Since Lincoln, You Are Here ~ The Risk Averse Alert

Thursday, January 12, 2012

Since Lincoln, You Are Here

I should add long-term Elliott wave perspective to yesterday's near-term outlook applied to the S&P 500. Namely, October 2007 top not only likely marked the end of five waves up from 1974, but also the end of five waves up from 1932. From 1974-2007, then, the fifth wave of five waves up from 1932 unfolded.

Now, five waves up from 1932 are thought to form but the third wave of five waves up from 1861. Why 1861 I will explain shortly. For the moment trouble more severe than a majority apparently are fearing (as laid forth yesterday) is an outlook only further substantiated by this Elliott wave count marking five waves up from 1861.

The first wave up from 1861 carried into the first decade of the 20th century. Not until July 1932 did the second wave from 1861 end. From 1932-2007, then, the third wave of five waves up from 1861 unfolded. Thus, October 2007 began the fourth wave of five waves up from 1861.

Already we have seen moments whose only recent precedent was the Great Depression. Harmonious, then, is an Elliott wave view supposing that, presently unfolding is a fourth wave of the same magnitude as the second wave that unfolded into the depths of the Great Depression.

Now, a funny thing about 1861. There was a cause — a need — begging action. This was met head on by Lincoln with his greenbacks policy: the most powerful weapon in the Union's arsenal — a virtual national bank.

Ditto 1932. Met with another virtual national bank by way of FDR's retooling of Hoover's Reconstruction Finance Corporation.

Chances are, then, the third Bank of the United States will be reality before the currently unfolding corrective wave — the fourth wave of five waves up from 1861 — has completed. Having been taught these past forty years the value of "choice" in markets, it's a safe bet sometime in the not-too-distant future the financial community will choose stability. National banking financing a state-of-the-art, physical economic platform is a proven means of establishing an anchor promoting enduring growth, with the ultimate objective being the effective leveraging of unique capabilities mankind alone possesses, which too, indeed, it is constantly striving to improve upon. This in a nutshell is Alexander Hamilton's great discovery, and I dare say a revelation impossible to erase no matter how many trillions it takes to fill a sophist's "liquidity trap."

As for the moment...


The recently noted disparity in the NYSE 52-week high-low differential coincident with lower peaks in the NYSE Composite index since July now is followed by evidence at this early stage in 2012 suggesting the market's stuffing is thinning with each passing day the market crawls higher. Hardly cause to be excited about 2012's start. Of course, the QVC of financials (CNBC) sees things differently, and Shemp has got his hyperinflationary happiness on, on, on.

That's an echo. Under the covers is plain view the cheer lacks a captive audience. These haven't the time. Too busy raising capital and cutting operations. The facade of promise in 2012 could give out any minute now.

Fast Money
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