The technical work of Robert Prechter and Elliott Wave International, as well as other sources of technical analysis and social trends suggests this recession is not like any other we have seen before. In fact it suggests we have completed an Elliott Wave uptrend of at least 70 years, of a degree called Supercycle. In fact, we may even have completed an uptrend lasting 200 years, of Grand Supercycle degree, dating back to 1764, right before the declaration of independence and the founding of this great country in 1776. If one looks at all the advancements there have been in this country that opened the door to prosperity for so many, it is astounding. There have been terrific advancements in medicine, transportation, technology, astronomy, and human understanding of so many things. On January 27,2000, President Bill Clinton gave what could be the best report card for America in its history. Clinton began the state of the Union Address by saying "Mr. Speaker, Mr. Vice President, members of congress, honored guests, my fellow Americans: We are fortunate to be alive in this moment in history. Never before has our nation enjoyed at once, so much prosperity and social progress, with so little internal crisis, so few external threats. Never before have we had such a blessed opportunity, and therefore, such a profound obligation, to build the more perfect union of our founders dreams. We began the century with over 20 million new jobs, the fastest economic growth in more than 30 years, the lowest unemployment rates in 30 years, the lowest poverty rates in 20 years, the lowest African American and Hispanic Unemployment rates on record, the first back to back surpluses in 42 years, and next month America will achieve,
the longest period of economic growth in our entire history. The Founding Fathers would have been in tears if they could be there. But did social progress go to far?
In 2000, Everything seemed perfect, the stock market was soaring to new highs, everybody was wealthy, and sentiment was at extreme optimistic levels. I would bet that if Americans were given the economic and social picture 10 years down the road, they wouldn't believe it, the same way they won't believe the forecast that Elliott Wave gives for the 10 years after the bottom of this bear market. Instead of calling Elliott Wave International Perma-bears, they will call them Perma-bulls for being so optimistic in a time of economic depression. These extremes in optimistic sentiment at the end of an uptrend are a normal part of human social progress and suggest a correction will begin shortly. The bigger the uptrend that completes, the more extreme optimism there will be in every financial market, as well as people personalities and attitudes in general. The very extreme optimism that existed in 1999 and 2000 is to be expected considering the size of the uptrend we have completed. However, at the ultimate bottom, there will be extreme pessimism, with people possibly saying the end of the world is coming. This will be a signal that another VERY large advance in human social progress is about to begin, possibly a Grand Supercycle Bull Market lasting 200 years.
Elliott Wave analysis goes much further into depth than just stock prices. It is easy to confuse what these waves of optimism and pessimism really mean. What Elliott Wave Theory suggests is that social mood moves in waves of optimism and pessimism, and that is
modeled by stock prices. If this is a Grand Supercycle Bear Market, should people be worried? No. The word I would use is people should use caution, making sure to keep their assets in safe places such as cash and gold. Deflation does not have to hurt anybody. There are safe places to keep one's wealth to be able to capitalize off of the bargains in stocks, commodities and real estate that will ultimately be there at the bottom.
Gold Spot prices hit all time high on Monday, June 21, 2010, however Gold reversed intraday and by the of the day they were down 1.83% and closed at the low of the day at 1,232.60. Although sudden, these intraday reversals after making a multi-week, multi-month, multi-year or even all-time highs are quite common when the trend is changing. Another common element at a trend change is a fundamental story to fool investors into making the wrong decisions. In 2001 when the Bull Market in gold started, there was on fundamental reason to own Gold according to most people. People looked down upon it as a non-income producing investment, since it doesn't pay dividends. Among traders, there were only 5% bulls in gold in 2001. Now, with 95% of traders bullish, everybody loves Gold and will give a fundamental justification for why you should own it, just the same as they gave you a fundamental justification for why you shouldn't in 2001. Now, there are commercials for companies looking to "buy your gold", talking about how much the price of Gold has risen since 2001. Well my question is, why would you want to own it if it has already risen better than 5 fold since 2001? The extreme in optimism at gold's peak is normal, just like any other market. By the time Gold bottoms out, people will hate it again, remembering 2001 when there was "no reason" to own gold. I could easily be wrong about Gold, as it is a true store of value, but if the Dollar rises, which I think it will, that will hasten the decline in Gold. Although the fundamentals paint a picture for why you should own gold right now, the technicals are painting a more bearish picture, as illustrated in the attached charts, one being a daily chart and one being a weekly chart of Gold futures. Gold has completed (or is close to completing) a 5-wave Elliott Wave uptrend dating back to the beginning of its bull market in 2001. This move is impulsive and suggests that after an A-B-C correction, Gold will begin a new uptrend. However, in the mean time gold should have a fairly steep correction, perhaps retesting or breaking below its October 2008 low of 680.75. If this happens, I will view it as not only a buying opportunity for the short or intermediate term, but a long term investment opportunity. Gold is a true store of value and the only real money in the world.
