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Friday, February 1, 2013

Elliott Wave Update ~ 1 February 2013

Where does one start? The market never ceases to amaze me. Social mood never ceases to amaze me. I guess what I am saying in the end is that people never cease to amaze me.

When stocks topped in 2000, the underlying fundamentals of the broad range of economic activity seemed fairly robust or at least "ok". And the US government was producing "surpluses". Yet the problems of debt and leverage undoubtedly fueled most of the exuberant 90's anyway. Hence the NASDAQ bubble.

Fast forward to the topping process in 2007. Alas, the underlying economy was much shakier and built largely on the housing and banking bubbles. One could say the underlying fundamentals were much more negatively divergent.  Government was running major deficits.

Now here we are again at All-time stock market highs and the underlying fundamentals are so disconnected versus the price of stocks and sentiment that one has to wonder if we have all gone stark raving mad.  Government debt/GDP ratio is above 100% and the economy appears to be rolling over into recession.

The entire world markets are one big Ponzi scheme. This is not hyperbole.  It is a fact. Every government is paying debt by issuing more debt. Mathematically, much will never be repaid that is certain.  They are attempting to cheat Nature's Laws.  They are all leveraged to the hilt. It will not last.

How does one chart the waves?

Well we had an impulse into the 2000 tops.   The period from 2000 to 2009 low probably best counts as a 3-3-5  expanded flat since the decline from 2007 to 2009 best counts as a five wave impulse.

The waves since the 2009 low? Definitely not an impulse as of now. From now on I'll call it a cycle b wave for the sake of consistency and simplicity. I'll drop the alternate cycle "x" wave count. regardless, its a moot point at this stage.
We now have our ending diagonal wedge "overthrow". A reversal is due next week based on time ratios and the right "look". Additionally, sentiment is robustly exuberant.
Short term count may be missing that final squiggle: A pop up Monday followed by a massive reversal would be a good start to confirm this wedge.
In a nutshell, extreme. Here is another chart via Sentiment Trader. This is their combo survey data compiled into one chart. if they had included yesterday's NAAIM chart, it would be at an all-time high of 75%.

So one could at least make the solid argument that stocks are due a breather.
May I remind you of what Ben Bernanke said on the launching of QE3. We are ruled by sociopaths.

The 10 year has popped above resistance. If the yield can hold 1.85 as support, it should move fairly quickly to 2.40. That ain't gonna help zero-down mortgages. Sorry Ben, you cannot have it both ways. You may be buying ES minis by the boatload, but you are losing your grip on yields.  The market is too big for you. You will be left holding the bag.

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