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Monday, October 18, 2010

Elliott Wave Update ~ 18 October [Update 10:11PM]

[Update 10:11PM:  Last I ran this bond chart, the 5 year had not yet confirmed new lows. It has now. But the 10 year is till a bit stubborn and the 30 year may be pulling them all the opposite way.

In a nutshell, I simply propose that when the 30 year (and perhaps the 10) cannot confirm the lows, that will mark the beginning of the end for bonds and they will begin to work toward the opposite end of things (a rising yield environment).

Everyone is chasing yield (now) and gaining little.
When yields go up, they will chase them some more - yet get burned (buy the dip mentality)
When yields go up some more - they will chase them some more  - yet get burned.
Finally after yields go up so much and then of course no one will chase them anymore.
At the end of the bear market years down the road, yields will be sky-high and no one will want to touch them ever again.
But didn't they want high yields in the first place?

Hyperinflation? No.

Japan style long term deflation? I say No.

I propose a rising-yield deflationary collapse. All assets classes sell in an effort to raise cash and get out from under the Ponzi debt system. Cash (and yeah gold might hold better than others) would be the last haven of the fiat system (a cruel irony).  But a rising yield deflationary collapse would be the only thing that could save the fiat system as it is. Problem is, will the medicine kill the patient?

It won't matter, the market will do as it wishes, the Fed be damned. And since bond yields have been steadily lowering since the early 1980's, its been a long run.
[Update 8PM: Fixed a glitch with my DJIA chart below]

The emini charts I posted this morning panned out.

The S&P minis was in a triangle and did make at a minimum a new high
The NDX minis hit their rectangle target at a minimum
Possible count on the INDU. Again, I am not trying to be too biased here one way or another. Just trying to make a good wave count. If it can go to a new high that Blue "2" would need to change into something else obviously.
Again my Supercycle channel line, traced from 1937, has held the DJIA in check for at least today.
Blue 3 is longer than blue 1 on the NYAD chart which is preferable if I have this extended wave [5] correct.  New stock highs today but not quite new NYAD highs. That is a bit bearish and I suspect Blue 4 down in NYAD may soon be in the works.

Remember, as far as I can tell, the SPX price high may have occurred in Blue 3 just as, so far, Red (3) matches the April top. I just won't know. But we cannot have Minor 3 down, indeed P[3] down in full force unless people stop accumulating all this paper (junk) and start serious selling.   Simply put, this NYAD chart shows people still accumulating the paper....
Some more wave counts.
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