Rising Wedge 2009 Warns Elliott Wave Analyst ~ The Risk Averse Alert

Tuesday, January 26, 2010

Rising Wedge 2009 Warns Elliott Wave Analyst

This much is certain: the credibility of the Federal Reserve and the U.S. Treasury is coming under attack like never before. Yet issues involving these institutions extend far beyond the personalities of Bernanke and Geithner. Rather, the real battle is over policy.

Right now, the question is how long can men wielding puny .22 caliber pistols maintain control over the battle field. The minute some organized division within the body politic joins the battle armed with heavy artillery it is game over.

Truth of the matter, too, is this alone offers the surest hope of ever restoring the credibility of capitalism.

Per Bernanke and Geithner, the problem is not their marksmanship. Rather it is mistaken belief each is firing a canon when instead they are beating credibility with crazy sticks. Were the policies of this pair of Monetarist Monkeys not such a clear and present danger to domestic Tranquility and the general Welfare, then there might not be much issue. Yet it is for the very threats the likes of these represent that, the U.S. Congress is given constitutional power to legislate bankruptcy laws (Article I, Section 8). This is the heavy artillery for which any investor desiring some modicum of stability awaits. This is the arbiter burying those political representatives embarassingly exposed to being among a dying breed whose irreversible pangs struck yet again in Massachusetts last week.

The likes of [retiring] Senators Kent Conrad (D-ND) and Judd Gregg (R-CT), who in the great body of the U.S. Senate would propose policies that could only hasten demise into chaos, are, without doubt, worthy of such scorn as secures their silence. You boys have gone off the imperialist deep end thinking "sound policy" is an outside commission determining cuts in the government's budget. Is not the point of "representative government" giving the people, at all times and at all levels of representation, a voice in such matters? Is this not the point of it all? And sound policy is taking this away? WHO do you work for?

Everything to do with stability hinges on power to legislate Bankruptcy Laws. Everything to do with any purposeful hope for peace and prosperity requires bankruptcy reorganization, and now. Without this, credibility is wasted, and every day this situation passes is another day risk of an irreversible collapse grows. We lose credibility not reorganizing, purposing to attain far greater stability than presently has come to pass.

Surely, there's much better than yesterday's ill-disposed leftovers to carry forward American leadership. What circumstance exists, right now, but weakens this.


A special Elliott, impulse wave called a wedge possibly has formed in the S&P 500 since March '09.

(What makes a wedge "special," form-wise, is the fact each of its five waves subdivides into three waves. Typically waves 1, 3 and 5 subdivide into five waves. Also "special" is certain forecasting value a wedge provides.)

By rule a wedge occurs in the final move in the given direction of a larger Elliott Wave trend. Wave C is the final wave in an A-B-C [upside] corrective wave that began November 2008.

Technical substantiation of this rising wedge possibility is rather compelling. RSI and MACD no doubt provide solid confirmation of every aspect an Elliott Wave analyst might consider about this "special" wave form, as regards both its unfolding and its place in the big picture.

The one consideration most responsible for restraining me from proposing this view thus far simply is the size of it. The S&P 500's advance off March '09 bottom seems hardly fitting a move the Elliott Wave Principle describes as ending a larger move that traveled "too far, too fast."

Yet think of this from perspective of the past twenty years. Think of liabilities built up, compounding leverage on a dispersed physical asset base. Recall glory bidding up financial assets whose "value" was being "unlocked" in leverage billed as "risk mitigation." As is always the case with financial bubbles, all goes swimmingly during the bubble's inflation. It's after the pop things come unglued.

And now an Elliott Wave form suggests the Great Credit Inflation of 1987-2007 took the S&P 500 "too far, too fast," and so imminently faces its greatest challenge yet. This conclusion is born of the Elliott Wave Principle, itself, as a rising wedge typically is fully retraced, and at a considerably faster pace than taking to form.

No doubt a possibility fitting my greatest fear! Thus, the best course of action still remains confidently disposed toward battening down the hatches. This position lives by overwhelming technical confirmation of an extraordinarily negative Elliott Wave-based point of view.

Fast Money
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Anonymous said...

Hmm... So your trusty RSI & MACD are telling you to sell? Lets take a quick look at the last time they had these types of readings:


TC said...

It definitely is not "just you" who thinks the present dip is a buying opportunity, EBITDA. With the current ratio of bullish-to-bearish advisors challenging highs set just a few months prior to the crash of October 1987, be assured you have much company.