16 replies to this topic

[tsharp]

Interesting count. I have mine based upon Glenn Neelys recent modification to his longer term count. He sees the S&P remaining in a wave (IV) correction for the next 10-15 years. I think wave b.(IV) lasts  until 2009-2010 before wave c.(IV) kicks in. Gold and the HUI are likely to go parabolic at this point. Should wave b extend further in time, wave c will be 5-6 years down. Inflationary periods are good for the commodities but bad for the S&P. S&P of 1200 ten years out would be like S&P at 400 right now.


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<{POST_SNAPBACK}>

imho, it's a myth that ANY inflation is bad for the financial markets.

the last longwave (K-wave) bottomed in 1949... stocks appear to have done pretty well in the initial stages of the mild inflationary climate of a new longwave... however, in the late stages of the uptrend, as in the 70s & early 80s, the financials suffered, then finally when the downtrend started kicking in, with disinflation, and then deflation, the financials, and especially Tech, were able to thrive once again, and hence the Naz bubble.

i believe that the last longwave bottomed in 2003 (54 years), so looking at the commodities starting to take off, but still with relatively low interest rates, i see a similar parallel to the previous longwave uptrend, where the financial markets will continue to be able to move upward (not Techs though) with mild inflation and relatively lower interest rates, until the plateau stage, where both high inflation and high interest rates will likely cause another 1987-style correction.

jmho, and as always, twt.


--tsharp


btw, it's also a myth that a 1929-style financial depression MUST accompany the bottom of the longwave (K-wave).

[BovineMarket]

imho, it's a myth that ANY inflation is bad for the financial markets. It really depends what one is invested in. I generally believe inflationary processes are started by shortages of key commodities, and that currency inflation is a direct result of that (yes other factors). With oil heading much higher, gold, silver, base metals etc., this will kill S&P earnings. Inflation will keep the S&P above 900 until 2010-2013, but at what cost?? Higher prices and currency expansion erode the value of the S&P. The S&P is fluid, so a top in commodities is likely to see 25% gold stocks and 30% oil stocks, so this could really make how the index evolves interesting. Inflation is bad for the broad markets in general, because the DOW around 700 in 165 was worth more in actual dollar terms than in 1982 no? I tend to disregard K-wave because its origins are agricultural based and having a set time frame does not function in Elliott Wave analysis due to the logaritmic expansion of price and time. When deflation does set in, it will represent a global civilization peak, closely tied to oil. If peak oil comes too fast and countries are not prepared, then things will get interesting. S&P likely to top out between 1300-1340 by mid June/early July. JMHO. The complexity of the markets does require an open mind though, I have had to change my opinion on a few things. BM

[Not Too Swift]

Great charts. Thanks! The only change I would make is that the lows may not be as dramatic as on your charts due to the falling dollar.

[tsharp]

Great charts. Thanks!

The only change I would make is that the lows may not be as dramatic as on your charts due to the falling dollar.

<{POST_SNAPBACK}>

the dollar isn't gonna keep goin down forever...

i suspect that over the next two years, we'll see the dollar rise...

gold will likely top up around $500, and then come back down to the low $400s, and then stay range-bound between the two for a while...

and crude will come back down to the mid- to low-30s...

but by then, the initial technical damage will already have been done in the financial markets, and turning around the inertia will take considerable time, and a real re-test of the previous lows...

the thing to keep in mind, is that gold isn't going to the $1,000 range overnight... it took some thirty one years from the bottom of the last longwave for gold to finally find its cycle high of the last up-phase...

if we run the numbers, imho it's likely to take until 2015-2020 for the precious metals to finally find the previous cycle's highs, and then to move higher from there...

(as humans, we're quite myoptic... tending to view the world from only our limited life's experiences, therefore these kinds of cycles are rarely fully understood in their true context by most of us, but instead we want to try to compress the entirety of the cycle into a shorter cycle than it really should be.)

imho, it's also a shame that particular EW permabears have perverted the concept/nature of the longwave, supposing and teaching as dogma that the longwave and the price level in the financial markets are somehow immutably connected... because they're not.

twice in the longwave cycle the stock market (in general) will thrive, and twice in the cycle the market (in general) will have difficulties...

imho, the financial markets in general thrive in a climate of mild inflation with moderate i-rates and also in a climate of mild deflation, also with moderate i-rates... these are the beginning to the mid-points in each cycle of the longwave, and as i suggested earlier, imho, we've just begun a new up-phase in the longwave.

however, the financial markets suffer during the extremes of the the two cycles of the longwave, that is, when at the up-peak, when there's high inflation and high i-rates, and an at the bottom of the cycle, when there's high deflation and low i-rates.

i realize that this is simplistic, but that's about all there is to the basics of the longwave. certainly, certain sectors will do better during the up-phase, such as industrials (commodity stuph), and then during the down-phase, Tech typically does better... that's why i've suggested that the Naz will not likely see its ATH again for another two decades or better, while the mainstays such as the dow and spx will exceed their ATHs within five years or so.

it doesn't take a rocket scientist to see that the makings of the beginning of a very powerful bool market are in place... the NYSE, VLE, A/D line, etc... all at new ATHs... that's the broader market leading the way... then later, as the bool market matures, *investors* become more selective, turning towards the safehavens, the dow and spx components...

it's goin to da moon... eventually... but imho, we still need a bit lower launching point... and as i always say... twt.


--tsharp

[BovineMarket]

If you remove hedonics from the US CPI, it is running at 6 1/2%/year. I do not call this mild inflation. Peak oil is set for 2007-2008.......but the Saudis have been pumping Ghawar extremely hard. If an oil field is pumped to hard, it does geological damage, causing the oil fied to collapse. If anything, inflation is set to ramp up, not down. Currency expansion is going gangbusters, so this will further feed inflation. I have the USD in wave [2].c of a decline since 2001. My target for the USD is 60. TIme frame? Good question. I originally thought 12-18 months, but it may be 2-4. I see a strong bounce then, but gold will be moving against all currencies at that point. Gold and silver rallies not set to really run until 2015?? Not a chance. The HUI has put in cycle degree wave I and is currently in wave II which I believe is a running correction setup, with wave III set to start in mid to late 2006. Silver is already at near critical levels and it will take 6-10 years for supply and demand to meet, once it is a demand driven market. Likely gold and silver peak at or before 2013. Silver is likely to be $15-20/ounce in late 2006, $200-400 by 2012. I do not like to use EW on gold because of the manipulation in that market. Oil is likely to be at $60/barrel or more in 12-18 months. A decline to 30ish I view as a very slim probability. The XOI is currently finishing off its first big impulse.I do not have enough data to accurately label it to the precise degree, but it is set to peak around 2010-2012. It has been a few years since I have done any reading and such on K-wave analysis, and it really is a quatlitative approach, rather than a quantitative approach. A number of commodity experts, one in particular sees the commodity bull market peaking around 2017. With peak oil set near 2007, this stands to skewer a K-wave cycle and possibly the longer term Elliott Wave count due to a major geological event. The financial components of the S&P are likely to suffer declines rather than further advances due to rising oil and interest rates. I misread the FED and thought they would back off on interest rates, thinking higher oil prices once worked into the system would naturally cause a recession. Now I see 4.8% in the TNX short term. With over 50% of S&P components deriving earnings from financing (Ford, GM), that puts the S&P near a 70% financial index. As the financials begin to weaken/collapse, gold and oil stocks will be stuck in, since the index is fluid. Whenever an index has a major overweighting, there usually is a rapid reversion, so 25% gold stocks and 30% oil stocks within 6-8 years would not surprise me one bit. The grains broke out recently, so watch for the CRB to hit 400 before years end. Gold should be at $600 or more based upon where the price is, so I am looking for gold to hit $800 within the next 2-3 years. After that level is taken out, to the moon. Glenn Neely has the DOW going to 50,000-100,000 around 2025-2030. This is when hyperinflation will hit. Maybe peak oil condenses this??? Who knows, but i do know the commodity bull market is going to climb higher and higher. The period we are in is anything but mild inflation/deflation. We may get a deflationary scare, but money will be created to ensure countries have access to commodities. I think the S&P launching point is another 10 years out at least. If you look at Glenn Neelys longer term S&P count, this is a minimal time requirement. 2007 would be too short. BM

[Not Too Swift]

If the dollar stops declining, deflation will be taking hold. The government and the fed cannot allow that to happen, and they have said they will not. The fellow who said it, Ben Bernanke, is considered first in line to replace Greenspan.

The longwave, like e-wave, has room for disagreement.

One simple difference between us is that I don't believe the 54 year length is fixed. If we had stayed on a gold standard, perhaps it would have come in at 54 years again.

But I believe the actions of governments and central banks have now lengthened the cycle as each politician makes the all too human choice of trying to defer the pain until his successor takes over.

Mike Alexander's work on P/R is one interesting example of how you might account for this problem.

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[Echo]

NTS,

From a longer view perspective, I can see why Tim thinks the dollar might bottom soon.

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Echo