Wednesday, July 17, 2013
The most important turn in U.S. stock market history
Back in 1978, Elliott Wave Principle by A.J. Frost and Robert Prechter, Jr. predicted a mania to occur comprising Cycle Wave V of Supercycle Wave (V) of Grand Supercycle Wave III. Needless to say, this has proven correct. And, It has taken much longer than expected to top. And yet, here we are, thirteen years after the orthodox high in the Dow Jones Industrial Average, with the nominal Dow at all-time highs, complacency everywhere and what could very well be the most important juncture in U.S. stock market history about to come to fruition. In their book, Frost and Prechter forecast, "...in order to set up the U.S. stock market to experience the greatest crash in its history, which, according to the Wave Principle, is due to follow wave V, investor mass psychology should reach manic proportions, with elements of 1929, 1968 and 1973 all operating together and, at the end, to an even greater extreme." Little did Elliott Wave Practitioners know the extent to which this statement would become true. The length of time the nominal stock market averages have spent levitating the past 13 years after the true high in stocks (Dow/Gold) has been nothing short of astounding considering the loss of real value that has occurred since that time. The implications of such a manic and parabolic rise in the 1980's and 1990's have not changed, and the fact that it has taken so long to top out makes the situation that much more dangerous. While we wait for the market to finally top out in this last and final peak in the decade-plus long topping process, please find below an Elliott Wave Count I consider to be a reasonably high probability. While conditions are again getting ripe for a top, I think the odds favor a moderate pullback for intermediate wave (4) and then one more final high, in intermediate wave (5) of Primary Wave C of cycle wave b to reach (and perhaps throw-over) the upper trendline of the broadening top formation the market has illustrated, on a monthly basis.