Friday, April 26, 2013

The True Bull Market Top

With the new all-time highs in the Dow and S&P, most are either calling this a new bull market or, by contrast, some analysts who are very bearish are calling this the end of the old bull market that still has not completed. I had originally thought the Bull Market actually ended in 2007, with the peak in the Housing and Commodity Bubbles. However, given the new all-time highs in equity indices, and the clear 5 waves down at Intermediate degree from October 2007- March 2009, I have really begun to rethink the phasing of this bear market. When one steps back and reviews the history of the past 13-years since March 2000 the Real Bull Market top, there is a potential pattern developing within this Grand Supercycle Bear Market. To review: In the first quarter of 2000, when the NASDAQ bubble burst and the technology indexes fell 78%, a low was created in October 2002. From that point, even after the greatest credit inflation in the history of man, society went through yet another credit bubble, this time concentrated in Housing, that kept nominal stock prices at inflated levels until October 2007, after which point the whole house of cards began to collapse, resulting in a 54% stock market decline and the greatest contraction in the overall supply of money and credit since the great depression. When the market bottomed in March 2009, at first it seemed like a bear market rally to most, but as the market has pressed higher, it has convinced more and more people that the rally is for real, that his is a new bull market, or, to the few perma-bears out there, that the old bull market never really ended. Looking at the wave structure, we may have uncovered a potential fractal pattern playing out for the entirety of Grand Supercycle wave IV. That is, an expanded flat fractal. Expanded
flat's within expanded flats. Please see my chart below. This would suggest that rather than the approximate 100-year bear market unfolding as a triangle, it would unfold as a series of expanded flats. First, from 2000-2009 at Primary Degree. Then from 2009 until whenever this b-wave rally finally concludes at Cycle degree, and then, after cycle wave c concludes, it would suggest yet another flat or expanded flat for supercycle wave (b). A supercycle wave (c) crash, sometime later in the century, would then finally end the bear market. At this stage, this is purely a hypothetical scenario. For now, we are focusing on an end to cycle wave b, and the beginning of cycle wave c. Let me make one thing clear. This rally from 2009 is a liquidity based rally based on inflation of the money supply through government borrowing. It is a phony, bear market rally that will be completely unwound and reversed once we get the proper setup in place. It will then be the extent and wave structure of the ensuing wave down that should give us clues as to the long-run prognosis. My first target is the lower trend-line connecting the 2002 and 2009 lows, perhaps for Primary wave 1 down. In the 2007-2009 decline , the market traced out 5 waves down of Intermediate Degree. This time, If my wave count is correct, the market will trace 5 waves down of Primary Degree. This next leg down is going to be bigger, swifter, and much more devastating than any leg down since the bear market began in 2000. This market is running on fumes and the fallout will NOT be pretty. The only safe place to store one's wealth will likely be physical, cash notes. Now is the time to prepare, not when the crisis hits. I am warning, when the market tops it's going to get real ugly, real fast. Now is the time to prepare.