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,  " 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.


  1. thank you, i enjoy your comment

  2. I applaud your knowledge and the fat you are a student of history but i feel that you do tend to move the goal posts a great deal.
    Eventually you will be right if you continue to keep adapting your count.
    I think you should have more conviction and stick to one count.
    I feel your previous count which had us leading to near yesterdays high was correct and this was the completion of wave V. Time will tell.

    Thanks again for a very insightful Blog.
    Much appreciated.

  3. Hello and Thanks for the comment. Successful practice of Elliott Wave Analysis requires one to be dynamic. Based on the evidence at hand, and the very shallow nature of this pullback, I think odds favor another high after a sharp correction, before the end of this bear market rally.

  4. Thanks Chris for the reply, I agree it requires you to be dynamic, I still think your original count was a better one!
    Regardless one thing I like about you is your always trying to spread a message of protection for the general public(retail investors. Advising people that we are toppy up here and prudence is advised.

    Just turn on the media and watch them cheer lead this up to oblivion just like 2008. Jesse Livermore said only a fool chases the last few percent of the market and this will be the case this time for most people and it will probably happen over and over again.
    I hope your message of caution is listened to but somehow I feel very few will hear it.

    Thanks again for a good blog.
    Good luck with your call.

  5. Chris, I enjoy listening to you and Tim in your in-depth and very informative conversations. About your expanding wedge count, I have seen it drawn out as an asymmetrical triangle A B C D E, E being the downward final downward slope ending close to the trend line. You have labeled C. Could you detail that count a little more?

    Keep up the good work,


    1. Hi Tom, and welcome.

      I am essentially counting this Bear Market since 2000 as two (so far) expanded flats. This first one being 2000-2009, with the second currently in progress. The ABCDE count would imply an expanding triangle, more clearly discernible on the S&P. While that count is a possibility, I don't favor it. Nevertheless, I am keeping it in the back of my mind. As always, we will just have to see what happens once we get down to that lower support line connecting the 2002 and 2009 lows. Should price strongly break through that support, as I believe it will, the ABCDE count will be null. Hope this helps.