grand super cycle revisited‏

The most common perception about a GSC is the one the RN Elliott described during his discovery of the Wave Principle. In basic terms, he determined that the cycle began in 1776 with the founding of the 13 original american states. Then from the 1776 revolutionary war he roughly counted:
1776 – 1857 SC 1 and 2, resulting in the civil war 
1857 – 1932 SC 3 and 4, resulting in a world war
1932 – xxxx  SC 5
Since each rising Supercycle is about 70-80 years, a good target for a potential top would have been from 2000 onward.
Originally we had dismissed this concept due to the lack of quantitative market data. In general terms, however, recent market behaviour has led us to take another look. When reviewing our favorite market chart of all time DOW 1929-present, it is quite easy to see the cycle waves of the recent SC:
1932-1937 cycle [1]
1937-1942 cycle [2]
1942-1973 cycle [3]
1973-1974 cycle [4]
1974-2007 cycle [5]
During cycle waves [2] and [4] the market lost about 50% of its value. Even after cycle wave [5] our market has lost over 50% of its value. These are the three largest bear markets during the entire 1932-2010 time period. When these bear markets are compared to the 90% market decline of 1929-1932 they seem inconsequential. Now read this:

 
Christopher Columbus was the first European to land in the territory of what is now the United States when he arrived in Puerto Rico in 1493. The subsequent arrival of settlers from Europe began the colonial history of the United States. The Thirteen British colonies that would become the original US states, were founded along the east coast beginning in 1607. Spain, France and Russia also founded small settlements in what would become US territory. The Thirteen Colonies grew very rapidly, reaching 50,000 by 1650, 250,000 by 1700, and 2.5 million by 1775. High birth rates and low death rates were augmented by steady flows of immigrants from Europe as well as slaves from the West Indies. Occasional small-scale wars involved the French and Indians to the north, and the Spanish and Indians to the south. Religion was a powerful influence on many immigrants, especially the Puritans in New England and the German sects in Pennsylvania, with boosts from the revivals of the First Great Awakening. The colonies by the 1750s had achieved a standard of living about as high as Britain, with far more self government than anywhere else. Most free men owned their own farms and could vote in elections for the colonial legislatures, while local courts dispensed justice. Royal soldiers were rarely seen.
 
The colonists did not have representation in the ruling British government and believed they were being denied their constitutional rights as Englishmen. For many years, the home government had permitted wide latitude to local colonial governments. Beginning in the 1760s London demanded the colonists pay taxes. The new foreign taxes on stamps and tea ignited a firestorm of opposition. The British responded with military force in Massachusetts, and shut down the system of local self government in what the colonists called the Intolerable Acts.
 
After fighting broke out in April 1775, each of the colonies ousted all royal officials and set up their own governments, which were coordinated out of Philadelphia by the Continental Congress. The American Revolution escalated into all-out war. Despite local King George loyalists, the new nation declared independence in July 1776 as the United States of America. After Americans captured the British invasion army in 1777, France became a military ally, and the war became a major international war with evenly balanced forces. With the capture of a second British invasion army at Yorktown in 1781, the British opened peace negotiations. The Treaty of Paris in 1783 proved highly favorable to the new nation.
 
Prior to the Revolution the standard of living in the american colonies was equal to that of Britain. That did not suddenly all disappear during the revolutionary war. Only about 10% of the population were involved. It is clear that the GSC may not have begun in 1776. It could have begun much earlier, probably entering the 18th century when the population grew to 250,000 or more. Or even after the South Sea/Mississippi bubbles in the early 1700’s: http://www.library.hbs.edu/hc/ssb/history.html
Historically, US per capita income doubled between 1700 and 1770, then dropped only 20% during the revolution, before resuming its climb to higher levels well into the 19th century:
What if the GSC began let’s say around 1700. Then it would look like this:
1700 – 1776 SC 1 and 2, resulting in the revolutionary war 
1776 – 1857 SC 3 and 4, resulting in the civil war
1857 – 1929 SC 5
1929 – 1932 GSC collapse, resulting in a total world war
The 90% market decline of the great depression appears more in line with a GSC collapse than any of the time periods noted before 1929, and any after 1932. When
we review intermarket relationships, using other asset classes, we first compare the regular 34 year commodity cycle to the stock market. During the 1929 top, commodities had been in a bear market after a major collapse in post WW I 1920, and remained in a bear market until 1933. Then, there was a total collapse in every asset class as deflation was broadbased. The inflationary pressure of rising commodity prices, to offset the deflationary pressure of a SC, as we have now, was not present between 1929-1932. This is probably why we are experiencing, a once in a lifetime, deflation in things we want versus inflation in things we need. 
The commodity cycle, in itself, is quite interesting. Refer to chart below, bull markets:
1933-1946
1967-1980
2001-2014
Notice there were Cycle wave peaks in the equity markets around the middle of each commodity bull market: 1937, 1973 and 2007. The first peak occurred four years after it began, the next two peaks six years after. Also notice, after the Cycle wave tops stock markets went into a bear market, and then stayed in a trading range until the commodity bull market ended. What followed after that was the extraordinary bull markets of 1949-1967 and 1982-2000. The best part of the Cycle waves, Primary wave III. 
Certainly a SC top definitely creates the worse economic experience since the great depression. But they do not appear to be of the same degree. There is very little protectionism now, no gold standard to limit an inflationary monetary policy, the world is much further along industrially and technically, plus currencies flow across borders in nano seconds.
In regard to currencies, during each of the last two commodity booms the USD was officially devalued. FDR did this in 1933 when he devalued the USD/Gold relationship from $20.67/oz to $35.00/oz. Then in 1971, Nixon took the USD off the gold standard completely. This suggests an official devaluation of the USD will likely occur before 2014. In addition, no need to tell you what will happen to gold and crude over the next few years. Gold and Crude made peaks in the 1940’s and then again in 1980. The FED policy of quantitative easing will only add more fuel to the current commodity bull market. When we review US Bond prices we observe that they had been in a 27 year bull market from 1981-2008. Now they have most likely entered a multi-decade bear market, which means rates will be rising long term. Gradually rising bond yields are often associated with economic expansions, not contractions. Bond yields were gradually rising during the 1950’s, 60’s and 70’s until they spiked in 1981.
Returning to the stock market. We are already into the 28th month since the Oct 2007 top, and the DOW had dropped 54% into the Mar 09 low and is now higher. Twenty-seven months after the Sept 1929 top the DOW had already lost (high-low) 81%. Twenty-eight months after the DOW was down 82%, and after 34 months it bottomed down 89%. We are not observing that kind of time/price relationship in this market. During that thirty-four month decline the DOW wiped out 33 years of market progress all the way back to the 1896 low. Using the same time/price relationship, the market should be well on its way to the 1974 low of DOW 570, which occurred 33 years from the 2007 top, by August 2010. And, this credit driven society would be well on its way back to the Dark Ages. It appears, at least to this analyst, that if there is a GSC it likely ended in 1932. The current GSC, then, will not top until the 22nd century. There are certainly many potential implications to this scenario.
Would publicly like to thank all in our OEW group that contributed to this analysis. They were certainly instrumental in piecing together facts, figures, charts and opinions which shifted a potential scenario into a more viable probability. This was truly a joint effort! Time will judge our efforts.
 

About tony caldaro

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50 Responses to grand super cycle revisited‏

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  5. MGD says:

    Tony, the FED bought credit instruments and keeps buying bonds. I understand it now holds more than 25% of total …so in my opinion the official devaluation of the USD will likely be that the FED will anounce that they will erase the total debt from their books..thats it !!
    I have no idea what what this would mean for the economy and the rest of the world. Have you ?

  6. Unknown says:

    No Name:I had been pondering both of your questions before your post.If 1929 was a GSC top, is it necessary under EW law for alternation to occur?Regarding the Kress cycles, I think they are fascinating. According to the book by Clif Droke, per Bud Kress\’s cycle theory, the 120 year cycle along with all of the components that make up this cycle bottom in 2014.One explanation would be that if the bounce out of a 2010 low into a 2011 high is sufficiently high enough, the 2014 low could be SC Wave 2 with perhaps a very deep tracement of SC Wave 1. With what appears to be a major debasement of the USD on the horizon once this current countertrend rally plays itself out, we may not see a nominal low in the stock market in 2014. The previous 120 year cycle bottomed in 1894. Tony, can you please tell us how 1894 or the closest stock market low to 1894 fit into the EW structure of that time period?Thanks for all your knowledge.

  7. gls says:

    R B: I\’m not sure exactly where the cycles are. The low at 1044 was probably the 3rd five week low from the 40 week low on Nov 2.I am also counting differently EW wise than others. In early Feb I proposed the market has been working on an irregular correction from the October high. And this low recently copleted the "C" of that. I mentioned it here and another site and had no reaction so I figured it had a good chance of being correct.Also, one can say the rally from the July low has a "v" up to go. This would complete 5 waves up from July. Now is the move up a "3 or a "C".? I beleive it is a "3" as I believe the low in March of 2009 completed a major, major correction. I know this is not popular and if it fails I will be ridiculed. I think a person should only play the long side as someday the big surprise move will be a tremendous move up.In eleven days the 89th day from the October high will occur. Let\’s see what side of the trading range that day is.Another thing, Friday was a cycle day that if you close above or below that day\’s range, that is the near term trend.

  8. Bill says:

    If this correction does not have to alternate with the 1929-1932 correction because it is not of the same degree and it is a SC 2 then how low can it go? To the level of the last corrective wave of a lesser degree?

  9. Bill says:

    If the correction we are currently in is a correction of a SC move from the 1932 low then why are we rushing it. We have time and space to correct to the previous wave of a lesser degree [4]. The 120 Kress cycle is not due to bottom ideally untill 2014 maybe 2016. How much damage could rising crude and other needed commodities do to stock prices as people liquidate positions to support a life that no longer has the income or the safety net of government support that has been enjoyed in the past. I believe the search for a low time wise is being rushed. Time compression of market movements has always been a large problem in fitting the market to our expectation. Tony, you do great work and your ability to be willing to examine the status quo thinking and offer other opinions makes you exceptional.

  10. R says:

    gls: do you have any cycles that show we\’re not done going up?

  11. Roger says:

    gls,The simple answer is I believe the elliot wave stucture off the top is a series of thrusts down,that have taken place after triangles in the "b"? position. This is what occured in the great "C" wave down in 1929-30,and we have that setup now.Maybe I\’m wrong,time will tell,and thanks for the question.Cheers,Roger

  12. gls says:

    The up move that is presently occurring is not complete. ( From Friday\’s low).

  13. gls says:

    I see three 5 wave moves up. The intial move off the low a week ago Friday. The move off the low Wednesday morning and the move off the low Thursday morning — both last week.

  14. Amos says:

    All of the waves up from SPX 1044 low are 3\’s… except for 1 of the waves.. which is wave C of 2… Wave C are the only counter trend waves that unfold in five\’s… wave C of 2 ended on Thursday high of 1080.04.. wave (i) down… started then.. the first part of wave (i) wave (ii) was complex and wave (iv) was simple pattern ended at the lows on Friday morning.. then wave (ii) unfolded in simple (a) (b) (c) pattern.. anyone who is long.. is on the side of three\’s… which is the wrong side to be on..

  15. CB says:

    Stan, the rates shot up and (temporarily) killed gold.

  16. Stan says:

    "A substantial increase in bond yields tends to be detrimental to gold price"Cobalt blue: What happened in 1980? We had high gold prices and high bond yields

  17. gls says:

    Roger Dwrote: I think tomorrow we are setup for a large thrust down. I far as I can tell the U.S,FTSE,DAX,Nikkei,Hang Seng are all now in impulse mode to the downside.Roger D: What do you see that tells you that a dramatic move down is right here for these markets? I am not trying to be argumentative, it is that I just don\’t see it. In fact, I see upward movement for everyone of those markets near term. If I am so wrong, I really need to examine how I look at markets.

  18. CB says:

    the charts I was referring to are:1.under FOREX :"bond yields 1960-2000"2. under Prec. Metals "gold 1920-http://www.chartsrus.com/

  19. Roger says:

    Hi Tony,Really hope your\’e right and I\’m wrong.Thanks for sharing your extensive analysis and expertise.Cheers,Roger

  20. tony says:

    Hi Aureliano,Agree, was surprised the analysis went against the grain of conventional thought.If we could buy the 1932 DOW in current dollars in would cost $2000, not $41.While nominally the DOW rose from 41 to 14,198 between 1932-2007.In real terms it only rose between 2000 and 14,198, or about 3%/year growth.The Carter years were at the tail end of a multi-decade decline in bond prices.Dilithium crystals goes with SG 1. The market is not always in touch with the economy.While the US exited the depression around 1942, the stock market had already completed Cycle waves one and two of a new Supercycle bull market from the 1932 low.The general consensus was expecting, and preparing for a GSC type of collapse. Agree!It was a natural response considering the melt down and frozen credit markets during 2008.Looks like the USA will try to inflate its way out of this problem. As it has done in recent history.In real USD terms the markets are lilely to go sideways or lower for a few years.We do not give investment advice, we only read the charts.The most bullish asset classes, technically, are commodities, some foreign currencies and some emerging markets.hope this answers your questionscheers!

  21. CB says:

    Oh great, my charts links don\’t work…lol.. Ok, if you are interested use this link http://www.chartsrus.com/ and find long-term bond yield charts and gold price charts. I promise theye are there.

  22. CB says:

    AB,Quite presumptuous of me to try to offer my opinions because you only mentioned “smart people,” which I am not. But I\’ll try anyway:) …Often when I don\’t know what I am dealing with I am first trying to figure out what it is that I am NOT dealing with. Sort of a multi-choice test. When Tony writes (about bonds): “Now they have most likely entered a multi-decade bear market, which means rates will be rising long term” I have to ask just how high is the probability of that, and do I care about it? My answer is: no. Here\’s why:1/ Someone would have to first convince me that this chart looks bullish. http://www.sharelynx.com/chartsfixed/BondYield.gif For now, I\’ll stick to the advice of our good friend Pepe, who says stay with the trend until you have a break-out. 2/ Our fundamental issue these days is risk aversion and low return on investment. The price of money( interest rates) will rise only if the demand for money increases. But for that to happen people/businesses need to see business opportunities somewhere so that they want to borrow. Plus, a high debt burden renders many entities unable to borrow. If the general demand is low and people are risk averse, they are not likely to make new investments, and therefore the demand for money will stay low (demand/supply/price relationship).Another thing that strikes me as inconsistent are seemingly simultaneous gold and bond price expectations expressed by Tony. A substantial increase in bond yields tends to be detrimental to gold price because it constitutes a rising opportunity cost to holding gold. So we can either have $3000 gold with low interest rates, or we can have really high interest rates which will kill gold . I am not sure how we can have both simultaneously; it seems intellectually inconsistent. Look at both charts and see how he relationship worked in the past .http://www.chartsrus.com/chart.php?image=http://www.sharelynx.com/chartsfixed/GC1900.gifOf course, we are still assuming that our markets are trading freely instead of being fully controlled by the FED and the Gov., and that people are making investment decisions based on expected return and not just irrational fear ( and that might be naive).As for investment ideas, there is one, which is very obvious: the growth of the US government, or governments in general. You, being around the DC area must be well aware of that. There are many ways to invest in that. And it promises to be a multi-year trend. Sad, but it is what it is.AB, are you a writer or an analyst, btw? Your vocabulary is soooo above the national average…:)Igor (the :hard-working” one), thanks for your charts and ideas.Enjoy the rest of your holiday everyone.

  23. tony says:

    Hi Roger D and X,Agree!

  24. tony says:

    Hi Bayoutrader,Did not state that.The current bear market should bottom around the Mar 09 lows.This will end the Supercycle bear market. A new bull market will begin, but it will take until around 2016 to explode upward.

  25. tony says:

    Hi GLS,The OEW pivot above 1168 is at 1179.

  26. tony says:

    Hi PW,The current bear market has already declined more that the other two in points and % terms.Will stay with the retest for now, and observe how Primary wave C unfolds.

  27. Roger says:

    I think tomorrow we are setup for a large thrust down. I far as I can tell the U.S,FTSE,DAX,Nikkei,Hang Seng are all now in impulse mode to the downside.The USD has a large bottom in place to launch from and the Euro has a Triangle to thrust down.Well see if my Bernanke China syndrome works here. The syndrome is based on the Fed policy of creating a USD carry trade and to short volatility in order to inflate equity values and reliquify bank balance sheets quickly. It also has the secondary goal to boost confidence in the economy. I think Bernanke has created a monster that will feed on it self as we enter this 3rd supercycle wave down,a black hole is best to describe it.There are many black swans circling and this degree of 3rd wave if the natural habitat for Murphy\’s law.CheersRoger

  28. Randy says:

    HD – Like driving down the road looking through the rear view mirror. Doesn\’t really say where you are going, but it has a clear view of where you\’ve been! Watch out or you\’ll get in an accident! All we have to go by is the past. History does repeat itself. That is what we are relying on…that and fib #\’s.Snow, 20* and working today. I\’d prefer your environment!

  29. H says:

    Hey guys, I\’m not really sure what that said and I read it twice. But if I have interpretted somewhat correctly it only re affirms my belief that EW is useless beyond certain time frames. Otherwise the count will be adjusted or corrected as needed indefinitely. The 5min confirms the 60 min and the 60 min confirms the daily but multi decade patterns are a huge leap of faith and I don\’t have faith in the market. Gonna be 70* great day to go watch some practice rounds and mull this over.http://www.pgatour.com/tournaments/r470/course/index.html

  30. pw says:

    Thanks Tony. I have wondered for some time how your short, med and long term views fit into the *really* long term view. This helps alot. Following the logic though, leads me to a question. It would seem that you are implying we are at a SC level correction. Not the 90% GSC variety, but not the 50% Cycle variety either. The 1929-2010 chart in fact does not contain a SC level correction to give us an historical perspective. It seems to me that this would lead to something in between 50 and 90% as the target for the current downturn. Does this new perspective cause you to adjust your projected revisit of 667 (i.e. will it go deeper?). A 61.8% retrace would seem to be a convenient middle ground.

  31. gls says:

    R B: it probably doesn\’t matter for now. 1168.00, the long term pivot, will probably hold this next rally that is trying to get going.Over and out for now.

  32. Pepe says:

    In one deal, Goldman channelled $1bn of funding to the government in 2002, in a transaction called a cross-currency swap. There is no suggestion of any wrong-doing by Goldman Sachs. Such deals are an expensive way of raising money, but they have the advantage of not having to be accounted for as debt. The eurozone rules dictate that governments must keep a country\’s deficit below 3 per cent of its Gross Domestic Product (GDP) and must take on total debt of no more than 60 per cent of GDP – rules that Greece did not keep to, even during the economic boom. Goldman Sachs, the world\’s most powerful investment bank, is already under intense scrutiny in the ongoing controversy over banking practices, pay and profits. President Barack Obama last month launched an assault on Wall Street, proposing to cap the size of the biggest US banks and clamp down on their trading activities. On the same day, Goldman began distributing nearly £10bn in pay and bonuses to its staff for their 2009 performance, just a year after the financial system was bailed out by governments. Reflecting the importance of the Greek government as a client, and the scale of the fees to be generated from derivatives deals, Goldman sent Gary Cohn, who as chief operating officer is second-in-command of the global group, to Athens last November to pitch for new business with the debt management office.

  33. gls says:

    R B: Tony had a distinction between a pivot and a long term pivot. 1168.00 or so is a long term pivot that has not been reached yet.He also mentioned a long term pivot higher but I can\’t remember what it is.

  34. Pepe says:

    The euro membership rules place strict caps on the size of government deficits relative to a national economy, but Goldman Sachs and other banks helped Greece raise cash earlier in the decade in ways that did not appear in the official statistics. With the current recession causing even official budget deficits to balloon all across the continent, fears of further hidden liabilities have been contributing to the crisis of confidence in Greek debt and pulling down the value of the euro. Goldman Sachs has been the most important of more than a dozen banks used by the Greek government to manage its national debt using derivatives. The bank\’s traders created a number of financial deals that allowed the country to raise money to cut its budget deficit now, in return for repayments over time or at a later date.

  35. R says:

    GLS: The current pivots are 1107, 1090, 1061, 1041. You can see them on Tony\’s daily spx chart.

  36. gls says:

    Tony, 1168.00 or so is a long term pivot for you. I think I have that correct.What is the next long term pivot beyond that? I know you mentioned it before but I can\’t remember what it is or know where to look.

  37. DD says:

    This is fascinating stuff. It seems that commodities are still following the stock market right now–they\’re both going down or flat. So in prior commodity bull markets, while commodities were going up, the stock market was doing the opposite. Can anyone tell me where I can find historical data (graphs, tables, etc) to show this. Thanks!

  38. Wiggin says:

    AB – dilithium crystals, that is brilliant!

  39. Amos says:

    The word Cycle means (Circle.) 120 Year Cycle, really just means 120 year circle. When we grow be it as people or nation or global scale. we arrive at the same place where we were before, but we arrive more ecperienced, higher on the Spiral. Remember, 21/34 is Mystery. the 34 force is upwards in the planets universe. Before, the foundation of this universe there was law given, Natures Law. What Tony has done with his conclusions is taken us to the questions. Can anyone tell the different between Male Sardine and Female sardine? One being Bull market cycle and one being bear market cycle to the larger question and more complex. Can anyone tell whats inside the Can of Sardines the investment world is trading? Perhaps the most important observations of the recent deregulation and other recent landmark changes in the securities and banking industries has been the availability to the average person or groups of investment alternatives (Cans of Sardines) to trade or invest in. Which in years past most alternatives of investments were formerly reserved for the wealthy. But welcome, to a whole brand new world order. Traditional investment vehicles have been whats called modernized, new ones such ETF\’s ect.. have been introduced. which has brought our society full circle to choices that are bewildering both in range and compexity. Certainly, the marketing departments today within the financial services comglomerates have sought to give their products mass appeal, which in turn these distinctions between different investment alternatives have become blurred. Todays more than ever before, we live within world, of planned developments. Well thought out communities by those who desire total control. Our towns today are very much different than in generations before us. And so our investment choices today. Those cans we trade or invest with, are really just filled with pure sand inside, but outside of the can is marketed with Sardine lable. What it boils down to, Is change without change. Societies are created on the Magic number 12. Cycle is Circle. Clock measures that circle or cycle. 12 numbers on the face of the clock. Markets like everything else, work on omnidirectional graph of forces in balance. Federal Reserve tries to control the balance they refer to as Equilibrium. Or truss. balancing three-dimensional forces most effectively. Called Economy. With each nations, Managers reporting to central managers. 12 managers. Trying to balance the 12 – around – 1 composes a wholeness, Unity, perfection, Universal New world order module of structure – function and order. Zodiacal Societies based on 12 managers systems. Have riddle or puzzle to answer.A Father has 12 children, Each has thirty daughters, one side white, the other side black, and though immortal, they all die. Who is the Father?Answer to this riddle will give you the greater precedence of which cycle among the various cycles that interplay with each other. wihin the 120 year cycle. Generation comes and another Generation comes. Change without Change is the goal of the end game.God bless

  40. Aureliano says:

    Tony: Quite an epiphany. While not an economist I can\’t help but notice a few things that make this proposal a bit hard to believe. I sense a bit of surprise and tentativeness even in your description. I would suggest for this type of long term analysis a trader needs to take into account a few macro economic considerations they could normally assume away. For instance, the chart of the DJIA looks nothing like the chart presented if you portray it in constant dollar terms (http://homepage.mac.com/ttsmyf/). While perhaps not interesting to OEW in technical terms you are postulating an economic phenomenon – not a technical one. A constant dollar (even one adjust by the specious USG CPI) shows a different picture that may color your conclusions a bit differently. Also, you assert that a bond bear implies expansion. It usually does but more directly measures the cost of capital. Rising cost of capital is not always under the direct control of the USG – especially in the current world economy. The assumption that the USG is the risk-free interest rate and that it will only rise an the Fed tries to control growth impulses ignores periods in our not to distant past where we had rising costs without growth – the Carter years come to mind. This led to the constant dollar destruction of 75% of the value of the DJIA that is a flat spot on your chart. You yourself have pointed out in detail, quite strenuously at times, that the current underlying economical factors have NEVER led to the launch of a major expansion. I don\’t think that this current proposal holds the same weight, economically speaking. Could another bubble of hope and ignorance get spawned once more – sure – but the waves seem to be occurring faster and faster and it doesn\’t seem like we about to launch a new generational wealth cycle barring the discovery of dilithium crystals. Seems like we have a bit of contractionist house cleaning before us at the moment. You concern about the rate of the decline (time and $) brings up an interesting point. I hate to be a conspiracy monger but it seems like all the indicators pointed to a decline into C much earlier. Even the psychology was prepared for it. As the investigations continue into the unprecedented interventions (by the DOJ in the bancruptcy courts removing for the first time in capitalist history the right of collateralized senior bond holders to be first in line for repayment in favor of unions and investment banks – remember the GM/Chrysler hearings; by the Fed and the Treasury in the directed selection of \’winners\’ in the retail banking industry, the investment banking industry, and the automobile industry; by the Fed and Treasury in extra-governmental collusion to flood the market with unregulated amounts of US$). It is horrifying and will not build a foundation on which prosperity (at least not general prosperity) will be based. Maybe in the end it doesn\’ really play into your model for the price of the DJIA – cost being different than price. Maybe you are equally projecting a catastrophic failure of the system through hyperinflation (bond bear? commodity bull?) due to the devaluation of the US$. So the DJIA may get to 20K and the average Union member will be making $100K/week. Nice. Thanks for taking the time to analyze what you have. Thanks also for taking the risk to hang it out there for comment. I would really love to see a coherent, cohesive explanation of what investment strategies should be evaluated under that scenario. Clearly buying the DJIA as it goes to 20K would not be one – all things being equal. Borrowing now and buying commodities for future delivery would seem more appropriate. I can\’t seem to get a handle on the play. I need some smart people to clear my head! Help!Thanks again to your team, Tony! And thanks to everyone else that can contribute.

  41. Amos says:

    BMZ Thanks that interesting futures hit 861 … A=C …

  42. Jason says:

    I posted charts with a potential resolution to the current wave structure in the S&P. The text is below, and the charts for a visual are here: http://www.graspthemarket.com/elliottwave/20100214a.php1. S&P 500 20 Minute: This is the S&P 500, 20 minute chart that captures the last month of trading—including the most recent bottom and the current countertrend rally. I’m considering the bottom that was reached on February 5 as the bottom of wave 1. Then, over the past 6 days of trading, the market has set off on a countertrend rally that has yet to reach the 38.2% retracement level. That is why I’m allowing for a bit of a pop early next week (although the pop is not a certain possibility) before the market begins wave 3 down as indicated by the arrow on the right side of the chart. According to the Elliott Wave Principle, “a count of 7, 11, or 15 with numerous overlaps is likely corrective” (pg. 55). The seventh division of this corrective pattern is underway, but once the lows of wave six as labeled above is cracked, the odds will increase that wave 3 down is underway. See the charts below for explanation of how I arrived at this conclusion.2. S&P 500 120 Minute: Is this 2010 or 2008? The pattern shown above is remarkably similar to the pattern that is currently taking place in the market. However, this chart’s dates range from late spring 2008 to fall 2008. Notice that there was a large decline in the market, and then the market started a countertrend rally with seven overlapping waves. The trend lines that were drawn on both the RSI and the MACD slanted down, just like the current market condition. Therefore, the resemblance is hauntingly close to the current action in the market. See the chart below for the resolution of this wave structure.3. The Resolution of the S&P 500 Chart from 2008: This shows the resolution of what occurred after the seven waves in 2008. The line shows where the last chart left off. As you can see, the resolution was a dramatic move to the downside. Also notice, though, the increase in volatility in the market after the line. The market had large moves to both the upside and downside, but the trend direction was overwhelmingly down.

  43. BMZ says:

    Amos,I see your arithmetic as being a touch off on a prior post. Wave A (666 to 956) was indeed 290 points. The next wave, however, (869 to 1150) measures 281 points. In addition, while EWers tend to be purists and measure using pit prints, the futures all night after the 869 close were trading at SP basis 861 (I remember vividly, I was short). Once we zoomed above 956 on the way up, I calced a simple A=C projection of 1151. I think we fell 0.5 pts. short.

  44. Amos says:

    Nikkei first two hours of trading on Monday..down… down.. trending lower.. Nikkie is at 10,051 levels… closed at 10,110 levels on Friday… Our Dow is about the same levels…

  45. Greg says:

    When Tony says: "the market should be well on its way to the 1974 low of DOW 570…this credit driven society would be well on its way back to the Dark Ages…The current GSC, then, will not top until the 22nd century…" Is he saying that from here we are headed down to DOW 570 after which we will not top out like we did in 2007 until the 22nd century (long after me and my children are dead?

  46. Roger says:

    I share a different opinion,I guess that\’s pretty well known around here. I guess the simplest explanation is if stocks were overvalued at similar prices at Dow 14,000 and some are now higher at 10,000. what would you attribute this to?Future economic activity and a growth level greater than at the 2000 and 2007 peaks?Or as I believe Fed and UST reflation efforts?Market intervention always ends badly.Roger

  47. x says:

    Tony, Thanks for sharing. Perhaps, a range bound US equity market (similar to 40\’s and late 70\’s) and continued commodity bullmarket for 5-10 years. The crash callers in US equities will be disappointed. However in US currency terms they got what they wished for,…Why short equities when you can go long certains assets and have the wind behind your sails.

  48. Roger says:

    Tony,If I\’m reading your tea leaves correctly,then your original forecast remains unchanged? You still believe a double bottom off the March lows is the worst we will see, correct?I like the historical references especially the colonial part.Thanks,Roger

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