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Friday, September 25, 2009

The Stakes are High



Most of the readers of this blog know that I am a severely bearish on the markets. In this post, http://danericselliottwaves.blogspot.com/2009/08/p2-massive-grand-supercycle-backtest.html I suggested that P2 was merely the DOW"s biggest "backtest" move of a very large scale channel line that goes back hundreds of years.

I suggested that at where the top of a Grand Supercycle wave III should have stopped, we decided to keep the party going from about 1996 onward via debt. It was mankind's decision to do this. We surged way above the long term channel in an overthrow move. We cannot just blame the Fed. Not just Wall Street. It was us. We wanted it. We got it. We enabled and elected out government officials to carry it all out. We cheated nature for many years. We wanted the world and we wanted it now.

Oh we may think its someone else's fault, but collectively we supported everything. We supported the tech bubble, the housing bubble , the stock market rising to parabolic levels, we participated to the fullest. We borrowed from our children at an exponential rate. Well at least many did. And now we are indirectly supporting the government debt bubble.

The top of a Grand Supercycle III rears its ugly head in the form of one of the most powerful emotions: greed. And if greed cannot be satiated, greed turns to anger, fear and anxiety all at the same twisted time.

I suspect the real reason social mood is foul is because the general public is more pissed about not getting their slice of the pie (or losing it through greed) rather than thinking the whole thing was a perversion of nature's balance. So greed is still pervasive. But now it is turning to an angry, fearful and anxious greed. And that is a toxic mix.

Hrmm, I was only going to talk about charts and I got off track a bit...

Channels exist on the very small scale and very large. Its a basic tenet of EW theory. I propose that this Primary wave 2 is merely a huge backtest of the "good times" we had above the Millennial channel.

My first chart shows the scope of this "suprachannel" (I just made that up). Its the purple parallel channel lines.

The second chart is zoomed in on where the DOW currently stands. The DOW obeyed the line as resistance, burst over it in a fit and now has settled back on the line. A continued unabated move staying above the line means we are in a new bull market, at least for a while. A failure back under means one thing: We will work our way to the lower purple channel line just as all channel moves of all sizes behave.

Hence the bear market low calls for 1000 DOW.

So those are the stakes as I see it. The stakes are high. Call me crazy, and I don't pretend to know the future. However thats what the long term wave count calls for in the primary count.

Whats the alternate? Something else I suppose.
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