Recent Observations

I have been observing an unprecedented amount of ignorance, giddiness, complacency and downright arrogance with regard to the current position of the market. Market analysts who have maintained their long-term bearish outlook have lost credibility in the eyes of many. But, I can tell you, this "realization" by many that this is a new secular bull market and that the long-term bears were wrong is phony and a result of optimism induced by the extent of the reflation and subsequent rally in equities since March 2009. Those who cannot read through the lines and look at objective data and statistics are setting themselves up for financial disaster.

In particular, market technical analyst Tim Wood of Cycles News and Views, who graciously extends me air time, and works tirelessly doing objective research on the markets, has taken a lot of criticism recently from ignorant people who want to make themselves look smart by calling him and other bears out on the fact that equities are at a new all-time high. Tim has been called names such as a "broken clock". As Tim and I have pointed out, new highs in equities are NOT necessarily indicative of a new secular bull market. The same thing happened in 1973, during Primary wave D in Elliott Wave terms, of a 5 Primary wave (A-B-C-D-E) expanding triangle. Primary wave E down then ensued, to new lows for the bear market. At this particular juncture, it is again a bear market rally, this time Cycle Wave b, and the new all-time highs in nominal terms have convinced many that this is a new secular bull market. Tim and I are constantly shouting from the rooftops, hoping people will put their biases and preconceived notions aside for once and look at objective data. No, Tim Wood does not pay me to do these interviews with him, nor is he paying me to write this piece today. I am writing this because I am personally disgusted with the level of downright arrogance that has come upon many market participants, that take their own insecurity and project it onto someone else who has remained objective all along. Fact is, Tim Wood has said ever since the rally out of the 2009 low began, that yes, we are in a long-term secular bear market, but until we get the proper setup in place to cap the rally, it will continue. We have not once gotten the DNA Marker setup. In fact, Tim went out on a limb to call for a move above the May 2011 highs, after that vicious decline in  the summer/fall of 2011, when many turned extremely bearish. This call was simply based on statistics, and the fact that we had not gotten the proper DNA Markers in place to cap the rally. That's it! It really is not complicated and I highly recommend people resist the urge to listen to so called "analysts" that are just pushing the popular line, and subscribe to Tim Wood's letter to get a truly honest and objective picture of the market. We are warning there is a financial storm coming, and few are listening. I hope readers of this blog will take action before it's too late. We hope you are listening.

Tim Wood's research, as well as our audio interviews, can be found at www.cyclesman.net

We will be starting regular audio interviews in September 2013 so stay tuned.

Tim Wood Interviews Chris Wilson

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DOW Weekly Rising Wedge

Below I illustrate the rising wedge form the market has taken since the rally began in 2009, with throw-overs and throw-unders. This volatility simply serves to illustrate the intense emotion in the market. And, the final move up is likely to be another throw-over, before a massive reversal to the downside and a resumption of the larger bear market.

A Major Shift in the Bond Market and Interest Rates

Recent data and evidence suggests, in my opinion, that long-term interest rates have bottomed, after a 31 year bear market, and a new bull market in rates has begun. By the same token, if in fact long-term interest rates have bottomed, a new bear market in bonds has begun. However, while most who agree that rates have bottomed will say this is because of a growing economy or rising inflation expectations, I think it is because of a growing fear of default. This shift in psychology is indicative of the onset of the biggest credit collapse in history. The Bond market, stocks and precious metals have been the last holdouts of this massive credit bubble. Now let's take a quick look at each. Precious Metals topped in April 2011 (Silver) and September 2011 (Gold). Gold has now broken down and confirmed a bear market, while silver has collapsed as well. The last holdout was U.S. Government Bonds, which topped in June 2012 (10-year note). Now, we are starting to see evidence of further stress with the recent bankruptcy of Detroit, Michigan. This is one of the first of the coming massive wave of municipal defaults and bankruptcies. Other notable municipal bankruptcies so far have been Central Falls, Rhode Island and Stockton, California. In reality, most municipalities are bankrupt, even if not officially yet, for the continuation of this debt ponzi scheme requires ever increasing amounts of debt issuance, and if municipalities have trouble issuing new debt, they go bankrupt. Such is the inevitable outcome of the largest ponzi scheme is world history. Back to the U.S. Bond Market. Below please find an Elliott Wave count in interest rates (inverse to bond prices) dating from to the top in rates in 1981 to the low in June 2012. The new Bull Market in rates should continue for decades.

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