A blowoff top in AAPL

Back in the late 1990's and early 2000's, when Steve Jobs, CEO of Apple, was brought back to the company after having been removed some years earlier, nobody believed in the company, and everybody knew why AAPL stock was not the thing to own. Of course in retrospect, it was a great buy. Well, now after Jobs turned the company around, everybody knows why AAPL IS the stock to own. As usual, the fundamentals are going to fool people into doing the wrong thing (buying Apple stock). AAPL has simply gone parabolic, and is in a fifth wave up from its 1997 low. As you can see, each rise (wave) slope has gotten steeper and steeper. This is not sustainable and AAPL is topping out on a long-term basis. Once the bear market in AAPL begins, as per the guidelines of  Elliott Wave Principle that state that support after a 5 wave advance lies at the 4th wave low,  my ultimate downside target for AAPL is AT LEAST the 2008 low at 78.20, and likely lower than that due to deflationary forces about to hit the markets. It is quite possible AAPL will do a "throwover" of the upper trendline of the wedge in a final burst up in a 5th wave of Primary wave 5, before reversing hard and heading back towards the fourth wave low.

Bear Market Rallies and B wave psychology

Bear Markets unfold in 3 waves. Most commonly labeled A-B-C. Whenever a supercycle is completed, a crash unfolds. This is the "A" wave of the bear market. It is usually a very sharp drop in a short amount of time (in this case, 17 months from October 2007-March 2009). Then, a B wave bear market rally unfolds, that serves to unwind the oscillators and relieve oversold conditions. This is often associated with a temporary recovery in economic activity. But perhaps the most important element here is the psychology of B wave bear market rallies. At the "A" wave low in March 2009, pessimism was dominant, with most thinking we were headed into deflation and  economic depression and thoughts about the end of the world. A bear market counter-trend rally then unfolds, called a "B" wave, and serves to correct the decline that just unfolded. By the time a B wave is over, most economists and financial professionals are convinced that the worst is over and good times are back. Then, the final, and most devastating, portion of a supercycle bear market unfolds, the "C wave" that drops significantly below the "A wave" low. I believe we are facing something similar to 1929-1932, and this time period can be compared to April of 1930, at the top of the "B wave" during that bear market. Economists have credited the FED with saving the economy, and most investors are convinced that we are in a new bull market. This is the nature of B waves. They fool everyone into thinking the worst is over. The goal of bear markets is to make the most number of people lose the most amount of money, Bull and Bear alike. I would say that has certainly been true of this bear market, as the bulls took it on the chin in 2008, and the bears have all but given up trying to short as the market has gone higher and higher since March 2009. However, even amidst this tremendous 100%+ rally we have seen, it is still just a wave B bear market rally, with wave C still to come. This deflationary wave should be MUCH worse than 2008. Historical precedent for this type of move can be found in the 1929-1932 bear market, shown below:

 

As can be seen, the B wave bear market rally retraced part of the initial decline from the 1929 top. The C wave then carried the market down to MUCH lower lows, and by the time the bear market was over the market had lost 89% of its value. I believe we are in for a similar decline, and my target remains the same of below 800 on the DOW.  The sentiment currently out there is certainly consistent with the top of a bear market rally, with some sentiment exceeding extremes seen at the all-time high in October 2007. Many who were calling it a bear market rally before have given up and turned bullish. The same thing happened by the top of the B wave in April 1930. The difference this time is that everything is bigger. The bubble is bigger, the upward retracement is bigger, and the lies are bigger. Ultimately, the decline should be bigger as well. This kind of environment is why it is important to NOT listen to the talking heads on CNBC and stay safe in the safest possible cash equivalents. The collapse of our debt-money system is dead ahead, and by the bottom the bear market nobody will even think about buying stocks, but of course that is the time when attractive valuations show up in the market and that is the time to buy. But its IMPERATIVE that people remain safe during this time. The C wave is out there, should be much worse than 2008, and likely worse in percentage terms than 1929-1932. This time everything has been magnified. The debt bubble is bigger, and the central planners have done even more to try to prop the system up. It will not work, and their efforts will only serve to make matters worse. I believe we are very close to the top of this B wave bear market rally. The C wave is next, and its NOT going to be pretty.

Risk and Return way out of balance....

In modern Finance, one is supposed to be compensated for risk. The higher risk one takes, the higher return should be generated...this has been historically true, but certainly not today with one investment. That is the investment of loaning the bank your money. Interest Rates are near zero, and the risk of loaning the bank your money is IMMENSE. Interest rates would have to be much, much higher to justify the current level of risk in the system. One might say, "But I don't loan the bank my money, I deposit it." But that assumption is false. Whenever anyone makes a deposit at the bank, because of our debt-money system, it is a loan which the bank in turn leverages hundreds of times over and lends out, or, in recent history, gambling it and additional free money from the FED in derivatives markets. Despite what all the pundits and "financial gurus" say, the banks are NOT a safe place to keep your money, and the FDIC will NOT be able to handle the coming system-wide banking collapse.The FDIC can handle so many banks at once, but certainly not the whole system at once...and to that point the collapse of the global banking system should be quite swift. As the onset of the depression draws near, people need to act now. DO NOT listen to the Media, telling you this is a "recovery". It is not. It was a temporary respite from an ongoing depression, and a depression that is about to make itself known in a big way. As soon the the bear market rally in risk assets ends, the real collapse starts. That is why people have to take action  NOW. This does NOT MEAN keeping your money in Gold and Silver as "safe havens", they are risk assets as well and will be sold to generate cash to pay off the massive amount of debt worldwide. The Dollar will rally as the global banking system collapses. This means either opening a Swiss Bank Account for those with large sums of money, or, for most, opening up an account with treasurydirect.gov and buying short-term t-bills only, as well as keeping physical greenback cash on hand. This is one of the last chances to preserve capital...time is running out fast.

A classic Breakdown and Backtest of trendline resistance

In Technical Analysis, whenever support is broken, it is usually backtested. With all the hype of a "new bull market", from a technical point of view the entire rally from 2009 has served its purpose: to backtest long-term resistance. The market broke cleanly below this trendline in 2008 and is simply backtesting it. Isn't it hard to believe? Talk of a "new normal", and "double dip, no double dip" is all very, very wrong. This is the wrong mindset. We are in a slowly developing depression, that has been developing since 2000. We have been edging towards the end of the cliff, and are about to fall off it. A breach of the March 2009 lows should be in short order, once we get the proper cyclical setup as identified by Tim Wood.

Now notice the same chart up close on a daily timeframe, and how close the DOW is to its long-term resistance line:

Huge Bull Trap Setting up

While the major indexes are closing in on their 52-week highs.... and are likely to exceed them as we await this cyclical setup identified by Tim Wood as occurring at EVERY major top since 1896...the bears are all but disappearing. The following chart by Sentimentrader shows how few bears there are left.

 

Meanwhile, as I have stated before, Tim Wood's cyclical DNA marker setup will mark the top of this bear market rally that started in March 2009. Despite all the bulls that are coming out saying its a new bull market....its still just a bear market rally that will serve to trap the bulls in that buy on a "breakout". the Nasdaq 100 index (NDX) has broken out to a new 52-week high today, and the other indexes are likely to follow shortly....but once we get this setup....its game over. I do not see the S&P getting much higher than 1440-1462. One thing I can say with certainty is the higher this bear market rally goes, the more people it is going to fool.....and the more pain will ultimately be felt as the next leg of this bear market takes hold and deflation collapses asset prices. If people think 2008 was something....this next leg of the bear market is going to make 2008 look like a Sunday School Picnic.

Very exciting Juncture in the U.S. Dollar

I have maintained a solidly bullish long-term stance on the U.S. Dollar on this blog since its inception (first post on U.S. Dollar in November 2009). However, I thought there was a chance the U.S. Dollar index could take out its 70.70 March 2008 low before starting its massive Bull Market. Very Recently, Objective Elliott Wave (OEW) developed by Tony Caldaro has confirmed a long-term uptrend in the U.S. Dollar. This suggests the Dollar bottomed in 2008 and has been basing since. This is the original stance I took, however I started to entertain the idea that the U.S. Dollar needed another all-time low first. However, with the OEW long-term uptrend confirmation in the USD and long-term downtrend confirmation in the EUR/USD currency pair, the odds now shift to that the Dollar bottomed in 2008. Tony expects the U.S. Dollar index to reach 140 by 2018.....I expect much higher than that...possibly to 300 or higher. However, it will likely continue to base until the Gold market tops out in 2013-2014. In my view, this is all a topping process. With the bearish expanding wedge pattern developing in the DOW going back to the late 1990's, the foreign currencies topping out in 2012, the USD cycles bottoming in 2012, and commodities due to top out completely by 2014. It seems as if Deflation is about to come back with a vengeance. The safest place to be is cash as I have reiterated many times before...and with all these cyclical events happening.....people need to act now to get liquid and stay that way until the deflationary storm is over.

Just as an FYI: this chart IS drawn to scale....yes I expect the DXY to hit 300 before the end of the decade.

Gold Silver and Commodities are NOT crisis hedges

Many analysts on Wall Street take Gold, Silver and commodities to be hedges against financial turmoil. The reality is that they are just assets that are sold to generate cash in economic contractions. Additionally, the entire time that Gold and Silver have been in bull markets since 2001, the stock market has held up and, in my view, been in a gigantic topping process. When this topping process ends, and the real financial collapse happens, which I believe is very soon, all of these markets should collapse with it. Gold and Silver will likely initially be viewed as hedges, and will likely be the last markets to top. But in the worst portion of the deflation, they will top out and collapse along with everything else as the 80-year credit bubble comes unwound along with the debt-money system. Dollars are is scarce supply and will be in great demand as the credit system collapses. Here is a great clip by Robert Prechter in which he illustrates how Gold and Silver go DOWN in bad economic times, not up.These markets may have a little more upside left, and the Dollar a little more downside, but 2012 is going to be a MAJOR bottom for the U.S. Dollar. I expect the USD to soar as the financial environment gets worse, as the margin calls come in and the USD shortage takes hold. The key to the end of this bear market rally, and ultimately I believe a decade long topping process, will be the appearance of certain cyclical DNA markers that have occurred at EVERY major top since 1896, discovered by Tim Wood. Once we get this setup, financial hell will break loose, and the U.S. Dollar should launch its greatest bull market of all time.