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Thursday, September 19, 2013

Elliott Wave Update ~ 19 September 2013

Time marches on yet social mood is sinking ever more on a supercycle long term trend. That negative trending social mood is curbing the exponential growth of the historic credit bubble we find ourselves in.  The urge to curb spending has been gaining strength in the public mood  for at least 5 years - 13 years to be precise - but much stronger in the last 5. But now that urge to slow spending is finally taking hold in government - the last holdout of social mood expression - and that mood should cause the worldwide credit bubble to finally pop.

The Sequester is proof of that. Yes its "small" but first steps usually are.  The credit bubble has already slowed. We are cresting at a multi-month crest but the bubble is so enormous that we hardly even feel that we are perched on the top of the credit bubble wave. But I am convinced we are indeed.

If you count on The Fed being a stalwart against a credit collapse, think again. The Fed's balance sheet is minuscule compared to the overwhelming amount of debt sloshing about in the world. And don't even consider derivatives. Just look at the amount of interest rate derivatives on the books. Its astonishing we lasted this long.

But time marches on and social mood marches on. Greed is good in that it helps mankind advance economically but greed can only reach a certain point until where it becomes its own worst enemy. We are far beyond that stage. The greed is gorging on itself now, eating its own flesh. Nature's laws - of which I propose Elliott Wave theory is a major part of - ensures that greed will reverse.  Oh, don't get me wrong, people don't all of a sudden "see the light" (some do), usually Nature (or the market for our purposes) will take care of things forcefully and the greedy go kicking and screaming.

Unfortunately for us, a collapse of the system will not necessarily bring about a "seeing of the light" and then all becomes healed and for the better. Nay, goodness is not the outcome of social mood collapse. You and I can look forward to not only having our wealth destroyed, but our liberties taken from us and standard of living greatly decreased. For in a social mood collapse it will be a free-for-all in the subsequent power struggles and dark forces usually win out because they are typically more godless, ruthless and willing to go more extreme than the more moderate groups fighting for control. We have far too many examples in history to refute this. Nazism, the brutal communism of Stalin's Russia, Mao's China, etc are but the obvious examples.

So as much as we hate the crony capitalism we have today, there is nothing certain that tomorrow will be better as a result of a collpase of that system. In fact, history has shown us our future will likely be a struggle.

I just wanted my readers to be clear on where I stand on that. Although I can see a collapse coming (math sucks doesn't it?), and I can see (some) justice finally being meted out to the guilty as a result, I also realize that the aftermath is likely not going to be a pretty place.  There will be a power struggle in a society that has become fractured as a result of a collapsing social mood and the "winners" are hardly ever the good guys in a society going through major social upheaval. Such is the way of Nature.

10 Year:
Again the weekly because I think it is an important chart. Remember, Fibonacci 55 months started approx 10 September. We are in the 55th month currently. It ends 9 October.
Dollar chart. Sentiment is low via Sentiment Trader this graph is from before the FOMC announcement so likely bearishness is even lower now. Yet the dollar is still much higher than 5 years ago in 2008. Yet sentiment is nearly as bad.
Incidentally I seen "The Drudge Report" had a prominent display of the dollar as a roll of toilet paper (see the captured pic below) for much of the day on his headlines.  When something like this shows up on a prominent website, it could be a sign of a sentiment bottom.  We'll see. They displayed this 5-6 years ago, yet the dollar is well off the price lows.   Seems to me that we are fast approaching a long-term dollar selling "exhaustion" and a breakout over the neckline of the head and shoulders chart above may be forth coming soon enough.

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