Thursday, October 29, 2015

Thoughts on the Elliott Wave and Macro Picture

Upon examination of the Dow Jones Industrial Average, the most likely conclusion is that the great secular bull market which began at the December 1974 low ended in the first quarter of 2000. Supporting evidence for this structure, as illustrated before, can be derived from the measure of the market valued in real terms, or Gold. It peaked in 2000 and even at the recent high, after over 6 1/2 years of a rally in nominal terms, has not even come close to those levels since in real terms:

Additionally, evidence that 2002-2007 was nothing more than a bear market rally can be derived from the failure of the market to make a new high in anything other than dollar terms. This suggests that real stock values were falling, and it only appeared as though stock values were rising because of the false measuring unit, the U.S. Dollar. Gold is real money, and the dollar is not, but rather a debt instrument that is built on a giant inverted pyramid. Please see prior blog posts for more on this phenomenon. I have also laid out clear technical evidence for this rally since 2009 being a bear market rally, or a rally in the context of a secular bear market. Again please see prior posts for a detailed analysis.

The most probable scenario is that the Bull Market ended in 2000, illustrated below:

It is highly unlikely that the Bull Market ended in 2007, due to the fact that evidence suggests the entire rally was based on credit inflation and the drop in the value of the U.S. Dollar. It was much more likely a B wave of an expanded flat correction from 2000. Expanded flats are a corrective wave form, and this one was either the first leg down of a bear market (most probable), or a fourth wave correction.

If it represented a fourth wave correction, the it was either of primary degree or cycle degree.

The bear market from 2000-2009 was too small to indicate a correction of supercycle degree, in addition to the fact that, as illustrated before, valuations were simply not indicative of a secular bear market bottom on a historical basis. This was also the case in 2002, which wasn't a secular bear market low either. Therefore, the 2009 low indicated either Cycle wave a of an ongoing supercycle bear market, or Primary wave 4 of the bull market that began in 1974. Although evidence doesn't support the latter count, it is important to remain objective.

Yet another possibility, presented by Patrick, a member of a private investor group, is that the bull market is still ongoing, but counts the 2002-2007 bull market as an impulse wave:

One last possibility, I discovered while constructing long-term Elliott Wave channels, is that the Bull Market is still ongoing in cycle degree. This would mean 1974 did not mark a cycle degree low, but rather a low of primary degree, and 2009 marked a cycle wave IV low. Supporting this potential count is the fact that the advance from 1932 channels well (EWP, p. 71), with the exception of the period between 1974 and the mid-1980's, where price remained below the lower trend line. This count would not be completely outside the realm of possibility, considering this period of time the market spent below the lower trendline was a period of deep skepticism of the market's ability to advance. Meanwhile, during early 1980's,the market was tracing out clear impulse patterns in a true secular bull market. Perhaps the primary reason I decided to present this possibility is the clear alternation between wave II and IV, satisfying the guideline of alternation.

Despite my convictions that the bull market ended in 2000, I have presented three alternate ways of interpreting the market from an Elliott Wave Perspective, in both Cycle and Primary degree. The post directly preceding this one, found by CLICKING HERE, included a detailed quantitative analysis of the market and presented the recent high in May 2015 as potentially marking a very significant high. This would be especially relevant if 2000 was indeed the end of the great secular bull market that began in 1974, as it incorporates the two rallies in this secular bear market period. If the secular bull market is still ongoing, the ratios presented in that analysis would no longer be valid, because 2009 would have marked a new leg in the ongoing bull market, but NOT a new secular bull market. This serves to complement the new high that would likely accompany the market, as the existing high would be surpassed, negating the current mathematical basis for termination of the rally.

 Internal Structure of the rally assuming calculated ratios hold:

Triple Zigzag correction from 2009:

One last possibility for the corrective count that would allow for a new high, and possibility still the validity of aforementioned ratios, is that the last leg of the rally topped in September 2014, and the May 2015 high was a b wave as part of an X wave separating the second zigzag from the third. The market would then stage a dramatic downward reversal after a minor new high.

I detailed in a post back in 2014 why, from a pure Elliott Wave Perspective, the internal structure of the rally did not count well as an impulse. This would serve to refute the rally that began in 2009 as a bull market.  Please see a link to that post below:

However, again remaining objective, should the market start impulsing up from the August low, it would likely be a fifth wave in intermediate degree from 2009, and the ensuing high would represent the top of Primary Wave 5, Cycle Wave V, Supercycle Wave (V) and finally finish off the Supercycle Bull Market. In this scenario, the market could accelerate upwards, ending with a blowoff top into 2017 to complete a Fiboncacci 8-year bull market, just as in 1929.

No matter how one counts the advance off the 2009 lows, the rally is terminal and the market is approaching a VERY significant top, following which should be a dramatic deflationary collapse that takes the majority of economic and financial commentators by surprise. The decline will go down in history as being the most significant in United States History to date.

Once again, we have a situation where a cyclical market bottom is being proclaimed throughout the investment community as a "generational low". It wasn't a generational low, and nor did it serve to properly correct the excesses that have built up throughout the 1980's, 1990's and early 2000's. What has occurred, is that central banks have attempted to solve the debt problem with more debt. We haven't solved any of the debt issues, but rather made them bigger. First, from 2002-2007 in the private sector, and now in the public sectors, educational loan sector, and auto loan sector. All of these are bubbles that will end the same way as the housing bubble, in total disaster. Except this time,the whole fraudulent debt-money system will collapse, and central bankers will be powerless to stop it.

Some proclaim the next crisis won't involve a banking crisis, however it would appear that evidence points to the contrary. Banks and companies are leveraged up again just as they were before the last crisis, except this time, both with debt and their own stock, repurchased on leverage. When the tide turns for good, forced liquidation of securities and major liquidity issues will once again present themselves. The banking system nearly collapsed in 2008. This time around, it will collapse. Because this is a developing Grand Supercycle Bear Market, social mood will reach such deep lows that will witness economic damage, social and political unrest  FAR  worse than anything seen during the 1970's secular bear market, and is likely to prevent any more bailouts, especially of private institutions. Political tension, from both the far left and far right, is currently increasing to institute major change. This tension will only become tighter and the backlash even more severe as the initial supercycle collapse, in progress since 2000, concludes. This final portion of the supercycle collapse, cycle wave c, will take the market below the 2009 lows. It will be breathtaking, and we will see things unfold in financial markets that have never before been witnessed since the inception of the Dow Jones Industrial Average in 1896, including absolutely unprecedented volatility and confusion as investors panic.

The Bull Market in valuations certainly ended in 2000. It is abundantly clear that optimism has stayed elevated throughout this whole 15-year topping process, with the exception of the late 2007- early 2009 period. The secular bull market certainly ended qualitatively in 2000 with the peak of true economic growth. As illustrated before, the bounce into 2007 was based on credit inflation, masking the collapse in real values that was taking place. What didn't end, is the topping process and elevated optimism. Some might say the 2007-2009 period was enough to qualify as a supercycle bear market, as it represented the largest percentage decline since the last supercycle low in 1932, suggesting it could have corrected the entire supercycle advance from 1932. From a pure quantitative perspective, this is true, but bear markets represent more than declines in the stock market. Secular bear markets serve to correct systemic excesses, and in this case, the highest degree of debt excess in history. Additionally, true secular bear market lows always include undervalued markets. This secular bear market has not accomplished it's goals yet, and if anything, the central bank's interference has extended the already insane levels of optimism and debt. From a causal perspective, however, rather than the central banks "causing" the extended rally in the stock market,the degree of a peak that is developing, a Grand Supercycle peak, is consistent with central banks tampering with credit and trying to hold an unsustainable system up.  Put another way, rather than central banks manipulating people to take on more credit, a society that is developing a large peak in economic progress exhibits unusual and historically extreme optimism, which thus allows central banks to exist and inflate. While there was no crystal ball in 1982, and no analyst could have known for sure just how far and how long the mania would go on, the current juncture, rather than being viewed as bizarre or impossible, should actually be expected and embraced, as it simply serves to confirm the exceptionally large degree of a top that is developing, just as R.N. Elliott originally laid out, when he foretasted the rally to last all the way until the year 2012. The precision he accomplished is remarkable considering he made the call over 70 years ago.

When the bear market intensifies and the debt-money system collapses, central banks will come under fire and get the blamed for it all, when in fact cycles were behind it. In this case, there is a direct cause, the central banking system inflating credit at insane levels, and an indirect cause, the developing Grand Supercycle Peak in optimism, social mood and thus economic progress. Contrary to popular belief, it is actually the indirect cause that is relevant, since it gives the analyst context and a basis with which to predict probable future outcomes. This causality has not yet been accepted by the vast majority of social theorists, and certainly not by the vast majority of equity strategists. It has, however, been discovered and heavily researched by social theorist and market technician Robert Prechter of the Socionomics Institute and Elliott Wave International. As the Grand Supercycle bear market progresses throughout the 21st century, this new science is likely to become more mainstream. For more on this breakthrough fascinating new way of viewing causality, please visit the Socionomics Institute's website by CLICKING HERE.

Monday, July 27, 2015

Long-Term Gold Outlook- A Bold Prediction

When Gold reached a peak of $1923.70 in September 2011, most analysts thought the metal would soar to $4,000+. When sentiment is extreme, and the right technical conditions are in place, markets reverse. Gold is no exception to this principle. Now, with Gold down 44% from its peak, the financial media and pundits have all but lost hope for the metal. This is the type of environment that is conducive to short-term bottoms in markets. But that's not what this post is about.

While Gold is certainly oversold and may rally in the short to intermediate term, longer term, Gold is in a bear market. Most analysts, even the ones that were bullish at the 2011 top, now admit this, even if they call it a "correction in a bull market". What is not a majority opinion by any means, is that Gold has actually been in a bear market since January 21, 1980, when the metal went parabolic and topped at $850 an ounce with the peak in inflation. It subsequently crashed 70% in a long, drawn out bear market that lasted 21 years into 2001. Some say the bear market ended in 1999, however, prices very nearly matched their 1999 low in 2001 in nominal terms, and made new lows in real terms (adjusted for inflation). I have deflated the price of gold using the Producer Price Index, and it bottomed in 2001. What this suggests, is that Gold as a commodity bottomed in 2001.

From the 2001 low, Gold advanced for 10 years into the 2011 top. However, looking back in history, this top was not anywhere near as parabolic as the spike up into 1/21/1980. It is more characteristic of a b-wave advance, than that of an impulse. This Article from an analyst whom I highly respect, although don't entirely agree with, Doug Casey, highlights the fact that the advance this time around in Gold was nowhere near the magnitude that the bull market that peaked in 1980 was. He also points out the fact that measures used to suggest Gold reached its 1980 peak in inflation-adjusted terms are wrong, and instead refers to measures used by John Williams of Shadow Government Statistics, by far the authority on exposing government lies in economic reporting. While Casey uses this as evidence the bull market didn't yet end, I contend it is rather evidence that the entire rally was not a bull market at all, but rather a rally in a much longer-term bear market. Further evidence of the three wave corrective advance comes with the near 1.618 Fibonacci relationship between waves C and A, a common characteristic of three wave corrective moves.

Note: This chart is not drawn to scale. It is tough to say how long the Gold bear market will last. However, a significant low should occur with the next deflationary low.

Short to intermediate term, the counter-trend rally in Gold could coincide with the initial drop in stock prices, as gold is initially perceived as a "safe haven", but then ultimately will not be able to withstand the deflationary pressures, and all assets will fall in value together, just like 2008, except to an even greater degree this time around.

The XAU Gold and Silver Index,an index that tracks Gold and Silver Mining Companies, has collapsed by 80% since its 2010 high. Gold and Silver mining companies will need to consolidate in order to survive, while others will go bankrupt. This will be a positive in the end, as the old makes way for the new, and new companies will emerge when precious metals reach a final low and a new sustainable bull market begins.

Further evidence of the ongoing gold bear market can be found in the Kondratiev cycle. The Kondratiev "Summer", a period of high inflation and slow growth in an economy, ended in the early 1980's, in my view kicked off by the top in Gold, a measure of inflation. The price of gold does not actually fluctuate. Gold can buy roughly the same amount of goods and services that it could many decades ago. What has changed, are values of measuring units, fiat currencies They have been devalued by the inflation of credit all throughout the globe. As the Kondratiev "fall" season progressed, it was the time to be invested in risk assets, and not in commodities, as dis-inflationary forces took hold. What follows the speculative dis-inflationary Kondratiev "Fall", is Kondratiev Winter, a period in which debt and excesses are purged from the system, which began in 2000, and which central banks have been fighting. My contention is, Gold as a measure of inflation, should move below the 2001 low prior to a new bull market beginning. The reasoning for this bold call is that the deflationary low should occur below the dis-inflationary low. Whether this occurs in Gold, remains to be seen. The uncertainty comes with the fact that in the 1930's Gold was used as currency, whereas today, it is not. It was, and still is, the only real money in the system, but the debt accumulation that has occurred over the past 30+ years has been denominated in fiat currencies, not Gold. Therefore, as the debt deflates, it is U.S. Dollars and other fiat currencies that will be in demand, not Gold. This of course completely turns on its head the conventional notion that Gold is a safe haven, and the notion of the "race to the bottom" with currencies we so often hear about. But, market fool people. And, this dynamic is simply another manifestation of this principle. All commodities should be under pressure as the most severe deflation in U.S. History takes hold. The fact that the CRB index of commodities, is nearly back to its 2009 lows, is a sign of trouble around the globe, and it's a hint at what is coming, not an inflationary bout, but a deflationary one.

Of course, nobody knows the future for sure, this is all speculation. I could be wrong in my prediction, but in my estimation, it is a well-founded one that has merit. Time and the market will be the ultimate judge.

Thursday, April 30, 2015

Treatise on the Bear Market Rally and Elliott Wave Count Update

It is no secret that counting waves has been difficult ever since the rally out of the March 2009 low began. At first, it appeared to be unmistakably corrective in nature, but starting in 2010, some have switched to an impulsive count. But, I maintain, as I have ever since the inception of this blog, that the rally out of the 2009 low is a corrective, bear market rally, which, when complete, will be fully retraced. The reason I have and continue to remain so firm on this belief is because of the absolutely horrid technicals upon which this rally has occurred, not the least of which is both the lack of and declining volume encompassing the entire rally, which I have illustrated before on this blog. Additionally, a lack of secular bear market bottom valuations at the March 2009 low also argues against a new secular bull market currently being in place. Some argue that the 2009 bottom is equivalent to the Supercycle low in 1932. This assertion can be proven incorrect on many accounts, mostly the failure of measures of valuation to reach historical levels associated with bear market lows, but not the least of which is the position of the commodity cycle. Back in 1932, the deflationary low in the stock market coincided with a low in a commodity bear market cycle. This time, the 2009 low occurred just before a high in a commodity bull market cycle (2011), and even at a lower high in some commodities that topped coincident in the end of the credit expansion in 2008. This dichotomy between 1932 and 2009 is more than notable, and indicative of coming deflation and depression, as opposed to reflation and economic expansion as was the case in 1932. In 1929, commodities made a lower high coincident with the high in stocks, If anything, this current divergence between commodities and stocks is an indication of the end of a stock bull market, not the beginning of one. That generational low, that was seen in association with the 1932 bottom in stock prices, as well as the 1974 secular bear market bottom, did not occur in 2009, and is coming up. Whether this is the end of the old bull market or, more likely, a rally in a secular bear market, either way the rally is terminal, which, when complete,  as hard at it is to believe, will result in a breach of the March 2009 lows.

Lance Roberts, of STA Wealth Management, and host of StreetTalk Live, wrote an article opining on the secular bull/bear market debate. While many are claiming that we are in the midst of a secular bull market because prices have registered new all-time highs, the truth is more than meets the eye. Roberts highlights what true secular bull markets are made of, including improving fundamentals and low valuations. Neither of which we saw in 2009 or today. Instead, this has been a liquidity fueled rally in a secular bear market, which has only ensured a worse ultimate outcome due to the attempt by authoritarians at staving off a depression. Ironically, the attempt by governments and central banks, worldwide, at preventing a depression has only ensured a deeper depression, and more ultimate damage, down the road. All systems in nature require setbacks and periods of rest to thrive in the long-run, and the ebb and flow of human social progress, reflected in economic growth and well-being of societies, is no exception to that rule. There are no shortcuts, and  in the end mother nature cannot be cheated.

The piece, posted by Zero Hedge, can be found by CLICKING HERE.

Additional evidence refuting a new secular bull market beginning in 2009 is the fact that every secular bull market in history has seen a cyclical bear market prior to taking out the all time highs. Case in point, the market during the 1932-1937 rally did not surpass the 1929 high before enduring a 50% decline and cyclical bear market for Cycle Wave II. The secular bull market that began in 1974 did not make new all time highs until after another cyclical low in 1982. That is not what has occurred this time, but instead a parabolic rally off the lows due to central bank inflation, and economic distortions created by government and those in power. These distortions have enabled leveraged speculation in asset markets and corporate buybacks, propping up stock prices as a result. But soon corporate buying, will turn into corporate selling, as companies are forced to liquidate their assets as the margin calls come rolling in. The market has been in a massive topping process since the first quarter of 2000,and despite media and higher education propoganda, this has not  been an economic recovery, and nor was the period between 2002-2007. Instead, we have been in a developing depression since 2000, that trend is about to accelerate to the downside. We are facing the biggest margin call in history, and it is going to lead to widespread defaults, bankruptcies, and outright deflation.

But this is not just about the stock market. We had a historic build-up in the value of money + credit from the early 1980's until 2008, and arguably still ongoing. The magnitude of the credit expansion, as well as the corresponding bull market in equity valuations, is unprecedented in history. Both the societal-wide credit expansion, as well as the bull market in valuations which ended in 2000, FAR exceeded that which was seen leading into the 1929 Supercycle top. This suggests a higher degree top, of Grand Supercycle degree, and resulting credit collapse that is more severe than the great depression. This is the natural ebb and flow of nature, and it should not be tampered with by authorities, as both expansion and contraction are a natural part of any growth system in nature. Unfortunately, ever since 2000, the authorities, especially the private global central banking cartels worldwide, have been trying to prevent the natural corrective process that naturally occurs after an overvaluation. As a result of the most extensive liquidity reflation efforts in monetary history, asset prices have been propped up as a result of central bank inflation and corresponding leveraging up of bank reserves by commercial banks to speculate in asset markets. Please CLICK HERE to read a piece by Doug Short on margin debt with charts. Despite rhetoric and propaganda espoused by the financial media, and manipulations and distortions by government of economic data such as unemployment and inflation, this rally is NOT based on solid improving fundamentals, but rather increasing debt and liquidity, the same combination which resulted in the financial crisis in the first place. How is the answer to a debt problem, more debt? It isn't. What it is, is a combination that will be ultimately lethal to the global financial system. But this is what the authorities have been embracing, all to get re-elected and to make themselves look good until they are out of office, at the expense of the citizens.

Now to the Elliott Wave Count. I simply cannot justify labeling the rally from the March 2009 low as an impulse, for reasons given above, as well as simply the last of clear impulsive behavior from a pure Elliott Wave standpoint. Please see My Prior Blog Post explaining and illustrating this in detail. This being said, we do have a potential triple zig-zag in place from the March 2009 lows.

This count would imply the rally is complete or nearly so. We also have a divergence between the DOW and S&P 500, where the S&P has moved above the February/March high, but the DOW has not. This is a striking divergence and either the DOW has to erase this non-confirmation by making new highs, or, if this divergence cannot be mended, this fractured market is warning of a major market top.

Another non-confirmation that takes on equal weight, if not more, than the DOW/S&P divergence, is the failure of the Dow Jones Transportation Average to confirm the Dow Jones Industrial Average in taking out the highs of 2014. The Transports topped in November 2014 and there has been an ongoing non-confirmation between these two indexes ever since. This is a Dow Theory non-confirmation and is warning of a potential market top and resulting Dow Theory Bearish Primary Trend Change.

While the preponderance of the evidence suggests a market top is near. This rally is in month 73, and, depending on how one looks at it, in terms of time is among one of the most or THE most stretched rallies in history. The highly stretched nature of the rally makes for an extremely dangerous market environment, and the risk is absolutely enormous for an outright market crash. This is NO time to be complacent, but rather to be aware of the facts of the market environment in which we are operating: a completing 15 year topping process and a bear market rally which,when complete, will lead to a collapse in asset prices across the board and resulting economic depression.

However, to remain objective, while not favored, there is another possibility with the Elliott Wave position of the market, and that is that the bull market from 1974 never ended, and is still ongoing. While there are many problems with this count, as I have alluded to on prior posts, we must nonetheless remain objective and present it as a possibility. A joint move to new highs by both averages that serves to mend the non-confirmation currently in place would certainly lend credence to this count, and imply a top in 2017, a Fibonacci 8 years from 2009. While this might sound compelling from the standpoint of the elapsed time of bull markets being a Fibonacci number of years, which is supported by history (1932-1937 rally was a Fibonacci 5 years, the 1982-1987 rally being 5 years, the 1987-2000 rally being 13 years, the 2002-2007 rally being 5 years), we are living in truly unprecedented times, and due to the degree of a top we are facing, prior rally duration may not apply. However, in order to remain objective it must nonetheless be considered as a possibility. The Dow Theory will likely be an important indicator of the market's direction between now and 2017.

Observation: I have been thinking about the possible reasons this rally has been going on so long and gone so far, and I considered the fact that the market rallied for 60 months between 2002-2007 and, using intraday extremes, advanced a total of 7000.61 points on the DOW, or 97.26%, and the decline that preceded that rally occurred from 2000-2002, and declined 4,552.79 points, or -38.75%. From 2007-2009, the market declined 7728.15 points from high to low, or -54.43%. Then it occurred to me that since the market was able to stage a 60 month, 7,000 point rally on the DOW from 2002-2007, following only a 4,552 point decline, the fact that the decline from 2007-2009 was more severe than 2000-2002, might be the impetus for the market to rally further this time as well, to be proportional. So, I conducted a few calculations and came up with the following: Using arithmetic scale, the ratio of the 2007-2009 decline to the 2000-2002 decline, is approximately 169.7%. Applying this ratio to the advance from 2002-2007 (7000.61 points) yields 11,883.21 points. From the 2009 low, should this ratio analysis be correct, the market would top at 18,353.16. Given that the high so far is 18,288.63, and this target is 64.53 points, or 0.35% above the current all-time high, the market is in a position to validate this analysis. Time will soon tell.

Friday, January 30, 2015

Deflationary Pressures Mounting

The books are being closed and the numbers are in on the first month of January, and it was not a good month for markets. Historically, a down January has not boded well for the rest of the year, and 2015 looks to be setting up to be a MAJOR down year across the board. I have always maintained, ever since the inception of this blog, that the rally out of the 2009 low is a bear market rally, or a rally within the context of a secular bear market. While this may seem implausible or downright crazy, remember what the people who were, throughout the 2000's, calling for a historic deflationary collapse sounded like to the mainstream media and general public; they needed admittance to a mental ward then, too. But, despite the vast majority of pundits, economists and anlaysts dismissng and ignoring the warnings of a financial collapse, the most severe bear market and recession since the great depression occured, and the secular bear market reasserted itself. Once again, with a reflationary rally in equities carrying to a new all-time high, economists and pundits are once again dismissing warnings of a deflationary collapse, instead focusing on the "recovery". This is not a recovery, but rather early in an ongoing depression. The secular bear market is still in force, and will once again reassert itself, and once again will blindside the majority of so-called analysts and economists. The data still points to this entire move occurring within the context of a secular bear market, and with a reflationary bear market rally that has been stretched in time and price in the case of equities, along with crude oil and commodities resuming their larger bear markets, along with relative weakness in foreign markets, the stage is being set for the biggest financial collapse and resulting economic depression in U.S. history. To review:

Crude Oil

Topped at $147 in July 2008, and has been in a bear market ever since, despite the most aggressive inflationary monetary policy by world central banks on record. The first leg down completed in late early 2009, and then staged a counter-trend rally up into the May 2011 top. Despite calls for $200 oil, true to Elliott Wave form, oil prices will break the 2009 lows as deflationary pressures intensify in the next leg of the bear market.  


Topped in July 2008, staged the first leg of the bear market into late 2008, had a counter-trend rally into May 2011, and topped out at a perfect Fibonacci 61.8% retracement of the initial decline in May 2011, and is now resuming its larger bear market. Here too, prices will ultimately break the late 2008 lows as global deflationary pressures intensify. 

There is a lot of talk on the mainstream media about falling oil prices being "good for the economy" and hence positive for economic growth by supposedly putting more money in the hands of consumers. This is not the case, despite the propaganda and false information. Rather, the dynamic that is taking place is that the global economy is heading into depression, and demand cannot keep pace with supply. Falling commodity prices, rather than being "good" for the economy, are simply indicative of the liquidity strains that are appearing in the system, and the global economy heading into depression. Ironically, this is in part due to all the central bank intervention and manipulation, proposing more leverage, debt and liquidity to fix a solvency problem. Further, oil producers are strapped for cash and need as much of it as they can get, and hence are refusing to cut production even at these low price levels. This simply exemplifies the shortage of money in the world, which leads to the next chart, the U.S. Dollar. 

U.S. Dollar

This is the one market that has been hated all along this decade-plus long topping process in risk assets. After a Supercycle bull market in equities, along with a greater than 96% devaluation of the U.S. Dollar through the issuance of massive quantities of dollar-denominated credit over the past century, this whole credit inflation scheme is set to reverse in a big way, with, ironically, fiat currencies as the beneficiary. The U.S. Dollar should out perform relative to the other world currencies for quite some time as the deflationary collapse ensues.

Crude Oil and Commodities have come a long way down since the Summer of 2014, and are due for a relief rally. However, this rally will only be counter-trend, and after its completion, both will continue their larger bear markets.


The Baltic Dry Index Measures shipping costs for dry bulk commodities. It is a good measure of global economic activity, and as is clearly evident, all is not well on the global economic activity front. Not only did this index not come anywhere near a new all-time high during this reflationary period since 2009, shipping prices have actually made a new low below 2008 levels. The collapse, weak bounce, and new lows in Shipping prices simply serve as further evidence of the developing global economic depression. 

Real Estate

On a national average basis, home prices have not made a new high, either. The next leg down in the global deflationary depression will draw home prices to new bear market lows and the failure of this index to move to new all-time highs further exemplifies the secular bear market, the failure of the central banks' efforts to reflate and the much, much stronger underlying deflationary forces that are present.


Most markets have NOT made new all-time highs during this reflationary period. One of the only exceptions has been equities. Due to central bank inflation and manipulation, U.S. equity prices have carried to a new all-time high as reserves added to the banking system, rather than meeting their "intended" purpose of being lent out to the public, have been leveraged up by commercial banks and used for speculation, which has in turn bid up equity prices to artificial levels. I put intended in quotes because the intention of this phony inflation scheme was never for the reserves to get out into the public, but rather for the fraudulent central bankers to help their banker friends on Wall Street at the expense of Main Street. A truly sad situation indeed. However, despite this attempt at keeping the global ponzi scheme banking system afloat, natural forces will prevail and the equity market, too, will resume its bear market as the final leg of the supercycle bear market gets underway, within the context of the larger Grand Supercycle Bear Market that began in 2000. 

In Summary

All these markets are currently driven by liquidity, and the relative weakness in foreign markets and commodities is warning that all is not well on the global liquidity front. The depression will not become apparent to most until equities decline a long way, but Elliott Wave and statistical analysis are warning that the bear market is not over, and that another devastating leg down lies ahead. Stocks, commodities and real estate will likely all bottom together at the ultimate low, with greater than 90 percent declines in each of these asset classes occurring before the Supercycle Bear Market is finally over. As per "Elliott Wave Principle: Key to Market Behavior, "Declining "C" waves are usually devastating in their destruction. They are third waves and have most of the properties of third waves. It is during this decline that there is virtually no place to hide except cash. The illusions held throughout waves A and B tend to evaporate and fear takes over. "C" waves are persistent and broad"(Frost and Prechter, 1978).  The "C" wave that this excerpt is speaking of is in force in risk asset prices across the board, and should be textbook in its characteristics. 

Important Message

Although we are facing the biggest financial collapse in U.S. history, and the global economy is heading into depression, the most important takeaway is that nobody has to be hurt financially. It is VERY important to stay liquid in cash, OUTSIDE of the banking system. There will be runs on the banks, and it is absolutely imperative to get safe and take proactive measures BEFORE this occurs. For those that do, the positive in all of this is at the ultimate bear market low and bottom of the depression, there will be tremendous opportunity in asset prices across the board.