Friday, October 24, 2008

Triangle Negated

If you are waking up to find the index futures limit down, hopefully you've realized that any notions of a triangle that lasts until election day have been completely shot down. This morning's limit down move confirms the wave iii of Minor wave 5 wave count.

Orders will be hard to get filled on the open this morning, so you might want to wait for 30 minutes to an hour to start taking profits on short positions.

While the markets could reverse off the low, the violence of this morning's move indicates that we will most likely see a severe decline today followed by a "black" monday type of scenario. It was sad to see the heads and former heads of our government's top financial regulatory agencies sit before congress yesterday and testify that this was unforeseeable and they are shocked at what is transpiring. The fact is human nature has not changed, apparently, for thousands of years. The markets are a reflection of human nature, and therefore what has happened in the past will happen again and again until there is some kind of evolutionary leap in our mass consciousness. These types of events happen at the generational level, meaning that each generation forgets what the previous one "learned".

It is no coincidence that 21 years ago within a week, the crash of 1987 occurred, and 21 years before that, 1966, was the low of the initial decline that kicked off the 1970s bear market, and 21 years before that we dropped the atomic bombs on Japan, and 21 years before that was the low that preceded the parabolic rise in the markets up to the 1929 high. Markets conceal the cycles very well, but they are there for those that have eyes to see, but that is a topic beyond the scope of this blog. My point is that anyone that looks back at history can see clearly that, while the form of events changes somewhat, events do occur on a cyclical basis.

So when is this bear market likely to end? Most elliotticians agree that 1942 marked the end of the 1930s bear market, and 1982 marked the end of the 1970s bear market, so it is not hard to forecast that the end of this bear market will be around 2022+-. Of course, the nominal low will be much earlier, but we won't likely see a secular bull market until the early 2020s.

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