Wednesday, September 23, 2009

A Timely EW Lesson

Also Reference:
http://fdralloveragain.blogspot.com/2009/01/elliott-thumbnail.html

Elliott Waves describe how nature weaves her incantations through similarly programmed, but differently sized, groups of people.

A perfect example looms large.

Remember, the basic magic of EWs is that nature's waves are fractal, or self-similar. Knowing how to identify and label patterned waves is an essential skill, because we can then apply known fractal patterns from large degree to small degree, or vice versa, to ascertain how we humans will create future events, react to them, and then drive future stock price movement.

Remember the following chart from The Correction Zone?

















Speaking of self-similarity, do you notice that the entire wave, from the left edge to the right edge, is self-similar with another piece of the picture. What part? I will give you a moment to stop and stare...

..... .... ... .. .

That's right, the complete wave pattern is self-similar to any degree Wave 1-2 completion within the whole, or that the whole will someday form. This very interesting and useful correlation always occurs, as any degree, large or small, Wave 2 reaches for completion:
















And by extension, in bear markets, we see the following:




Do you notice any application to today?

(CLICK TO ENLARGE)





13 comments:

  1. So, does EW suggest that from C (today) we go on a downhill slope over a period of 7-8 months, landing at a terrace of 4000?

    Aracuan Bird

    ReplyDelete
  2. And 5 years from now, we end up in the depths of hell?

    -Aracuan Bird

    ReplyDelete
  3. "So, does EW suggest that from C (today) we go on a downhill slope over a period of 7-8 months, landing at a terrace of 4000?"

    The timeframes and jumping off points are aproximate, but yes. I discussed the retracement guidelines in "The Correction Zone."

    If Y2000 was in fact a multi-century high, and not just some point along the way, then we would ultimately retrace to around the 1929 high of 400, probably a decade or two from today.

    ReplyDelete
  4. "And 5 years from now, we end up in the depths of hell?"

    I think the next great low is around 2012, guidelines say Dow 3,800. That is probably a multi-century A termination. From there we likely have a many year B, then an utter collapse into a pretty heinous C bottom.

    But wait, it gets better.

    If the Roman Empire was the first great Wave 1-2 of modern civilization, and the Dark Ages into the Renaissance was the first great Wave 3, that makes Y2000, possibly, an even bigger top. In that case, it is entirely possible that we retrace back into or very near the Dark Ages, perhaps taking hundreds of years to re-emerge. After that, a many-thousand year wave Wave 3 of booming prosperity.

    It is quite interesting, only because it's inevitable.

    ReplyDelete
  5. Dark ages, eeeck. You know a lot more about this that I do, obviously.

    But...I'm not going to live for a few hundred years. So how do we profit from this scenario? Just short all the indexes and wait?

    This scares me a bit. Where's the upside?

    ReplyDelete
  6. FDR-

    Any comments on the Fed's proposal to borrow from money market funds in order to withdraw stimulus and "drain liquidity from the financial system, helping to avoid a burst of inflation as the economy recovered"?

    http://tinyurl.com/yc884cj

    ReplyDelete
  7. "But...I'm not going to live for a few hundred years. So how do we profit from this scenario? Just short all the indexes and wait?"

    The key is to recognize that all manias reverse. There are several manias still wildly inflated, presenting opportunities for huge profit potential. The larger scale the mania, the more potential, but the more careful you have to be about using time-sensitive leverage.

    You can either hold cash in your home or in treasuries (don't use banks except for smaller amounts in transit to someplace safe), which should yield about a 50% average annual return until 2012 as prices free fall.

    For those willing to take risk, shorting virtually any monetary asset can produce excellent returns out to 2012ish. The manias still inflated include gold and to a lesser extent oil, stocks, and real estate, which have already started their plunge. All three areas have plenty left to the downside and are just beginning their roll over into the most vicious down leg of the bear.

    The biggest mania, by far, is the 80 year bull market in the issuance of paper assets, like cash. Cash is about to become extremely rare, if it hasn't already. Unfortunately that also means it will take a long time to fully bottom, probably in the mid-2020's.

    That means you'll have to jump off the bandwagon after the 2012 intermediate bottom, and possibly reverse the position, depending on your age.

    ReplyDelete
  8. "Any comments on the Fed's proposal to borrow from money market funds in order to withdraw stimulus and "drain liquidity from the financial system, helping to avoid a burst of inflation as the economy recovered"?"

    Yes. As my blog readers know, the Fed is trying to cause massive deflation. It is how they roll up the assets themselves after they've inflated asset prices and secured the debt notes.

    In this way, they profit from both the outrageous amount of the debt note at an outrageous interest rate, and they recover the underlying asset.

    ReplyDelete
  9. so what happens when the MBS they've bought go bad (i.e. have to be marked down)? i guess in a way i'm asking: can the fed go bankrupt if in fact there's deflation and its debtors default?

    ReplyDelete
  10. "so what happens when the MBS they've bought go bad (i.e. have to be marked down)? i guess in a way i'm asking: can the fed go bankrupt if in fact there's deflation and its debtors default?"

    Yes, the Fed went bankrupt in the 30's when they underestimated their own damage. They have taxpayer guarantees, so they'll try to hang the American taxpayer via the politicians they've pocketed. The Federal Reserve shareholders would LOVE to see America fail as long as they can protect their share value (not necessarily price).

    Bottom line:

    It then becomes a political war; but they'll try to frame each political battle using their paid pawns, so they win either way.

    ReplyDelete
  11. The Federal Reserve shareholders would LOVE to see America fail as long as they can protect their share value (not necessarily price).

    What is the price and/or value of a share in the Fed? Who measures that and by what method?

    ReplyDelete
  12. "What is the price and/or value of a share in the Fed? Who measures that and by what method?"

    ...like they would ever reveal that to The People.

    ReplyDelete
  13. i need to brush up on my history, but how did the fed overreach in the 30s and go bankrupt? and how was it then bailed out, since it's still with us?

    ReplyDelete

The USA's political-economc system is best described as:

On Nov 2, 2010, I plan to vote (FOR or AGAINST) my incumbent congressman

 
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