July 26, 2013 Interview with Tim Wood

In this interview, we discuss the herding impulse inherent in human beings,  how this manifests itself in financial markets, the extremely dangerous state of the markets, and much more.

                                                                Click here to listen

The most important turn in U.S. stock market history

Back in 1978, Elliott Wave Principle by A.J. Frost and Robert Prechter, Jr. predicted a mania to occur comprising Cycle Wave V of Supercycle Wave (V) of Grand Supercycle Wave III. Needless to say, this has proven correct. And, It has taken much longer than expected to top. And yet, here we are, thirteen years after the orthodox high in the Dow Jones Industrial Average, with the nominal Dow at all-time highs, complacency everywhere and what could very well be the most important juncture in U.S. stock market history about to come to fruition. In their book, Frost and Prechter forecast,  "...in order to set up the U.S. stock market to experience the greatest crash in its history, which, according to the Wave Principle, is due to follow wave V, investor mass psychology should reach manic proportions, with elements of 1929, 1968 and 1973 all operating together and, at the end, to an even greater extreme." Little did Elliott Wave Practitioners know the extent to which this statement would become true. The length of time the nominal stock market averages have spent levitating the past 13 years after the true high in stocks (Dow/Gold) has been nothing short of astounding considering the loss of real value that has occurred since that time. The implications of such a manic and parabolic rise in the 1980's and 1990's have not changed, and the fact that it has taken so long to top out makes the situation that much more dangerous. While we wait for the market to finally top out in this last and final peak in the decade-plus long topping process, please find below an Elliott Wave Count I consider to be a reasonably high probability. While conditions are again getting ripe for a top, I think the odds favor a moderate pullback for intermediate wave (4) and then one more final high, in intermediate wave (5) of Primary Wave C of cycle wave b to reach (and perhaps throw-over) the upper trendline of the broadening top formation the market has illustrated, on a monthly basis.

June 28, 2013 Interview with Tim Wood

In this interview, we discuss common investor misconceptions and biases, how these can be dangerous, and how to overcome them to improve overall performance. We use Gold as a prime example of how biases  and pre-conceived notions can get one in trouble when trying to discern the direction of a market from the so-called "fundamentals".

                                                       Click here to listen

                                                          

                                                                                              



     

May 3, 2013 Interview with Tim Wood

Another discussion between myself and Tim Wood regarding the extreme bullish sentiment in the markets, as well as a dire warning to investors. We are in a secular bear market bigger than any in U.S. Stock Market History. The worst is NOT over, and once we get the proper setup in place, the entire house of cards will come collapsing down. We hope you are listening.

The Interview can be found by clicking here

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.

A Potential Symmetric Rally

March 28, 2013
12:13 P.M. EDT

This market has the potential to top in a manner symmetric in price to the last decline from 2000-2002 and rally from 2002-2007. Assuming the bear market started in 2000 (more on this potential new development in another post), the rally from March 2009 would top at 14,589.26 on the Dow Jones Industrial Average if the rally retraced 1.538 times the previous decline. However, because we are assuming the bear market started in 2000, we are taking the top from the orthodox top in 2000 rather than 2007.  The first expanded flat Primary wave B extended approximately 1.538 times the length of Primary wave A down from 2000-2002. Applying this relationship again in cycle degree (taking the move from the orthodox top at 11,750.28 to the cycle wave a bottom at 6469.95) now would give us a nominal DOW target  of 14,589.26. The reason I decided to post this is because the high as I am writing is 14,585.10. If in fact this relationship were to play out again, the entire rally from 2009 would top right now. I am by no means certain of this relationship, but given the fact that the market has basically met this relationship today, March 28, 2013, I thought I would present this possibility.

Update April 2, 2013 1:18 P.M. EDT:

Applying this same relationship to the S&P 500 Cash index, we arrive at a level of 1579.10. Although we have exceeded the ideal level on the Dow Jones Industrial Average, we will give it a bit of room as we await this uptrend from November 2012 to top. The S&P Cash index is currently trading at 1572.

A Terminal Rally

We have a clear 5 waves up from the November 2012 low.  Therefore, the market is setting up for at least a correction, if not a resumption of the larger bear market. The ending diagonal pattern previously posted has been negated due to the fact that the third wave as labeled was the shortest, which is a rule breaker in Elliott Wave terms. The Elliott Wave count is a bit muddled here, but anyway you look at it, we have corrective waves up from the 2009 low, which imply, even after new-all time highs have been achieved, this is still one large bear market rally, which, when complete, will lead to a decline below the March 2009 lows in a 4-year cycle low. That being said, the divergences currently present are less than ideal for a 4-year cycle top. The rally from November has been quite strong and has managed to trigger a Dow Theory Bullish Primary Trend Change, which, after the previous bearish primary trend change had been in place for 5 months, is quite significant. However, as we saw in the Summer and Fall of 2011, not all Dow Theory Trend Changes are equal. When everybody and their brother were calling for a bear market, we had not gotten the cyclical setup we needed to cap this rally. Tim Wood was literally the only analyst I knew of that specifically called for a move above the May 2011 highs. We must look at the statistics, Elliott Wave picture, and momentum data to determine if a longer term top is likely. Once we get the proper setup in place, and a completed Elliott Wave structure, this market will be set to resume the larger bear market. Although the Elliott Wave picture is unclear on an intermediate-term basis, I believe I may have uncovered the reason why this Grand Supercycle top is taking so long. More on this in a subsequent post. For now, our focus is on this rally from November 2012, which is in its final stages. Additionally, one can clearly see a rising wedge form the February low. This is indicative of a terminal move. Therefore, a top is just around the corner and we will have to examine the nature and extent of this coming move down. If it is corrective, that would suggest a move to new highs after a period of retracement from near these levels. If the move is 5 waves, impulsive, it would suggest a completed uptrend off the 2009 lows and a resumption of the larger bear market.