear market that is not over.

There is also a potential time symmetry relationship between the peak of Grand Supercycle wave I in 1720, and at least the absolute low, perhaps not the orthodox low, in Grand Supercycle wave IV in the Dow/Gold ratio. If we establish the peak of Grand Supercycle Wave III in 1965, as it appears to be, and Grand Supercycle Wave IV is tracing out a Flat Correction, then we may have a time target for the absolute low in the Dow/Gold ratio. The time between the peak in 1720 and 1965 is 245 years. If we then take that and add it to the bottom of Grand Supercycle Wave II in 1784, that yields a time target of 2029. If this timing is correct, it may mark the absolute low of Grand Supercycle Wave IV, with cycle wave V of Supercycle wave (c) terminating in 2050 with the next 34-year cycle low in a failed fifth wave. Or, alternatively, if Grand Supercycle Wave IV turns out to be a combination, with a flat and triangle, the bear market could end in 2084, the low of the following 34-year cycle low. The fact that fourth waves tend to last longer than second waves may imply the latter scenario, with the bear market lasting many years longer than it's corresponding Grand Supercycle Wave II. The exact timing of the end of the bear market is uncertain. Nevertheless, this scenario has extradorinary implications for the next few years, with an all-out collapse in stock values, both in real terms and nominal terms. Nominal stock prices would stage a 3-year collapse between now and 2029 in wave III of (c), very similiar to wave a of (IV) from 1929-1932. This does not require that Gold stage a parabolic rally. The top in Gold may well be in, and the financial markets and U.S. economy may well experience a terrific deflation, bringing Gold prices and nominal dollar denominated asset prices down together.

In keeping with Elliott Wave Guidelines for a flat correction, the Dow/Gold ratio should bottom at or below 1.04, the 1980 low. If Gold has topped, which appears to be the case, that implies the nominal Dow will collapse to around 4,000, at a minimum. This represents a 92% collapse from the peak. Needless to say, this implies the most severe bear market and financial disruption in United States History.

A Series of Fifth Wave Extensions

2026-04-17T16:55:00.000-07:00

The SPX appears to be tracing out a series of fifth wave extensions from the 2009 low. The final wave v of (5) of V, is by definition limited in it's length, as by Elliott Wave rules, wave 3 cannot be the shortest. This count appears to fit well with the ebullient sentiment environment that has caused the greatest degree of equity overvaluation in stock market history. Additionally, as illustrated below, the SPX has staged a throwover of the upper trendline going back to the 1930's, a classic ending move. A move back underneath the upper trendline should confirm the top is in. Coincidentally, today, April 17, 2026, represents a Fibonacci 6,765 days since the closing high on October 9, 2007. Also of note, there is potential time cycle symmetry form the 1974 low. 1974-2000 was 26 years in duration, and 2000-2026 is also 26 years in duration. The previous cycle would be 1948, which was only one year before the 1948 Supercycle Wave (IV) low in real-terms. A top in 2026 would balance out a pattern of low (1948)-low (1974)-high (2000)-high (2026).

Under this count, the upper limit for prices to register a top would be SPX 8,339.55 on a closing basis. If this count is correct, the market should be tracing out the final waves of the Grand Supercycle Bull Market, and the reversal will be a record setting event.

UPDATE 5/19/2026: The SPX registered a closing high on May 14 of 7,501.24. This represents a Fibonacci Multiple from the March 2009 low of 676.53, with a 1.618^5 multiple off that low. The actual calculation works out to 7,502.04, within 0.01% of the May 14 closing high. This is a strong case for a significant top.

Dow Jones Industrial Average Fibonacci Price Target

2025-09-23T16:56:00.000-07:00

Fibonacci price relationships may be indicating an approaching top to the bull market in the Dow Jones Industrial Average. The Industrials registered a closing high on February 9, 1966 of 995.15. The Industrials have demonstrated a series of Fibonacci numbers at important highs, the high of 1929 of 381.17 being notable as close to the Fibonacci number 377. At this point in September 2025, the Dow Jones Industrial Average, long considered the bellwether for U.S. Stock Prices, is approaching a Fibonacci multiple of the 1966 high. Being as the 1966 high was associated with the true Grand Supercycle top in real money (gold) terms, that high seems logical to project a Fibonacci Multiple with respect to a price target for the final high in nominal equity prices. The high today, September 23, 2025 was 46,714.27, whereas the Fibonacci price target based off of the 1966 high is 46,743.01. Given the gap up in prices and reversal today, the final nominal equity price high could well have been registered during today's session. If not, and this Fibonacci Relationship is to be of consequence, the final top should be imminent.

SPX Symmetry Target

2025-07-01T21:15:00.000-07:00

Equities have registered a new all-time high and as such, a revised count is warranted. Here I show a potential fifth wave extension, with wave (5) of 5 of V completing now, with symmetry targets met. Symmetry is but one tool technicians can utilize to anticipate tops. This could well mark the final top of the bull market.

S&P500 Alternate Count and Deflationary Forecast

2025-04-15T16:22:00.000-07:00

The preponderance of the evidence certainly points to a final peak in equity prices. What follows should be the most severe deflationary stock market crash in U.S. History. The previous post outlined the mot likely count, that Cycle Wave V peaked February 2025 on the S&P500 stock index. While the market exceeded the price targets suggested by the ratios presented in that post, it only did so by less than 2.5%, a very brief overshoot of my price targets given the multi-decade bull market that is peaking now.

Below I show an alternate count, that brings back the idea of the move from March 2009 being nothing but a large scale bear market rally, the position that was held on this blog since it's inception in 2009. However, given the scale of the rally, it would be reasonable to conclude this was Supercycle Wave (b). What would follow is Supercycle Wave (c) down that would complete the bear market. Supercycle Wave (c) would take the market well below the 2009 lows, and likely down to the 1974/1982 lows or lower.

Supporting this count is the fact that the SPX Priced in real money, Gold, has been in a bear market since 2000, when stock market actually peaked. The rally since 2009 has been driven by Central Bank Liquidity and optimistic investors bidding up asset prices. Now that wave structure, and thus the trend in Social Mood, has shifted from up to down dramatically, nominal asset prices should reprice to reflect the Gold denominated price of equities, the true value of U.S. Corporations.

Note that if this count is correct, wave (b) would equal a Fibonacci 6.18 times the length of wave (a). This is not a coincidence. It is the Golden Ratio, Nature's Mathematical Manifestation, at work.

SPX Long-Term Wave Symmetry

2024-11-11T12:17:00.000-08:00

The S&P 500 index is exhibiting potential wave Symmetry from the 1949 Supercycle (IV) low, between waves I and V of (V). A common Elliott Wave Guideline is that Wave V will travel an equal distance to Wave I. The market is potentially signaling the presence of this symmetrical dynamic in percentage terms. If a top were to occur today, 11/11/2024, it would imply a 2/3 duration of Wave V of (V) to Wave I of (V).

Also of note is the length of Wave V is equal to a Fibonacci 6.62 Multiple of Wave B of IV from October 2002-October 2007.

Final Bull Market Top

2024-08-02T13:25:00.000-07:00

It appears the Stock Market has completed the Grand Supercycle Bull Market. The prior bullish stance of this blog back in early 2022 proved correct as equity prices advanced to new all-time highs. The deflationary forces that have been building for decades should now take hold and result in the largest bear market in centuries. Ultimately, the March 2009 lows will be taken out, and likely the 1982 low.

The Final Significant Correction of the Bull Market

2022-01-26T19:52:00.001-08:00

It has been posited on this blog since early 2018 that the Bull Market would continue until 2022, simply utilizing the power of the Fibonacci Sequence in determining the likely duration. When equity prices continued past the 8-year mark, 13 was the next number of years in the sequence, and that year has arrived. I am not taking credit for this call yet, because 2022 has only just begun. With the extent and duration of stock market speculation, leverage, and historically high valuations, it would seem this should be it- the Grand Supercycle Bull Market, spanning more than two centuries, should top this year. It is now up to the market to prove this assertion correct. If this analysis really is correct and equities are beginning a multi-decade bear market, the bull market reversal and initial decline off the top should be unlike anything market observers have seen before. Records will be broken in downside breadth, gauges of fear and rate of change in the sheer swift nature of the initial bear market kickoff. In the meanwhile, the bull market is still ongoing and below I present an analysis of the current wave (4) correction.

Intermediate Wave (4) is now underway, in what is anticipated to be the final correction of significance in the Bull Market that began in March 2009. In Elliott Wave Analysis, there are a number of different structures corrections can take. Considering that wave (2) was a flat correction, wave (4) is likely to either be a triangle, zigzag or combination correction. A simple triangle appears to have been ruled out due to the new highs registered in January, and the subsequent decline below the December lows, ruling out a possible running triangle. It would appear the two most likely outcomes are another expanded flat, or a combination for wave (4). Given Elliott's guideline of alternation, and the fact that wave (2) was a flat, wave (4) should be a combination correction. Below is a double-three composed of a flat followed by a triangle. This would serve to frustrate the majority of market pundits as market direction will become unclear. When the correction is over, Wave (5), the final impulse wave of the Grand Supercycle Bull Market, would then commence and take equity values to new all-time highs.

Elliott Outlined the tendency of impulse waves to form a channel connecting the ends of waves 1 and 3, running parallel to a line connecting the ends of waves 2 and 4. At the recent low on January 24, price briefly undercut the lower trendline, only to stage one of the biggest intraday upside reversals on record. The market clearly recognized this support zone. I would therefore be remiss if I ignored the possibility of the entire wave (4) correction completing at this low, or possibly a higher low in a truncated wave 5 of C of (4). Under this scenario, the market would test the lows, perhaps respecting the lower trendline before reversing upwards and impulsing straight to new highs in wave (5).

Elliott Wave Bull Market Projection

2021-09-22T14:22:00.003-07:00

U.S. Equity prices have continued to remain strong, as the expected ongoing correction scenario posted in January did not materialize. The long term bull market, however, remains intact as expected into 2022. Below is the favored Elliott Wave Count and projection for the remainder of the bull market. Although Intermediate Wave (2) was shallow, wave (4) is expected to be sharp to set the market up for the final top.

Long term price targets are derived from the previous bull markets of Cycle wave V of Supercycle Wave (III) and Cycle wave I of Supercycle Wave (V).

Crude Oil's Secular Bear Market

2021-07-19T14:42:00.002-07:00

Back in March 2020, amidst a crashing stock market and outright fear amongst speculators, the primary concern was deflationary pressures as the global economy went into recession. Oil prices went negative in April 2020, and many pundits were speculating oil would "never recover". While not published here, I was expecting a recovery in oil and that has now occurred. Now, all the talk is of inflation concerns. Just as occurred last spring the markets are once again poised to fool the greatest number, and reverse back into a deflationary trend. Below I present a long term Elliott Wave Picture in Crude Oil Prices. From the July 2008 Bull Market top, oil declined over 95% to a low in April 2020, and staged a throw-over of the lower trendline connecting the 2008 and 2016 lows. From that low oil has staged an impressive rally back to the 2018 wave (4) highs, as well as the 50% price retracement from the 2008-2020 decline, a common stopping point for price in Elliott Wave Analysis. Also of note is it has been a Fibonacci 13 years since the 2008 peak. It is fitting that the timing of the cycle wave V high and the cycle wave b high are separated by a Fibonacci number of years.

Given my longer term deflationary thesis in equities and global markets, I do not see oil beginning a new secular bull market. It now appears oil has completed its bear market rally from the 2020 lows, and is apt to continue it's secular bear market. The above notwithstanding, oil could hold up relatively well until the anticipated peak in equities in 2022. Updates will be posted periodically.

A Potential Bear Market Fractal

2021-02-15T15:07:00.003-08:00

It is anticipated the final peak for Supercycle Wave (V) and thus the Grand Supercycle Bull Market will occur in 2022. While it has long been widely held amongst Elliott Wave Practioners that Supercycle Cycle Wave (IV) ended in 1932, and a Cycle Wave I Bull Market occurred from 1932-1937, I present an alternative in which the entire period from 1929-1949 was a barrier triangle. If correct, this interpretation would explain the failure of the bull market to top in 2000 or 2007, as that period from 2000-2009 would be labeled as an expanded flat correction for Cycle Wave IV, with Cycle Wave V, Supercycle Wave (V), and Grand Supercycle Wave III terminating in 2022.

The projected timing is derived from time ratios of the durations of wave a of (IV) relative to the durations of wave b-c-d-e of Supercycle Wave (IV) as a basis for determining the duration of ensuing waves (b), (c), (d), and (e) of Grand Supercycle Wave IV

Under this scenario, wave (a) would last a Fibonacci 8 years, wave (b) would last a Fibonacci 13 years, wave (c) would last a Fibonacci 13+1 years, wave (d) would last a Fibonacci 13-2 years, and wave (e) would last a Fibonacci 8+1 years. Even assuming a margin of plus or minus 2 years for Fibonacci Durations, the internal wave duration discrepancy from a Fibonacci number of years of the entire structure balances out. Finally, the entire Grand Supercycle bear market would last a Fibonacci 55 years from 2022-2077.

An Ongoing Correction

2021-01-04T13:01:00.000-08:00

Happy New Year. The Intermediate Wave (2) Correction that began on September 2, 2020, despite new all-time highs in the stock market, is still ongoing and has taken the form of an expanded flat. The lack of an impulsive wave structure from the October low supports this interpretation.

All expectations are for the market to trace out 5 minute waves down into the intermediate wave (2) low sometime in the first quarter. Should the duration of Intermediate Wave (2) equal Intermediate wave (1), timing symmetry points to a low on February 15, 2021. Additionally, on a closing basis, wave c of (2) would be equal to 161.8% of wave a of (2) at 26,401.46. Previous price targets surrounded the 50% and 61.8% retracement range between 22,600- 22,800. While this is still feasible based on Elliott Wave guidelines, it is less likely due to the expanded flat structure of the correction. Nevertheless developments will be monitored closely. Minor wave c is apt to be sharp, in keeping with typical c waves of flat corrections.

When Intermediate wave (2) completes, Intermediate wave (3) should carry the stock market to new all-time highs. As previously stated, a final top for the bull market is not expected until 2022.

Intermediate Wave (2) Correction Underway

2020-09-04T18:08:00.002-07:00

The Stock Market traced out an extended first wave into the end of April. This has had the effect of extending the entire Intermediate Wave (1) rally since the Primary wave 4 low on March 23, 2020. Intermediate Wave (2) is now due, and should retrace between 50% and 61.8% of the entire rally, as illustrated on the chart below. A 61.8% retracement would also line up with the previous minor wave 2 low, which is a feasible target given that minor wave 5 was relatively short in price. Hence, expect the Dow Jones Industrial Average to find support between 22,600 and 22,800 on a closing price basis. In terms of time, a 50% time retracement of Intermediate wave (1) up from March 23 falls on November 23, 2020.

Of note is the fact that minor wave 3 is shorter in price than minor wave 1, and minor wave 5 is shorter than minor wave 3. It is therefore reasonable to assume this will also be the case for Intermediate waves (3) and (5). This is consistent with the assertion that momentum will wane for quite some time into the final top of the bull market in 2022.

Precious Metals Update

2020-08-11T16:20:00.005-07:00

With all the bullish sentiment prevalent towards Gold and Silver and linear extrapolations out there. It appears to this analyst that both metals are topping out and continuing the bear market that began coincident with the peak in the rate of U.S. inflation in January 1980. Gold moving above the 2011 high was not expected, but it appears to be double topping with that high and staging a dramatic downward reversal into a continuation of the secular bear market that should, if my thesis is correct, draw prices below the 2001 lows at $256.60 and Silver Below the 2001 lows of $4.03.

Potential Important Timing Symmetry

2020-05-27T20:16:00.000-07:00

The Stock Market as measured by the Dow Jones Industrial Average has rallied over 37% from the lows of Primary Wave 4 in March. Elliott Wave Analysis suggests the rally from the March 23 low at 18,591.93 should take the market to new all-time highs above the February 2020 high. The current rally should represent at a minimum, the first intermediate wave up of that Primary wave 5, and possibly only the first minor wave of Intermediate wave (1) of the final stages of a centuries long Grand Supercycle bull market. The above notwithstanding, on an intermediate term basis the stock market has completed 5 waves up and is thus due a 3 wave correction.

Potential timing for the low of the imminent corrective wave 2 may be demonstrated from the time symmetry of the cycle degree wave lows of 4/28/1942, and 12/6/1974. A total of 11,911 days elapsed between those two significant lows. The low of the upcoming correction will not be of similar degree as the cycle degree wave lows of 1942 and 1974, but more similar to that of 12/4/1987, a Primary degree wave low. The timing symmetry that is being illustrated does not precisely match wave degree lows, as the upcoming low is only of intermediate or even minor degree, but nevertheless this potential time symmetry is worth pointing out. Should the market recognize such timing, a low would be implied on 7/14/2020. 11,911 Days from 10/19/1987, the absolute closing low of the crash of 1987, is 5/29/2020, too soon to indicate a low. 11,911 days from 12/4/1987, the orthodox low of Primary Wave 4 of Cycle Wave III, is 7/14/2020. It is possible the market could recognize both sets of symmetry, where 5/29/2020 marks the high of wave 1, and 7/14/2020 marks the low of wave 2. The market will dictate the correct answer.

Stock Market Registers Primary Wave 4 Low

2020-03-18T17:40:00.002-07:00

The Stock Market Appears to have just registered the Primary Wave 4 low. Below I present an alternate count that illustrates an Extension for Cycle Wave V from December 6, 1974 low of 577.60.

Supporting evidence for this count emanates from the fact that a channel encapsulates the important peaks of waves 1 and 3, and the lows of waves 2 and 4. This count is presented on an arithmetic scale, which is consistent with the calculations for price targets conducted on an arithmetic basis. While it is still favored that Primary Wave 4 is correcting the Primary Wave 3 advance from October 4, 2011 to February 12, 2020, this alternate count should be entertained. In any case, it appears the stock market has registered a major low, and new all-time highs should be achieved. On a closing basis, Primary Wave 5 would be equal in length to Primary Wave 1 at 33,519.42. Currently it appears this target will be achieved in 2022. The final wave of the bull market would throw over the upper channel line, before reversing into a true bear market. In 2020 there is widespread panic and fear, and it is quite obvious to the public why the stock market is declining and the world appears headed into a depression: The Coronavirus. This is indicative of a panic stock market crash, not a bonafide bear market. It is simply not how long term tops are achieved. In 1929, the bear market begun with a crash, but it was denied by many observers far and wide. Such is not the case in 2020. Most are afraid for what the future holds. Elliott Wave Analysis suggests a bullish outcome for the intermediate term.

The final bull market top, and for some time following, during the initial leg of the bear market, there will be denial by many that a bear market has begun, and there will be optimistic justifications for a continuation of the bull market. Until such time as the market does register it's final high, at the present time, the stock market appears to be in an extraordinary bullish position.

Taking an Elliott Wave Step Back

2020-03-09T20:32:00.001-07:00

The stock market appears to be at or near the low of Primary Wave 4. It was foretasted on these pages in November 2019 that a sharp correction would occur for Primary Wave 4. That has now occurred, fulfilling the forecast, albeit later than projected. Nevertheless, the market is now in oversold territory and, it would appear, amidst all the calls in the mainstream media for the end of the bull market that began on this very day 11 years ago, set up to once again fool the majority of traders and reverse to the upside in Primary Wave 5, the final wave of the bull market. Even amidst all the fear over the Coronavirus of an imminent stock market decline and recession, the technicals are painting a different picture, as is to be expected at a low. It is the opinion of this analyst that capitulation has taken hold and a bullish reversal will commence shortly. Currently, the bull market should still be on track to end in 2022, but updates will be provided on these pages to track developments as they occur should the market dictate otherwise.

Of particular note should be a pattern that, should this count be correct, have remained consistent in this bull market. Primary Wave 2 traced out a Zigzag, and Primary Wave 4 traced out a Zigzag as well. Intermediate wave (2) traced out an expanded flat, and Intermediate wave (4) did so, too. Should this pattern of lack of alternation by corrections of like degree hold, the market should be tracing out a zigzag for Primary wave 4, of which wave (C) appears to be terminating. The next move should be a thrust to new all-time highs in Primary wave 5, to last many months. Fear is dominant currently in the stock market. Undoubtedly by it's terminus this sentiment will be lopsided, and most investors will be bullish and projecting exponential growth in the stock market. That will indeed be a sign the bull market is in it's final stages and a bear market reversal is due.

Gold to Resume Bear Market

2020-02-24T19:25:00.000-08:00

With all the focus on the Coronavirus and today the sharp drop in equities, few are realizing the selling opportunity in Gold. Those who are watching Gold view it as a crisis hedge, which the market does perceive to be the case at times Regardless of any preconceived correlations. Evidence appears to suggest Gold is about to Resume it's bear market that began in 1980.

Most who are long term bearish on Gold assert the bear market began in September 2011 at $1,923.70. However, it is my observation that Gold in fact was not rising in a bull market from 2001-2011, but a three-wave, counter-trend bear market rally. In Elliott Wave Terms, a b-wave. If I am correct about that, wave c should consist of 5 waves, of which the first and second waves have just completed. Next should be the third wave down, which at a 1.618 relationship would take Gold to $270 per ounce. As hard as that is to believe, my Elliott Wave Analysis suggests that as a target for the next wave of the bear market, which could take a number of years. Wave 4 would then partially retrace the third wave decline, to be followed by a final fifth wave down to complete wave c and the bear market in totality.

Quick Stock Market Update

2019-11-20T19:38:00.000-08:00

The Bull Market is in its tenth year, and still appears to be on track to match or exceed the longest bull market on record, from October 1987-January/March 2000. This would portend a final top in 2022. However, developments will be monitored closely should the market top sooner. In the interim, the market appears to have reached important resistance as evidenced by a trendline dating back to 1987.

In the intermediate-term, the market has likely peaked or will with one more minor new high in Primary wave 3, with a sharp correction due for Primary wave 4, to be follow with one final wave up to end the Cycle Wave V bull market and likely mark a peak that will not be seen again for decades. More detailed analysis to follow soon.

The Bull Market Continues

2018-09-21T11:17:00.000-07:00

It's been 8 months since the January high in equities. With the historically slow summer season over, the market is now trading at all-time highs, ending the corrective period that has persisted virtually all year. While the high in January may have appeared to mark a blow-off top and end to the bull market than began in March 2009, it was stated here that probabilities suggested a long-term top was not approaching. The initial move down was sharp and swift, in line with the forecast given in January. While the timing of the correction was correct, the degree of a top that the market registered was larger than expected, and therefore a minor alteration to the Elliott Wave Count is necessary. It appears the January high marked Minor Wave 1 of Intermediate wave (5). The DOW has caught up with the other major indexes and has made a new all-time high, and Minor wave 3 appears to be in force. Minor waves 3, 4 and 5 still need to complete before the bull market ends. Because Minor Wave 2 was drawn out in time and took a sideways form, Minor wave 4 is expected to be simple, sharp and short in duration before Minor wave 5 commences to end the bull market. Currently, expectations are that minor wave 4 will occur in 2020. If our timing is on track, Minor wave 5 should then take the market to new all-time highs once again until 2022. After that, the biggest bear market in 300 years will commence.

While at first glance of the major indexes it may seem that price action since January through May was a classic fourth wave triangle, upon closer examination of the Dow Jones Industrial Average, the benchmark index for long-term U.S. investor sentiment, made a new low in Late March on a closing basis, and early April on an intraday basis.

As per Ellliott Wave Principle, in a corrective wave that takes the form of a contracting triangle, "Wave C never moves beyond the end of wave A, wave D never moves beyond the end of wave B, and wave E never moves beyond the end of wave C (EWP, p. 90)." In this case, wave C moves beyond the end of wave A. Therefore, a triangle can be ruled out. Instead, it is far more likely that the Minor wave 2 correction took the form of a triple zigzag, with a truncated low in May for the third and final zigzag in the sequence. While this may not appear the correct way to label the correction, truncated ends to corrections do occur. Additionally, the move from early to mid April is not impulsive, suggesting it is still a part of an ongoing correction. The third zig-zag, labeled wave Z, then takes the market down in the form of three wave into early May to end the Minor wave 2 correction. As per EWP, "Sometimes a pattern's end differs from the associated price extreme...in Figure 1-47, the end of wave Y is the orthodox bottom of the bear market even though the price low occurs at the end of wave W (EWP, p.55)." The Dow was the only major index that did not trade higher than their respective February peak for wave X. An argument could be made for wave X ending in March rather than February for this reason. However, wave Y has a proper form of 3 waves when the rally in early March is counted as wave (b) of Y, and the Dow is benchmark index for the U.S. Stock Market, so this labeling appears to be acceptable.

Now that the Dow Jones Industrial Average has made a new all-time high, greatly increasing the probability that the Minor wave 2 correction is over, we can make some projections for Minor wave 3. Currently, the expectation is that Minor wave 3 will not be as robust as Minor wave 1. Looking forward, Minor wave 5 should be even weaker in both participation, price advance and slope than Minor wave 3. Minor wave 5 will be tracked in real-time as it unfolds, but for now, Minor wave 3 appears to be impulsing. Minuette wave (i) progressed in a simple 5 waves into a May high of 25,086. Minuette wave (ii) then took the form of an expanded flat into late June, terminating at 23,997. Minuette wave (iii) is projected to travel 2.618 times the length of wave (i), yielding a target of 28,068 before Minuette wave (iv) unfolds. Minuette wave (v) should then carry the market to new highs once again to end Minute wave i of Minor wave 3. In the near-term, taking 1.618 times the length of Subminnuette wave i yields a target of for Subminuette wave iii of 27,538.

Elliott Wave Structure Analysis of Markets, and other Macro Opinations

2018-01-19T13:44:00.004-08:00

It's 2018, almost 9 years into the current stock market rally that began in March 2009. 2017 saw record low volatility in the U.S. Stock Market, and record levels of complacency and optimism among investors. 2017 marked the first year I did not write about markets since the inception of this blog in November 2009. I felt the need to take a break and let the market do it's thing, as, despite the probabilities assessed in recent years, the great bull market reasserted itself. Incredibly, rather than reversing the uptrend since 2009 and resuming the larger bear market that began in 2000, the market bottomed in 2016, and has accelerated to the upside, amidst a wave of optimism not seen since the 1990's. Taking a step back, however, reveals underlying issues with long-term market structure and has decidedly bearish implications for the long-run performance of the U.S. and Global Stock Markets. Whenever the market does something unexpected, it's wise to zoom out and take a look at the big picture.

As discussed before, in 1974, amidst high inflation and a stagflationary period in the economy, the stock market registered a Cycle Degree low in Elliott Wave terms, and a generational low, and historic buying opportunity, as P/E ratios were in the single digits, and dividend yields were at levels consistent with a secular bear market bottom. The same was true in 1982, coinciding with a disinflationary recession following the peak of inflation and the orthodox peak of the Gold and Silver bull markets. 1982 marked the end of the great secular bear market that had been ongoing since 1966. Following that low in August of 1982, the market took off to the upside in what would become the longest and greatest bull market in history. In 1999, the market peaked in terms of Gold, and in inflation adjusted terms. It appeared to be the end of the great bull market that had at the time, already run much further than expected by traditional Elliott Wave Analysis. That peak in the market was followed by a deflationary secular bear market, which saw unprecedented credit inflation, then deflation as the secular deflationary forces imposed limits to economic growth. The extreme credit inflation following the 2003 orthodox lows in world stock markets was associated with the bear market rally in nominal terms into 2007, which preceded the biggest market collapse since the 1929-1932 Supercycle Bear Market. Despite what appeared as a certain indication the great bull market was over, the 2009 low only turned out to be wave (C) of a flat correction from 2000. The market has since confirmed an impulse to the upside, indicating a bull market. The only topic up for debate now is, exactly what degree the 2009 low represented. Broader macro considerations will be expanded upon in later posts as data continues to become available, but for now, one consideration is the continual and persistent slowing of inflation, over time.

Commodities and Deflation

In 1980, coincident with the peak in inflation, the Gold market registered an orthodox top, that in my opinion, has not been exceeded. My thoughts on the matter can be found by Clicking Here. Others may disagree, but I think the case is strong. Nevertheless, I digress. What is not up for debate, is that inflation on the whole, has been slowing since 1980. The robust bull market of the 1980's and 1990's, coincided with disinflation (slowing inflation), and was foreshadowing a period of deflation, just as in the 1920's, preceding the Supercycle bear market and Depression of the 1930's.

Below is a chart of producer prices during the 1920's bull market and proceeding depression. Prices made a lower high in conjunction with the final bull market peak.

Current Chart:

Here in the current time period, prices declined in conjunction with the deflationary collapse in 2008, but moved to a new high in 2014. The current chart that better illustrates the analogy, though, is the chart of the Reuters/Jefferies CRB Index of Commodities, a global measure of commodities, and in turn, over time, trend in inflation and deflation. As is evident on the chart, prices bottomed in early 2016 in conjunction with the stock market, and have rallied off those lows. Similar to the 1920's, I expect this chart to peak at a lower high in conjunction with the final Grand Supercycle Bull Market top in stock prices. Inflation should pick up as unprecedented optimism acts as an impetus for business owners to expand their businesses, and the perceived benefit to tax-cuts and other regulations are cut. The key though, will be a peak of inflation and commodity prices at a lower high, just like 1929. The ultimate outcome circa 2022, should be a resumption of the long-term bear market in commodities, and this time, unlike 2008, an outright deflationary depression.

I will provide an update to the socionomic implications to politics and economic policy more in later posts, but for now, suffice it to say, the appearance of expansionary policies such as tax cuts and regulation reductions, is self-fulfilling as social mood trends more positively, the stock market rises, and business owners expand hiring and consumers increase spending. In the end, the real driving force, and all that matters with respect to markets and economies, is mass psychology and social mood, despite strong and widespread opinions to the contrary.

Given recent market developments, it might be tempting to label the lows of March 2009 the end of a great bear market, and the beginning of a new generational bull market in equities and economic expansion. However, upon closer examination, this argument does not hold up. Below is a chart published by Doug Short over at Advisor Perspectives, plotting the monthly average of daily closes, and creating a regression channel, which illustrate the move above and below the mean regression line during bull and bear markets. As is evident on the chart, previous generational lows, namely, 1932, 1949, and 1982, all experienced moves below the mean regression commensurate with the bull market move that preceded it.2009 however, did not, registering only a 17% move below the mean regression line. Given the 2000 top moved 136% above the regression line, far exceeding any move in history, it would be reasonable to expect an undershoot commensurate with the size of that bull market. Historically speaking the absence of this condition, makes the supposed secular bear market low, questionable at best.

If 2009 was not a generational low, then what did it represent? It would appear, as far fetched as this sounds, that the bull market from at least 1932, and likely from 1974, never ended. That would mean the 2009 lows marked a low of either Primary or Cycle Degree. Below are the top interpretations.

Primary Long-Term Elliott Wave Count:

Elliott Wave Structure thus far for Primary wave 5:

Alternate Supercycle degree Interpretation:

Despite the extremely bearish long-term implications of The Elliott Wave Principle, momentum analysis suggests extreme buying pressure, and thus a long-term peak is not imminently approaching.

High readings on Momentum Indicators can somtimes be interpreted as a sell signal, however, in certain cases, it indicates extreme buying pressure and optimism, and rather than indicating an imminent reversal in the market, can indicate a continuation of the current trend. That being said, the RSI reading at 99%, is extremely high, and in my opinion is a testament to a final burst of optimism. Nevertheless, the analyst should not assume this means a crash will necessarily follow. As is evident on the chart, what is likely to follow is a relief of the overbought readings, and divergences as the market keeps advancing to it's final bull market high. Each bull market is different with respect to the RSI profile, as is also illustrated on this monthly chart above of the Dow Jones Industrial Average. We might therefore expect that while there are likely to be divergences, the setup at the final bull market peak will not look like 2000, or 2007, but unique, entirely dependent on the Elliott Wave sturcutre that the market traces

Shorter-term, the market appears to be completing the rally that began in August 2017. Given the relatively low degree of the top, however, only a shallow correction is expected.

Although 2016 fits well as a fourth wave, there are some indications that it did mark a higher degree low than 2011, which would imply the 2014-2016 correction, in Elliott Wave terms, was correcting the entire move from 2009. While this doesn't appear likely given the shallow nature of the correction at only 12% from absolute high to low (as opposed to orthodox high to low), in order to be objective, the possibility should be entertained. Below is a chart illustrating this possibility, though the chart is not drawn to scale, and should not be taken as a price projection. Under this interpretation, what is a possibility from a price perspective, however, is that, given the current parabolic nature of the rally, intermediate wave (4) is sharp, sets up severe momentum divergences, and intermediate wave (5) ends up being relatively short-lived, in time and/or price.

Another consideration is the likely occurrence of the 34-year cycle low, a Fibonacci duration cycle, and the last occurrence of which in 1982 marked a very significant long term bottom. This time around, I think the cycle will peak in a highly left-translated fashion, or, put another way, the bull market will peak long before the mid-point of the cycle, leaving many years for the ensuing bear market to unfold.

The market is impulsing to the upside again, that is without question. The question that remains is, how far does the bull market go before the whole Grand Supercycle degree wave of Optimism is finally over? As R.N. Elliott himself stated, time is the least reliable when conducting Elliott Wave Analysis. Nevertheless, given the Fibonacci duration of stock market rallies- case in point, 1921-1929 8 years in duration, 1932-1937 5 years in duration, 1982-1987 5 years, 1987-2000 13 years, 2002-2007 5 years- Since the bull market is now in it's 9th year, this analysis suggests a 13 year bull market, and thus a top in the year 2022. Due to the unprecedented nature of the bull market, and it's extreme extent and duration, it is reasonable to give that time projection some leeway. If the market tops in 2021 or 2023, we can consider that Fibonacci time projection fulfilled. One of the characteristics of bull market tops in equities is momentum divergences. Given that none exist on a long term basis at the moment, it is not likely the market is topping now. Regardless of the exact timing of the ultimate peak of the bull market, the stock market, and no doubt other credit markets, should be running into severe trouble by 2021, with some sectors topping early, as divergences build to set the market up for the final bull market top. The proceeding bear market will be of Grand Supercycle degree, and last for decades.

This is an exciting time for the market, and 2018 will not be a continuous lull in volatility as in 2017. Correction will be sharp and fast, as the market continues to trace out Elliott Waves into the final bull market top. I will provide updates on both a short and intermediate term basis, as conditions warrant or as time permits.

Update on Markets, Other Developments and Observations

2016-12-02T20:59:00.001-08:00

With the Presidential Elections now over, many are speculating as to what it will mean for the future of the U.S. and Global Economy. But those who follow the Elliott Wave Principle and its resulting real-time implications know the correct framework with which to interpret these events, and therefore are more likely to be correct at major turning points. It would appear that the current juncture is one such occasion. This is a financial blog, so I refrain from expressing political opinions, but I'll make an exception in this case, as the current political environment is too exciting not to comment on as it relates to social mood and the implicated Elliott Wave position of the stock market. While it is normally logical to assume that the election of Donald Trump will change the course of the United States of America, the Elliott Wave model and the new science of Socionomics teaches us that the election of Donald Trump, rather than being a cause of anything, is actually a result of the wave position of social mood, and therefore indicative of the wave position of the stock market and economy. Once this causal link is established the question still remains, is the election of Trump bullish, or bearish for the future of the U.S. Economy? The answer multi-faceted and complex.

While Pro-Trump voters are elated with the election of their candidate, and the biggest political upset in modern election history, some are also going out on a limb to say that Trump is another Ronald Reagan, and this is just like 1982. At first glance, it might seem tempting to adopt such a viewpoint- both individuals are non-career politicians, and appear to have the best interests of the people at heart, rather than cronies in business and politics, as is the case with many other ordinary politicians. However, it is a mistake to compare the two as if history will repeat, or even rhyme as it often does. The essence of the Elliott Wave Principle tells us that markets and economies repeat history in a fractal form rather than a linear form. This is an important distinction because it prevents the analyst from making the fatal error of assuming, in simplified terms, that the outcome in the next period will necessarily be equal to that of the current period. In forecasting, this method is called the naive model of forecasting- it has that name for a reason. The analyst would be remiss if he assumed outcomes repeat from one instance to the next, and by association, assuming that trends are linear in their nature. Whereas many forecasting techniques in business are not forward looking, and rely on past data to predict future outcomes in a linear fashion, the Elliott Wave model is one of fractal repetition, meaning trends are self-similar at all degrees. The perspective of an Elliott Wave analyst is one of being able to anticipate not only change, but change in trend, at exactly the point at which most observers would be caught off guard. Elliott Wave analysts have a leg up from other disciplines for this reason. I said all that to say this: It is dangerous to assume this is 1982 all over again, first and foremost because this is not 1982, it is the year 2016.

Aside from the fact that outcomes change from one period to the next, in this case 1982 versus the current juncture, 2016, there are many other vast differences between 1982 and 2016. Most people who would agree with this statement would give all the fundamental economic differences, and many are quite valid, between the two junctures, such as the level of national debt, household debt-to-GDP ratios, labor force participation rate, etc. But I'll spare that discussion in this piece, because the technical evidence that is available stands on its own.

First and foremost, in 1982, the P/E Ratio on the Standard & Poors 500 index on August 1, the month of the final secular bear market bottom in real terms, stood at 7.97, with the dividend yield at 6.23%. This is historically consistent with secular bear market bottom characteristics of undervaluation in equity shares and high dividend yield. As of February 1, 2016, 10 days before the low of the year in many equity indices, the S&P 500 P/E ratio stood at 22.02 and the dividend yield was 2.27%. The valuations at the 2016 bottom are simply not consistent with historical secular bear market bottoms. Therefore one can say, 2016 was not a value low, and thus not the end of a secular bear market. Another major difference between 1982 and 2016 is the fact that in 1982, manic activity in financial markets was nowhere to be found, as investors were highly pessimistic about the future of the stock market and economy. One might argue that the public is pessimistic now, and they are, but only to a degree. That will be addressed next, as there is quite an interesting dichotomy that appears to be unfolding now that also provides evidence. But first, some charts of common, well-known companies and indices:

Amazon.com, Inc.

Amazon.com, An internet retail company, has advanced 2,082% since December 2008, close to the low of the last bear market in equities. This is a parabolic advance and indicative of speculator fervor and optimism, not undervaluation and pessimism. Additionally, a P/E ratio of 169 is extremely high and again indicative of extreme optimism.

Apple, Inc.

Apple, Inc. a computer, cell phone and electronics manufacturer, has advanced 1,104% since January 2009. With a P/E ratio of 13.22, the company is not anywhere near as overvalued as Amazon.com, however Apple's dividend yield of only 2.06% is hardly attractive. Here again, a major company, in this case the biggest company in the world by market capitalization, has run up in a parabolic fashion, something that should not be occurring at the beginning of a new secular bull market.

The Priceline Group Inc.

The Priceline Group, an Internet Travel Company, has advance a mind-blowing 3,446% since October 2008. It's P/E Ratio is currently sitting at a lofty 37.60. Here again, this is a company that has been bid up by investors to extreme levels, further indicative of manic levels of optimism in the financial markets.

Amex Biotechnology Index

These stock manias are not isolated examples, either. The Amex Biotechnology Index has advanced 778% since November 2008, again illustrating the manic behavior of stock prices.

If these examples aren't convincing enough, look no further than the Dow Jones Industrial Average itself, which, at the February 2016 low, was 31.9% above the level of the start of the secular bear market in January 2000. Compare that with the 1982 low, which was 23.6% below the level of the start of the secular bear market in February 1966. Additionally, the nominal stock averages registered new all-time highs in 2013, a full three years before the supposed end of the secular bear market here in 2016, amidst a rally that is even more parabolic than the rally in the late 1990's. This again further serves to confirm the terminal nature of the rally in equities.

Given the weight of the evidence, from individual stocks and indices staging parabolic advances since 2009, the lack of a value low in 2009, as well as the continued move to new all-time highs all throughout the supposed end of a secular bear market, which would be labeled at least one degree higher than the secular bear market of 1966-1982, the stock market is acting much more like the end of a secular bull market, than the beginning of one.

The Bond Market

Bond prices appear to have finally peaked, yet another beneficiary of the great bull market. The 35-year rally in government bonds, and decline in yields, has been coincident with the rise of most other assets since 1982, when Primary wave 3 of Cycle wave V in the stock market commenced, and the financial mania that is incredibly still ongoing to this day began. While many believe bonds move opposite to stocks, on a long-term basis that isn't true, and they have for the most part, both been in an uptrend since the early 1980's. The peak in the bond market is being interpreted by some to mean money will begin flowing out of bonds for many years, and into equities, and that this is therefore bullish for the stock market. That thinking is much more likely to be representative of investors justifying their optimism at a major peak, then an actual likely scenario for the future. The rise in bond yields likely represents both a burst of optimism near a peak with a widespread belief that business activity will pick up along with a demand for loans, which would then justify a rise in the price of money, interest rates, as well as the stealth beginning of a bear market in debt instruments; namely, most corporate and municipal debt as the economic depression intensifies, and entities both public and private are forced to declare bankruptcy and default on debt obligations, rendering many bonds worthless or nearly so. While the U.S government itself may not declare bankruptcy, the rise in long-term interest rates is more likely to be indicating investor fear of default, and a move out of bonds, than a sustained trend of economic optimism. The decline in bonds, as well as a myriad of other markets that have been expressions of long-held optimism, is likely to go from orderly, to disorderly as pessimism begins to dominate diverse financial markets all over the world. The Federal Reserve is also likely to be forced to raise raise their own target rates during a financial collapse, as the bond market demands ever higher rates of return, just as during the 1929-1932 collapse. Built up excesses over the past few decades are about to come unwound, and it will result in a total collapse of financial assets around the world. Nevertheless, topping is a process, and in the meanwhile, while the last of the financial markets top out, the current mix of optimism and pessimism as reflected in the rise of bond yields, is likely to remain until the U.S. stock market registers a final high. Additionally, this market psychology hybrid dynamic that appears to be occurring in the bond market, is not limited to the bond market by any means. It is indicative of the end of the giant Grand Supercycle topping process that began in 2000, and a transition from bull market psychology, to bear market psychology.

The Current Optimism/Pessimism Duality

One may come to the logical conclusion that this has been a secular bear market given all the turmoil around the world and in the U.S. since 2000, but given the weight of the technical evidence, question that thesis. The answer is, it would appear, while the rest of the developed world has been in a clear secular bear market, with many European equity indices nowhere near all-time highs, save for Germany, the U.S. has been the last holdout, and is the last one to top. This stands to reason, given that globalization and the resulting effect on world economies has been mainly a function of the agenda of the U.S. Government and Corporations. Put another way, the driving force behind the economic expansion of the great secular bull market in western civilization, globalization, is centered right here in the United States, so it stands to reason that the U.S. economy would be the final holdout in the giant expansion that is Cycle Wave V of the supercycle bull market.

The election of Donald Trump, at least in so far as the electorate believes, represents a repudiation of that policy. Whether or not he actually carries out that agenda is irrelevant to this analysis, because what is being examined here is the election of Donald Trump as it relates to, and indicates, the wave position of the United States. Trump appears to be both an expression of optimism, as well as pessimism. A populist president has not been elected in many, many decades, and it's clear there are big changes afoot in U.S. politics. People are tired of establishment politics and corruption, and the election of Donald Trump brings this phenomenon clearly to light. On the one hand, arguably the biggest political shakeup in U.S. history indisputably represents negative social mood and upheaval, common characteristics of a secular bear market. Also of note, is the fact that all throughout the supercycle bull market that began in 1932, an establishment politician has been president. Now, that mentality has been repudiated by the american public. This is something that has not occurred during the entire bull market. The shift in mood that has brought on this change in politics, may also be indicating the end of the supercycle bull market that accompanied establishment politics. As market market technicians, we look for changes in character to indicate a change in trend before most other analysts recognize it as such. This change in U.S. politics certainly qualifies. From a social mood perspective, while it may appear at first glance that the election of Trump is representative of upheavel and bear market mood, on the other hand, the election of Donald Trump amidst his promises to "Make America Great Again", and the sudden burst of optimism about the future of the country this has appeared to invoke, could well be interpreted as a contrary indicator, and indicative of a top in equity markets, rather than the beginning of a new secular bull market. Put another way, this type of new-found hope was not present in 2009, at a significant stock market bottom, but now that the market has rallied for 7 years, people are finally optimistic that good times are coming back. Given the imperative that the public is always wrong, and can therefore be used as a contrary indicator, it would appear the current euphoria and new-found hope, especially given the weight of the technical evidence in the stock market, is more indicative of a terminal move, than of the beginning of a new bull market. This combined with the underlying rot of the debt-money system, extreme overvaluation in financial markets, and the pessimism and upheaval that is clearly taking place on the streets, with some chanting Donald Trump is "Not My President", suggests a major shift is coming. Further conflicting evidence can be found in arena of scandals. Wells Fargo is in the spotlight as it is being revealed that employees of the bank, in an ill-fated attempt to meet their quotas, created fake accounts in customer's names, with those same customers being charged bogus fees for an account they didn't open. This type of fraud happens all the time, but it's during periods of negatively trending social mood when they are exposed, as people focus on the negatives more than the positives, just as there are more sellers than buyers in the stock market. The Wells Fargo Scandal is clearly indicative of negative social mood, but in another instance of social mood sensitive outcomes, people have spent a great deal of time focusing their attention on Hillary Clinton and the Clinton Foundation as criminal entities. But, amidst all this supposed pessimism, she wasn't even prosecuted. More recently, with the market trading at all-time highs, the now President-Elect Donald Trump said he wouldn't even carry out his campaign promise of hiring a special prosecutor to investigate and possibly jail Hillary. If mood were decidedly bearish, Hillary would likely be well on her way to jail already, and yet with all the time and energy the public has spent on her, she appears, for now, to be off the hook. When social mood turns down for good, there is a very real possibility Hillary will be investigated once again, and prosecuted. It is social mood and perception that is driving all of these social and political trends, not objective analysis and reality itself.

While it is tempting to draw parallels between Trump and Reagan, and declare a new era is upon us, the data cannot be ignored, and the very real possibility of a financial crash and economic depression must not be taken lightly. This being said, because Social Mood has been declining for well over 16 years now, since the first quarter of 2000 when the Dow priced in ounces of Gold topped, and the whole global secular bear market began, it would not be surprising to see a divergence at the ultimate low of the supercycle bear market between social mood and stock prices. It is quite possible that the social upheaval that lead to the election of Donald Trump is setting up for an upcoming low in social mood. While the financial markets are imploding, and the economy is tanking, it would be with the understanding of the american people that what is collapsing is the old way of doing things, and it would be a welcome change, again indicative of the repudiation of Keynesian economics, crony capitalism, and establishment politics. This divergence where social mood would begin a basing pattern, while stock prices and the economy collapse, would serve to balance out the divergence that has occurred on the other side, where nominal stock prices have remained elevated, yet social mood has clearly deteriorated for many years now. Also supporting this scenario is the notion that the coming Supercycle collapse in stock prices is only supercycle wave (a) of a larger, Grand Supercycle bear market, so there may not be a basing process with stock prices, as there was after the 1929-1932 Supercycle collapse, and the 1966-1974 Cycle degree bear market. From a secular perspective, then, we can say that while stock prices are approaching a major price peak, this leg of the secular bear market that began in 2000 is getting very mature in terms of time, and a low might therefore be approaching, both in the economy and the stock market, sometime in the early 2020's. If that turns out to be correct, then needless to say our new President would be in for quite a wild ride in popularity. Perhaps another pertinent observation is that as the country approaches a Grand Supercycle peak, it is fitting that Trump, who is the epitome of everything the United States has represented- wealth, hard work perseverance, discipline domination, and victory- is president at the very peak of it all. The question is, will he also be the justification for a turnaround in both social mood and financial market stability at the final low. People blame or credit the sitting president with whatever happens in the macro picture, so Trump's legacy will depend on whether the market tops and collapses in 2017, or after some years of stronger economic growth. If the market decides to extend even further beyond 2017, Trump would likely be re-elected and the crash would come in his second term, rather than his first. While people will credit or blame Trump for the economic outcome, Socionomists and Elliott Wave Analysts know better, and we will be analyzing the market, social mood and social action in real-time, without political bias.

Stock Market Elliott Wave Picture

One possible scenario for the end to the bull market, is an ending diagonal, which should ideally finish sometime in 2017 to mark an 8-year bull market, the same number of years that attended the 1929 Supercycle top. Short-term, the market is extended and likely to correct in wave b of 3. If this count is correct, the market will continue to push higher to complete the ending diagonal, with waning momentum, into the final high in 2017, at which point the market will crash, to kick off the Grand Supercycle bear market in nominal asset prices, just as it did in 1929. Except, this time the market is about to register an even larger degree top, so I would not be surprised to see a swifter collapse. Either way, it will be quite a sight to see.

If I am wrong in my analysis of this election cycle and the resulting implications for the stock market and economy, so be it. But what may appear to be one thing on the surface, may actually be another entirely when properly analyzed. The evidence is undoubtedly mixed, but based on the data at hand, this is much more likely to be a final rally of the great bull market, than the beginning of a new secular bull market. Either way, there are big changes coming, and volatility is about to pick up in a big way, financially socially and politically. It's important to position portfolios and assets now accordingly.

A True Market Milestone

2016-09-09T23:19:00.001-07:00

When I started this blog in the Fall of 2009, I never knew how profound its title would become. An Elliott Wave sequence consists of five waves in the direction of the one larger trend, and three waves against it. All throughout the years since I began writing, I strongly maintained that the rally in the U.S. Stock Market, as tracked by the Dow Jones Industrial Average, was a bear market rally and that the ensuing decline would be a resumption of the ongoing bear market. Given the technical and fundamental evidence at hand, I had almost, though not completely, ruled out an impulse wave. But it appears this year, the market has proven me wrong. The market has advanced beyond the acceptable lengths for a b-wave advance-161.8% of the preceding decline is usually the limit. While I have kept an impulse count as an alternate, it was not preferred, due to the plethora of evidence that suggested it was a bear market rally. That being said, the global secular bear market that began in 2000, has certainly not ended, and is still ongoing.

The Dow Jones Industrial Average, by far the most popular and widely followed index, and thus the best barometer of the collective psychology dynamic, has traced out an impulsive five-wave primary degree advance since March 2009. The above notwithstanding, other than the Elliott Wave labeling of the rally that began in March 2009, nothing else has changed, and the stock market is still in the Grand Supercycle peaking process that began in 2000. The wave that is terminating now is the fifth primary wave from the 1974 cycle wave IV low, the fifth Cycle Wave from the 1932 Supercycle wave (IV) low, and, as Robert Prechter points out, probably Supercycle wave (V) from the low of the last Grand Supercycle Bear Market in western civilization, which was measured using British Stock Prices, and bottomed in 1784. Below please find an updated Elliott Wave Count for the U.S. Stock Market, as measured by the Dow Jones Industrial Average.

Primary Wave 5:

Wave Label Reasoning

Allow me to preface this section by stating that labeling waves since 2000, and especially since 2009, has proven to be extraordinarily difficult, due to the highly unprecedented nature of current market dynamics.

It is understandable and perhaps even expected that Elliott Wave Analysts should balk at the idea of placing the orthodox end of intermediate wave (1) at the 12,753.89 high in July 2011 rather than at the 12,876 high in May 2011. After a failed flat for wave 4 of (1), which usually indicates strength in an uptrend, it is highly unusual for a fifth wave to truncate, or in other words fail to make a new high. However, it appears appropriate in this case due to the fact that there is no clear completed impulse pattern from March 2009-May 2011, as well as the fact that if one were to label the orthodox top of wave (1) in May 2011, the move down from May 2011-October 2011 would count as five waves, which is a definite rule breaker for a corrective wave (2). At first glance, labeling the end of wave (1) may appear apt, with the move from the March 2011 low at 11,555.48 to 12,876 in May 2011 being the fifth wave. But, the issue lies within the supposed fifth wave itself. Within an impulse, all subwaves must themselves contain five waves. As per Elliott Wave Principle by Frost and Prechter, "...each subwave 1, 3 and 5 is a motive wave that must subdivide into a "five", and each subwave 2 and 4 is a corrective wave that must subdivide into a "three" (EWP, p. 23). In this case with intermediate wave (1), however, the assumed fifth wave is only composed of three waves, and not the required five to make it a valid impulse wave. Yet another way to label the move would be an expanded flat for wave (2), beginning in April 2010, but here again, the move from March 2011 to May 2011, wave c of B in this case, is not itself composed of five waves. Please see below for a visual of what is being alluded to:

Consequently, the only valid way to label the move from March 2009 to May 2011 is Minor Waves 1 through 3, with May 2011 marking wave b of an expanded flat for Minor Wave 4 The only issue lies with the fact that wave c of the expanded flat truncated, yet the subsequent wave 5 did not make a new high. Normally this would be considered invalid, but the Elliott Wave discipline is one of assessing relative probabilities, and it appears to be the best option given the qualitative evidence at hand. Of note, however, is the fact that the Dow Jones Transportation Index, a very important barometer of economic activity, consisting of companies transporting the nations' goods, made a new high in July 2011 as well. The fact that the Dow did not was a classic Dow Theory non-confirmation, and was warning of an impending decline. The Nasdaq 100 index did register a new low for wave c of 4, as well as a new high for wave 5. This is not a justification to unequivocally say the impulse pattern presented is valid, but it does, in my estimation, lend credence to the aforementioned wave count. If the orthodox top of wave (1) is labeled at the July 2011 high, that would make the move down to the October 2011 low a clean zigzag pattern, with wave C of (2) being an ending diagonal, which seems consistent with the end of a second wave. An ending diagonal sets the market up for a powerful move in the other direction, which again is consistent with the beginning of wave (3). Wave (4) in my judgement is best labeled as a double three combination correction. The alternate would be a double three combination composed of a zigzag for wave W, and a barrier triangle for wave Y. The barrier triangle option is not favored due to the fact that the Dow is the only major index that did not trade below it's 2015 low, on an intraday basis, in 2016, and a rule of triangles is wave C cannot move beyond the end of wave A. A common Elliott Wave count has the low of wave (4) in October 2014 at 15,855.12. This count is not favored here because the move from October 2014 to May 2015 is three waves, and not five. This suggests the move is part of an ongoing correction rather than an impulse wave. Please see below for a detailed wave count for Intermediate Wave (4):

I would be remiss if I did not mention the fact that, back in late January of this year, 2016, the Dow had formed a near perfect channel, with a line connecting the highs of waves 1 and 3 running parallel to a line connecting the lows of waves 2 and 4. I myself had shown this very channel, near the low of wave (4), but failed to recognize it as such. Sometimes, the simplest answer is the correct one, and that was certainly the case this time. The good news is, that channel is still very much intact and should be useful for the remainder of the bull market. As R.N. Elliott, the founder of Elliott Wave Theory himself noted, "Elliott noted that a parallel trend channel typically marks the upper and lower boundaries of an impulse wave, often with dramatic precision" (EWP, p.71). Below please find an updated chart illustrating the impulse channel that the market has created.

The Dow has been in a Cycle Degree Bull Market since December 1974. For a long time, I had maintained that the bull market ended in 2000, with an alternate count implying it had ended in 2007. Only as a second alternate, in order to remain objective, was an impulse count presented that suggested the bull market was still ongoing. Given the current structural evidence at hand, however, it does appear that the bull market never did end, and instead will make its final high with the rally from the 2009 lows. If one studies the following chart as it pertains to the guidelines of Elliott Wave Theory, it would not seem right to label the March 2009 lows as Primary wave 4. However, it appears that an expanded flat correction unfolded from January 2000-March 2009, and expanded flats are consistent with a fourth wave. The fourth wave, then, served to relieve the overbought condition of the market since 2000. To be clear, it has not properly relieved the overvaluation that was present in 2000. That move from overvaluation to extreme undervaluation is coming once the bull market in nominal stock prices, the last holdout of the Grand Supercycle Bull Market itself, finally ends. Perhaps a justification for the fact that the fourth wave was unusually deep is both the shallow, sideways nature of the second wave, during the bottoming process. Now the market is topping after Primary wave 4 as part of the Grand Supercycle topping process. Although unusually deep, the volatile Primary wave 4 alternates well with the relatively shallow and sideways nature of Primary wave 2. On a fundamental level, the main driver for this Cycle Wave V bull market has been credit inflation and liquidity expansion, encouraged by central banks around the world. These dynamics were not occurring on any comparable level following the Cycle Wave II low in 1942. In 1971, President Nixon closed the gold window, which cut the final link of the U.S. Dollar to Gold. The only new dynamic that began unfolding after the March 2009 low was QE, which is really just more of the same credit pushing that the Federal Reserve Bank has done since its inception in 1913. While not strictly quantifiable and defensible, it would appear that there would need to have been more of a fundamental change in the monetary and banking system dynamics for the 2009 low to have represented a Cycle or Supercycle degree low. Luckily, there are other metrics that do prove 2009 was not a "generational low", such as the P/E ratio and Dividend Yield, as alluded to many times before on this blog. They simply were not anywhere near levels consistent with a secular bear market bottom.Thus, it is reasonable to conclude that the bull market that began in 1974 did not end, but rather paused between 2000-2009, during which time the market traced out an expanded flat correction, in preparation for the final wave to new all-time highs to cap the Grand Supercycle Bull Market.

Still further evidence for an ongoing bull market, is inflation-adjusted stock prices, which have made another all-time high, and which made a new low in 1982, even though in nominal terms, the Dow's bull market had already begun in 1974. In 2009, the inflation adjusted stock prices had been in a downtrend for 9 years, since the overvaluation peak of 1999/2000. The fact that stock prices on an inflation-adjusted basis made a new low in 1982, amidst a known secular bull market and had a substantial setback from 2000-2009, lends credibility to the idea that both were within the current secular bull market in U.S. stock prices, especially when the relatively shallow nature of the setback that inflation adjusted stock prices had from 2000-2009. The next peak in stock prices will be the final one in the Grand Supercycle topping process and will include both inflation adjusted stock prices as well as nominal stock prices, very similar to 1929.

The stock market is completing a Supercycle Degree move, and probably the Grand Supercycle that began at the founding of the United States. The fact that prices have remained above the supercyle channel for so long, and the asset mania has gone so far, simply serves as evidence of just how big of a top the stock market has been in the process of forming.

Timing of the Grand Supercycle Top

Now that we have established that the Cycle, Supercycle and Grand Supercycle bull market never ended, when might the market finally top? If we gather the weight of the evidence to portend a top of Grand Supercycle degree, when might the final peak actually happen? Clues are often found in the Fibonacci sequence, and the relationships between major turning points in history. As alluded to above, the low in British Stock Prices, was in 1784 after a 64-year bear market following the peak of the South Sea Bubble in 1720, the last Grand Supercycle top. Because U.S. Stock data only goes back to the mid to late 1800's, we need to rely on another data source for the Elliott Wave position of western civilization prior to the founding of the United States. Hence using stock prices in Great Britain, which originally founded the 13 colonies. The data was compiled by Elliott Wave International. If the year 1784 was in fact the start of the current Grand Supercycle advance in western civilization, we might conclude that the peak in the final holdout of that bull market, U.S. nominal stock prices, will occur a Fibonacci 233 years from 1784, which is 2017. This would also mark an 8-year bull market from March 2009, the same number of years that occurred in 1929, the last Supercycle top. However, the one caveat here is that unlike counter trend waves, which are limited as to their allowable entrancement, impulse waves can extend, and go on far longer than anyone thinks. The most recent example of this is U.S. stock prices in the 1990's. The market kept subdividing and subdividing, until the final peak of the overvaluation in March 2000. Since the market is about to register a Grand Supercycle high, there is no Elliot Wave rule saying it can't extend further in time and price, although given the global financial picture, it is unlikely. Nevertheless, in order to remain objective, should the market choose to stretch the bull market even further, we might look for a top in the year 2022, which is a Fibonacci 13 years from 2009, and a Fibonacci 233 years form 1789, another acceptable starting year of the Grand Supercycle in western civilization.

From October 9, 2002 to October 11, 2007, on a closing basis, the market rallied for exactly a Fibonacci 5 years. If the following rally, from March 9, 2009, were to rally for a Fibonacci 8 years, the next number in the sequence, the market would top on or about March 9, 2017. The year 2017 is certainly compelling for a top from multiple mathematical and historical standpoints. We'll just have to see.

Bull Market Aftermath and Macro Picture Observations

As shown before on this blog, the valuation peak was 2000, the peak in credit inflation was in 2007/2008, and the final peak in the 16-year topping process to date, will be the liquidity peak, after which time, the phony debt-based financial and monetary systems will collapse under their own weight.

The fact that global central bank have supposedly "held down" interest rates is commensurate with the degree of a top we are forming. But, the myth that central banks control interest rates is just that, a myth. As illustrated by only a handful of analysts, the FED does not "set" interest rates, but rather follows the short term t-bill market for clues on what to do. Therefore, rather than the FED "keeping interest rates low", it has actually been the market which has simply not demanded high rates of interest for the opportunity of keeping their money in perceived safety with governments. While this may seem like a ramification of pessimism and an excuse by market and economic pundits to claim when interest rates rise, it will be reflective of an "improving economy", upon closer examination and deeper analysis, such is not the case. Please CLICK HERE to view a prior blog post explaining the true dynamic of FED operations, and why the FED is not omnipotent.

For debt instruments, interest rates move in the opposite direction as prices. As the price rises due to increasing demand, the interest rate falls. While it is true that The willingness of lenders to keep their money with governments at such low rates, or even paying the government in the case of negative interest rates, to keep their money in an entity perceived as safe, it is not the only reason interest rates are low. Interest rates on other high-yielding instruments have in recent history gotten to historically low levels, too, and thus the prices high, and that is reflective of optimism. The fact that investors are trusting governments, who are notorious for stealing from the public through inflation and taxation and wasting the money, is also reflective of a complacency in that regard, albeit much more suttle than the manic overvaluation peak of 2000. Which brings up another point. The system has been held up over the past 15 years by credit inflation and liquidity expansion. This has manifested itself in overvaluation first in tech stocks, then the blue-chip stocks, followed by commodities, and when that fever ended investors jumped to bonds, after getting tired of being burned. A noticeable pattern is found in the progression of markets where investment manias are present. Since 2000, when the global deflationary secular bear market began, and with it the Grand Supercycle topping process, bubble after bubble has been inflated by the market, but a thoughtful analysis will reveal each one has gotten progressively more conservative. Additionally, this type of reasoning has each time been used as an excuse as to why "this time is different" with each successive mania and to thus rationalize buying into each one. Starting with the tech bubble, stock in companies can become worthless and go to zero,especially tech startups with no earnings and no history. When people lost their retirement in that because they had bet the farm, they moved into housing, because everyone needs a house, right? When investors found out the answer the hard way, they decided to move into blue-chip stocks, because they have a long history and couldn't go down. Well many companies in the Dow did go down, some a long way. Then as 2008 approached investors shifted their focus to commodities, because the world always needs commodities. The CRB index of commodities, proceeded to collapse 67%, from peak to trough, so far, and as shown before, is now below the 1999/2001 lows. Now, investors "get it". They understand they shouldn't risk money in risk assets, so they have turned to bonds, because bonds are safe investments. But the irony is, the bond bubble is the biggest of them all, and when it bursts, it will bring down the entire financial system with it. Nevertheless, The Elliott Wave Principle and the psychological dynamic of financial markets, has taught us that when it comes to finance, perception becomes reality. With the perceived safety in bonds, bond prices continue to be bid up, hence the continued move to historical new lows on government bond yields. The answer as to when the bond bubble will burst is when collective psychology finally turns for good, and the Grand Supercycle Bear Market truly begins. In 1929, bonds crashed right along with stocks, and that is the real reason why the FED "let it happen". The central bank gets harsh criticism for tightening credit conditions in the 1930's during a financial panic, and that is given as a reason why the depression was so severe, when in fact, unbeknownst to most, the FED simply takes cues from the market for treasury bills, as to where to "set" interest rates. So, Rather than the FED "choosing" to be asleep at the switch in 1929, it was the Supercycle degree top in stocks, coupled with a bond market collapse, along with the stock market in 1929 amidst a secular deflationary cycle, that was responsible for the severity of the financial panic and resulting economic depression. This time, rather than markets peaking together, it has been a much longer and more drawn out process, because the financial top that is coming is of one larger degree, a Grand Supercycle degree bull market that began in the 1780's, right after the founding of the republic.

As this update nears its end, I wanted to touch on something important yet widely overlooked, and that is the concept of dis-inflation. The true commodity bull market ended in January of 1980 after the stagflationary 1970's cycle wave IV secular bear market in stocks. From that point forward, there was dis-inflation, a time when commodity prices were falling, and speculation ran rampant asset prices went to manic levels. Following the dis-inflationary bull market, comes a deflationary bear market. It was all on track to begin in 2000, then again in 2007-2008, but when that didn't occur and with stock prices now at new all-time highs, it appears that dis-inflation and a commodity bear market has been going on the whole time, since the early 1980's, when the cycle wave V bull market accelerated, and the great asset mania began. We have never witnessed such a divergence before between commodity performance, which is clearly signalling all is not right in the global economy, with U.S. Stock prices. That gap will be closed, and while commodity prices could rally in the short-to intermediate term, the natural forces of the market will take over, and global bond commodity and stock prices will collapse together into a final secular deflationary low. It is a truly amazing dynamic to watch unfold, as the global secular deflationary bear market is in full force, but U.S. stock prices are going parabolic, as the last holdout of the Grand Supercycle Bull Market. We are living in unprecedented times, with the greatest financial and monetary experiment in history unfolding. The ultimate resolution will be a stock market collapse of historic proportions, and we are going to see things happen that have never happened before in financial history.

So what is going on with these mixed signals in the current financial juncture? The fact that the debt markets are giving off mixed signals is representative of the financial topping process that began in 2000 with the bursting of the tech bubble. Optimism is slowly dissipating as the fundamentals deteriorate further, and at this point are rotten to the core. Meanwhile, investors are searching for yield in high-yield instruments, but are going to end up losing their principle once the deflationary forces truly take hold, and credit once again freezes up, with borrowers defaulting on their debt in droves, and businesses declaring bankruptcy, bond issuers can and will default during the next deflationary collapse, and as explained above, that is likely to be sooner rather than later. While an ideal time target for the final high in nominal stock prices has been set to 2017, the market does not always conform to expectations and is technically weak and vulnerable, with many stocks already in bear markets. The stock market is at great risk, and staying invested for the final waves of the bull market does not carry a favorable risk/reward ratio. The warnings given before on this blog have not changed. It is important for long term investors to seek the safest possible stores of value until the bear market runs its course.

Even though investors as a whole will never learn, and humanity keeps repeating it's mistakes of the past, there is undoubtedly a progression of becoming more conservative, and by the end of the global bear market, investors will be so off-put by stocks, they won't even want to hear the word. This extreme financial pessimism will serve to counterbalance the many years of financial excesses, and the overshoot on the downside with respect to market sentiment is completely necessary to satisfy nature's law of long-term equilibrium as it relates to humanity's progress in fractal form, as beautifully illustrated by the Elliott Wave Principle.

Update and Outlook on Markets with Important Message

2016-01-20T17:35:00.001-08:00

It's official. 2016 has gotten off to the worst start ever. The first week saw the Industrials decline -6.2%. The old Wall Street adage, "as goes January, so goes the year" will likely apply this year. And, 2016 is likely to witness record volatility in markets as the global bear market and deflationary depression accelerates. In my last update, I entertained the possibility of one more new high, but offered a count that had the rally complete in May 2015, at which point the markets almost precisely hit my calculated targets. The piece I wrote back in May 2015 which illustrates my work on these ratios can be found by CLICKING HERE.

On my last post, found by CLICKING HERE, I entertained the slight possibility, in order to remain objective, that the Bull Market from 1974 never ended, and was completing now. That possibility has now been virtually eliminated, as the market has not completed an impulse up from the 2009 lows, bur rather, as I have been alluding to for years, a 3-wave, corrective, bear market rally.

Despite the new all-time high in nominal terms, and indeed in inflation-adjusted terms as well, I remained firm that the entire rally was one giant, corrective structure that was bound to fool market participants into believing a "generational low" was in place in March 2009 and a new bull market had begun. Indeed, this is the goal of any bear market rally. And. this one sure accomplished the goal of fooling the vast majority of market participants and economic commentators into believing the worst was over, and we were recovering from the "great recession". The tech bubble that burst from 2000-2002 and the resulting 78% decline in the NASDAQ was NOT the end of the bear market. The Financial collapse from 2007-2009 was NOT a "great recession". This was NOT an "economic recovery". Instead, it is just the beginning, in terms of price, of the most severe bear market, financial collapse and economic depression since the founding of the republic in the 1700's. Now that the topping process has lasted so long, and we can say with near certainty the larger bear market that began in 2000 has resumed, and considering the secular deflationary cycle has already been going on for 15 years, this leg of the bear market should be the most breathtaking yet. The imminent crash should be swift, to complete cycle wave c into the final bear market low of the cycle. However, the bottoming process, once the final low in price is in, should take longer than most expect. Just like the topping process took a long time, so should the bottoming process. Perhaps not in terms price itself, (due to the fact that bottoms tend to be more of an event vs. a process, whereas topping action in prices tends to be more of a process), but rather in sentiment. After the third financial collapse of the past 20 years, people are likely to be so put off and opposed to the idea of investing in stocks, that they will advice those in future generations not to go near the stock market. And, the resulting negative mood vibe in society is likely to persist far longer than almost anyone expects, even after stock prices have put in a final bear market low. This persistence of negative mood would serve to counterbalance the unbelievable persistence of optimisms that has accompanied the Grand Supercycle Top in stock prices. I have covered extensively analysis of the economic and financial situation in recent posts, as well as technical reasons for the internal structure of the rally, so there is no need to go over all of the details again, but to recap, please see below for the internal structure of the rally from 2009, a triple zigzag upward correction, and the projections going forward for the remainder of the bear market.

Short-term, the market is oversold and it is interesting how the market recognized the lower trend line of a parallel channel connecting the tops of the first zig-zag in May 2011 with the May 2015 top:

Longer-term, the market is likely to trace out a series of impulse waves in a giant c wave, until the final bear market low, early-to-mid next decade.Please note these projections are not necessarily drawn to scale.

Now, in the short to intermediate term. Once wave 2 of (3) completes, the decline should turn from orderly, into disorderly. In fact, I would not be surprised to see a substantial market dislocation, and a violation of the 2009 lows in short order.

Notice the series of Head and Shoulders patterns setting up:

2008. Notice the truncation of wave 5 of (1) in 2008, similar to 2015:

Finally, the expected wave structure. This is an ideal approximation, and not an exact prediction of what how the bear market will play out. What is certain, is that absolutely unprecedented volatility is likely to hit global markets, and financial markets will set records for bear market activity.

Gold looks to be setting up for the biggest rally since the 2011 top, but, it will only be a bear market rally, and not a new bull market. Ideally, in order to realign with equities, Gold's rally should occur during Primary waves 1 down and 2 up in equities, then during Primary wave 3 all assets, including bonds, crash together as forced liquidation and margin calls occur and anything and everything is sold to raise cash in order to satisfy debt obligations and conduct daily transactions. Again, this is not necessarily drawn to scale.

Crude Oil has been in a bear market since 2008. Oil has been decimated and is now below the 2009 lows. It is lost 81% of its value since the all-time high. A rally can occur at any time, but the ultimate target is below $20 per barrel.

Commodities have been in a bear market since 2008. The bear market has been brutal as the CRB Index of commodities is now down 67% from the all-time high in 2008 and is now below not only the 2009 lows, but the 1999/2001 lows as well.

Both Commodities and Oil topped in 2008. 2016 represents a Fibonacci 8 years from the high, as well as a Fibonacci 5 years from the counter-trend rally peaks in 2011. This suggests a significant low will occur this year in these markets. However, it is not likely to mark the final bear market low for commodities.

The housing collapse is NOT over. House prices on average, nationwide, should be down 90% from the top in 2005/2006.

I do not care what any pundit says, this is cold hard data, and it suggests these markets are falling because of demand destruction and deflation, as well as suppliers continuing to produce despite low prices, in order to satisfy debt obligations. Many oil and commodity producers will go bankrupt, and, along with a myriad of other credit problems in Student loans, housing, and auto loans, will once again freeze up credit markets and cause a banking crisis. Stocks have been the last holdout, and they, too, are now collapsing under the weight of too much debt and an ongoing secular bear market.

Finally, the most important part of this all:

Most people are not and should not be traders, and during the bear market period, far more important than return on capital is return of capital. Stay in the safest possible cash or cash equivalents. There is always the risk that governments will try to confiscate cash, but there are alternative cash equivalents that are relatively safe.

If you are reading this blog and unsure of what to do, contact me at the above e-mail address in the upper right hand corner of this blog. I cannot give investment advice as I am not a registered investment advisor, but I can suggest ways to stay safe during the bear market. This bear market is so severe, with such wide and potentially devastating implications, and it is so important that people act NOW to protect their wealth, that I do not charge at all. Simply e-mail me.

Those who act now can prevent personal financial devastation. Bear markets unfold faster than bull markets, and with the baby boomer generation getting ready for retirement, there is no time for political correctness, to "wait it out" like financial advisers will tell you. DO NOT listen to the financial media with their propaganda and the fools they have on, telling you how cheap this market is. The Bear Market has no mercy, will crush anything in it's path, including any portfolio that is not properly positioned for safety.

It is absolutely imperative that people get safe now before it is too late.