Divergences everywhere, Elliott Wave Pattern, and record complacency and bullishness portend swift decline

With the textbook throw-over after an ending diagonal pattern having completed, record bullishness,  the patterns in the U.S. Dollar, Commodities, and precious metals, the situation could not be more dangerous and deflationary.

First, the U.S. Dollar. The U.S. Dollar index bottomed in March 2008 at 70.70, and, even with all the central bank inflation,  has not  even taken out that low. And, the Dollar index now has in place a massive divergence with equities since the Spring of 2011.

 

Next, Commodities topped in the Spring of 2011 commensurate with the bottom in the U.S. Dollar, and have been diverging with equities ever since.

All of these divergences are big warning signals, which, when combined with record bullish sentiment, a VIX that looks ready to explode to the upside (has already begun), and the longer-term phasing in equities with a cycle wave b wave labeling, portend a massive deflationary move in a cycle wave c down to complete supercycle wave (a) down of the Grand Supercycle Bear Market.

Further, I want to address one more thing. Many people say that there is a big decline coming, but it will be in real terms only,and won't be in terms of "worthless U.S. Dollars" becasuse "Helicopter Ben" will just keep printing money. It's not that simple. The FED is NOT "printing money". They are adding reserves to the banking system, and it takes a willing populace to  borrow and spend those Dollars (velocity) and willing investors to take the money and speculate with it. With speculation at unheard of levels already, and with social mood about to reverse dramatically from a decade-plus long topping process, the outcome should be a stock market decline of greater than 90% in nominal terms. For more on this discussion, please listen to the interview I conducted with two other gentleman on Friday, February 15, 2013, which can be found in my post below.

Frank DeBaere

I would like to introduce Frank DeBaere. Mr. DeBaere is a resident of Belgium and an extremely intelligent individual. In our interview conducted between Frank, Tim Wood and Myself on February 15, 2013, we discuss the highly fragile nature of the global banking system. Specifically, Frank gives us a first-hand perspective on the european banking system that is as much of a Ponzi Scheme and house of cards as the rest of the global financial system. Stay tuned for more highly informative and thought-provoking interviews.

Click Here to Listen to Frank DeBaere, Tim Wood, and myself discuss the state of the markets

Wayne Patton

I would like to Introduce Wayne Patton. Mr. Patton is a Florida-based Asset Protection Attorney. Asset Protection is essentially legal planning that places assets beyond the reach of future creditors. Wayne is extremely knowledgeable about the legal system and can help you safeguard your assets against potentially devastating lawsuits. Given where the financial system is headed, now could not be a more important time to take proactive measures not only to protect the value of your assets, but to protect your hard-earned money from the broken legal system that exists today. Please find below a link to an interview I conducted with Tim Wood and Wayne Patton on January 11, 2013.

Click Here to Listen to the Interview

Historical Extremes being tested once again.....and it's NOT going to end well

It would be reasonable to assume, that the 2007 top marked the end of the great bull market, that originally tried to top in 1999/2000, but, due to extreme leverage and debasement of the U.S. Dollar, markets carried to new highs in nominal terms in 2007, however NOT in real terms. This distinction is important, because the divergence between nominal values (in inflated U.S. Dollars) and real values (adjusted for inflation) signaled the end of the great bull market. However, once again, the powers that be are attempting to keep the great credit bubble inflated, through asset and debt purchases by the Federal Reserve. The markets are at a critical juncture, in that if the Dow Jones Industrial Average closes above the October 2012 closing high of 13,610.15, it will generate a Dow Theory Bullish primary trend change. Should this occur, it would suggest the 4-year cycle is stretching, just like it did in the 2006-2007 time frame, and the large expanding wedge I have illustrated before would be playing out, with a target above the 2007 all-time highs. However, we do have a potential ending diagonal playing out, with an extended minor wave 1 of Intermediate wave (1). This scenario would allow for one more new post-2009 intraday high in the DOW, before finally reversing. Ending diagonals are final moves, and the pattern completion is always follow by a hard reversal in the other direction, in this case down. Technically speaking, the Double Zig-Zag scenario from 2009 is still intact until the DOW takes out 13,661.87 intraday, but this is another possible scenario that could be at play here. The key for this scenario is not to close above DOW 13,610.15. As long as that level holds on a closing basis, this scenario would allow for a new intraday high, immediately followed by a swift intra-day reversal. Things have already been stretched beyond imagination, however if the DOW manages to close above 13,610.15, the 4-year cycle is stretching once again, and, just like 2007, it will end at some point, and the fallout will be much worse than 2008. Meanwhile, our focus is on this potential pattern and the DOW levels cited on a closing basis. As long as 13,610.15 holds on a closing basis, the Dow Theory Bearish Primary Trend Change from August 2011 is still intact, and this market will be set up for a swift move below the March 2009 lows as the inevitable deflationary forces take hold and drive the next leg down of this massive bear market into the 4-year cycle low.

Elliott Wave Count Update

We have a potential completed Elliott Wave Count off the March 2009 low. It counts well as a double zigzag in a cycle wave B bear market rally. Of course, nobody believes it is just a bear market rally anymore, but the goal of bear market rallies is to convince all market participants that it is a new bull market. I would say the bear market rally has done its job, to say the least. We truly do live in interesting times, with historical extremes being reached in global finance.

Monday, December 10, 2012 Market Update

Long-Term Supercycle Market View