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Monday, June 27, 2011

Elliott Wave Update ~27 June 2011 [Update 7:51PM]

[Update 7:51PM: Updated 6 month yield chart.  They can't get much lower folks and we may have a completed EW long term pattern.  Who would have thought yields would be rock bottom on the verge of Congress wrangling over a debt ceiling raise over the current $14.2T?

Yet thats where we are. However, its about a perfect bearish setup for the long-term outlook on things.  Massive debt loads being serviced at historic low rates.  And its now a Ponzi trap and it has clamped shut. We are not "traveling down a road...", we have already traveled it and have come to near its end.   We find there are no unicorns at the end of the rainbow. Only a bad social mood and a desire to shed oneself of debts.

That individual desire to get out from under the debt bomb is slowly translating into government action which is, as Prechter always points out, the ultimate consensus group which takes time to change directions. But changing it is.  The Federal Reserve, although we like to think of it as a one man band, is also a consensus group and they too are subject to the laws of social mood.  They also are showing an unwillingness to leverage up any further than they already are.

The sovereign debt games have only just begun.
Again, nothing has notably changed than from what we have been talking about for the last many sessions.

The top bear count calls for a break in prices under 1258 SPX prior to any rally above 1311.8 SPX. That supposes the current bull/bear struggle is a sideways Minute wave [iv] of Minor 1.   Minute [v] of Minor 1 can turn out to be a spike down panic wave (or not - it need only make a new price low under 1258).  So we have potential for a serious round of selling which would be fitting in that both the uptrend line from the 2009 lows and the 200 DMA will have to be broken under both in order to take out the 1258 SPX Minute [iii] low.
The top bull count supposes price will maintain and that the market is working on a long Minor 4 running-type contracting (or descending if it turns out to be) triangle that will eventually hold support and make a challenge to the old highs.
My 30 year bond yield chart still calls for a yield low to challenge my "blue box" area.  If we have a panic "flight to safety" coming up in equities this would nicely fit into the bond count picture.  
And after that, Zero Hedge points out what I think a lot of people have taken their eye off the ball in  

A glut of treasury issuance could wind up sparking a wave (3) UP in bond yields after my wave (2) lows are set.  And I think would pull up short term debt yield and perhaps catch the FED off guard and a possible spike in the 3 and 6 month yields sparking rumblings of short-term interest rate hikes.

Is a rise in interest rates bullish long term? Umm, no.  The greatest credit bubble in the history of mankind can no longer afford a rise in interest rates at all. Its simple math.  I don't need to go into all the reasons why even a few percent will kill the "recovery". First off think of credit card debt, home loans and other loans being more expensive - well you get the idea.  The final act to kill the consumer and piss him off for good in social mood.

RISING YIELD DEFLATION.   Yes thats not in any textbook and not "supposed" to happen, but thats the way I see it.
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