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Saturday, January 23, 2021

Elliott Wave Weekend Charts - (B) Wave Edition

I went and made a more detailed proposed fake top (B) wave. Basically the subwaves take my original 5 wave count to the September 2020 peak and labels that September high wave A. Then we had a few months of correction forming wave B (a regular 3-3-5 flat). And since the election proposed wave C of (B) has been tracing out.

This proposed wave (B) is part of proposed Primary wave [A] of Cycle wave a of Supercycle wave (A). In other words, the "correction" to a Fibonacci 233 rise in social mood has just begun.  But this correction actually stated last March and we are reaching the middle "three" waves in a proposed 3-3-5 expanded flat count. This would account for the still deteriorating social mood decline since February 2020.

We likely won't be alive when the Grand Supercycle wave [IV]'s correction is finally over. It should last decades.

Here is the proposed count:

Recall my primary count in September has us in 5 waves up (which is why I thought it was the top).

If you search the history of this blog, when the 2009 low occurred, the preferred count was that it was only Primary wave [1] of [5] of a cycle wave c expanded flat count. That lengthy Cycle wave c simply never came. "P3" never happened. I had been using Robert Prechter's count that the 2007 high was an  "irregular" top. It made a lot of sense at the time and it certainly seemed like the bottom was going to fall out and the financial system collapse. But it wasn't to be and we have endured quite a runup since then fueled on incredible amounts of debt.

Of course the 2007 high does count best as a (B) or [B] wave (depending on degree you want to use) in a 3-3-5 flat count.  However it was pretty much just a regular flat or slightly expanded.
So now we have reached yet another situation where the first subwave "corrective" of Grand Supercycle wave [IV] could be possibly a "false top" irregular (B) wave - or [B] if you want to use the next higher degree. Mr. Prechter does not consider this a false (B) top at all as he had back in 2007 but I am almost convinced it probably is. I'll detail my reasons:

1. Waves are about the underlying social mood. Can you remember back in January 2020 what you felt like? Was much more calm and peaceful. No riots, no COVID lockdowns, and a very low VIX. In fact Elliott Wave International had a solid count pointing to that February top as the GS III top.  More or less so did I (but I was thinking a small wave 4 and then 5 were coming which never did).

2. This "new" top now seems false in every sense of the way.  Fueled by speculation and yet even more debt, the VIX is still above 20, there is fear, and real anger throughout entire populations. This just doesn't "feel" like a kumbaya moment in time.  An election was stolen in broad daylight and now civil liberties are about to be extremely curtailed. The politicians are scared of the population by deploying troops to the Capitol city and then questioning if they can be trusted! Does this fit the profile of an orthodox peak? There is a rapidly senile "President" in place and his Inauguration was so embarrassing no one showed up (no one would have showed up even if their wasn't 25K troops locking it down).  Its like we are living a "Hunger Games" movie in that we are the districts expected to produce and enrich the Capitol City in perpetuality. Again, is this a real top in social mood?

3. The mood has changed drastically since just less than 1 year ago. Yet the stock market has screamed higher, fueled by light volume Robinhooders amplified by HFT computer algorithms front-running them and the largest ever percentage of "passive" investing injections into the stock market which are largely injections of debt in reality.  Your 401K match wasn't "earnings" it is debt fueled by insanely record amounts of Corporate borrowing. You're getting richer but only if you sell high. Most will not (except the Insiders who are selling like crazy!)

4. Unemployment was extremely low last February. Highways were packed at rush hour all over the country. Today? Still gargantuan amounts of weekly unemployment claims, criminally insane COVID lockdowns, and now the "cult of the mask" has seemingly become permanent. Is this a true social mood peak?

I could go on and on but you get what I am saying. 

The main reason is in an expanded flat, wave (B) goes higher than wave (A) and wave (C) is going to go much lower than Wave (A) low.  The "max" this (B) wave would expand is probably about 1.5 times the length of the price drop of wave (A).  In the Wilshire, we have reached 1.4975 x (A) @ 40,915. About 31 points shy of a perfect 1.5 multiple.  

But again, if this is wave (B), wave (C) should follow in a very sharp manner (just like 2007-2009 was a nasty 5 waves down forming (C)).  In other words, we already have identified 2 of the 3 pieces of the first corrective. So we shouldn't ignore that (C) could come and blow this market away. 

The target for (C) is a Fibonacci 1.38 x length of wave (B) - a guess - which is roughly 14,980 - or the support provided by the Wilshire 2000 and 2007 peaks (see charts above). This is a guess but timing for a major 20 year cycle low is in 2022. This implies that this collapse will dwarf the 2007-2009 collapse in total price, speed and %.  Be ready!

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