Second Interview with Tim Wood

On the 25th anniversary of the 1987 crash, and the timing could not be better.

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Potential Long Term Wave Counts

The market is in a similar position as late 2007. With October 11, 2012 being a Fibonacci (5) years away from October 11, 2007, the day the stock market registered its all-time high, many divergences are present, such as the Dow Theory non-confirmation ("major" flashing red signal) yet the market keeps on crawling higher. Since the Dow Jones Industrial Average, the bellwether index, has retraced over 90% of the 2007-2009 decline, it can now be labeled as a flat. No matter what waves the market creates going forward, it is quite obvious the structure from 2009 is corrective. However, corrective Elliott Waves can take on many different forms, a flat being one and an expanded flat another. In the flat scenario, wave b must retrace over 90% of wave a, and that level was 13,425 on the Dow. Since the high so far is 13,661, the market now qualifies for a flat. Should the market be tracing out an  expanded flat cycle wave b scenario, the market would make another all-time high, likely be completing an expanding wedge, and then crash in a cycle wave c down. Below is an illustration of such a scenario.

 

This would be under the expanded flat scenario with the market making new all-time highs. The market does not have to make new all-time highs in what could also be a regular flat, which does not require a new high. Either way, the upside seems very limited and the downside risk extremely high in what could be a Grand Supercycle Bear market.

As a side note, R.N. Elliott ,the original Pioneer of the Elliott Wave Principal, projected the Grand Supercycle degree top in...you guessed it...2012. While the market has really been in a bear market in every other denomination but nominal terms since 2000, 2012 may be of great significance as the final peak in the decade-plus long topping process is completed. 

My Interview with Tim Wood

On Friday, August 10, 2012, I had the pleasure of being interviewed by Tim Wood, an excellent market technician whose focus is on cycles and Dow Theory. A link to the interview can be found below.

The interview can be found here.

A look at the Crude Oil Market

Back in July 2008, with Crude Oil trading at an all-time high of $147 a barrel, everyone was calling for "peak oil" and a move to $200. This happened to be the end of the Crude Oil Bull Market from 1998, and probably dating back decades and even centuries. Well, instead of oil soaring to $200, it collapsed 78% in one of the biggest commodity busts of all time. It bottomed in 2009 at $33 a barrel. Since then, Crude has more than tripled in a wave B bear market rally. Crude topped over a year ago, at just under $115 a barrel. Of course, this got everyone in the peak oil camp excited again. But, it was just a bear market rally that is now over. Crude retraced 71.6% of its 2008 decline. That is more than enough for a bear market rally. Crude Oil has now entered the next leg of its bear market, wave C down. Granted, it is oversold in the short-term and due for a bounce...but Crude's long term downtrend remains in force.

Crude Oil Futures

The Return of Deflation

I think it is officially safe to say deflation has returned and the 3+ year reflationary bear market rally is over. Oil and commodities are collapsing, the stock market has turned to the downside, after horrendous technical conditions and non-confirmation warning months in advance of this top, and all you hear from the pundits on television is "don't panic, this is not a time to sell". They will be saying that all the way down until the bear market low, just as they did from 2007-2009. Except this time, its wave C of the bear market, and should be stronger, last longer, and ultimately do much more damage. Neil Cavuto recently interviewed Bob Prechter again. Once again, another great conversation with excellent unconventional insight.

The true nature of the FED

               The Federal Reserve is NOT what most people believe it is.

A look at the long term Nasdaq 100 index

The Nasdaq 100 Index (NDX) has approached major long-term resistance. It fell just short of the 50% retracement of the 2000-2002 crash, at 2,805.80 and is backtesting a long-term trendline. After a 10-year bear market rally in this index, this seems poised to turn down in a big way. I posted about the parabola in Apple Inc. (AAPL), and as soon as this stock really gets going to the downside, the NDX should follow suit, as well as the general stock and commodity markets as the coming deflationary crash gets underway.