The surprise the bears feel over the continued rise of this market may be due to QE3 in disguise. ContraryInvestor has a good analaysis of how the backstopping of the European bailout fund LTRO by the Fed is acting like a wnother wash of liquidity, this time trhough Europe. (See chart).
Given how the market inexorably rose with minor pullbacks during the last two QE episodes, we should expect something similar now until the LTRO backstop runs its course.
The bears will expect it to crest before getting too out of control, but they may be misreading both the Fed's determination and thye wave count. If we count this structure as wave C since 2009 in a large ABC made up of two doubke zigzags internally, it could continue up like the QE2 period (the A leg of the second double zigzag) towards 1500, giving a triple top since 2000.
Not a prediction but food for thought for the bears.
Duncan,
I used to be good at puzzles like this
What's the next number in this series:
16...8...?
Posted by: Virgil | Friday, February 03, 2012 at 04:34 AM
Glad to see that you are posting again!
Energy issues not breaking out so the strength of stealth QE3 is a suspect. I am watching the King Dollar carefully which may likely signal the next big thing.
Posted by: Edwin | Friday, February 03, 2012 at 09:07 AM
Global temperatures below zero line with La Nina kicking in
Posted by: Virgil | Friday, February 03, 2012 at 11:38 AM
Virgil, the AGW argument is pretty much over; now the scary question is will the next solar cycle be at such a low level that the world gets really cold.
Posted by: yelnick | Friday, February 03, 2012 at 11:40 AM
Duncan,
the Warmers are totally missing the problem. Temps are rolling over, and it could cause far more damage than warming. The immediate threat with La Nina that we need to keep an eye out for is disease. 1918, 1957 & 58, and 2009 all saw cooling Pacific waters and major flu outbreaks. The theory is birds change their migratory patterns and carry and mix flu viruses in ways that could spread a pandemic. Doesn't mean it will happen, but conditions are certainly more favorable for it.
I don't have a bullish outlook because I believe the central banks shenanigans are yielding diminishing returns. However, if I have to look at it that way, I'm wondering if the whole mess since Jan 10 can be looked at as some kind of skewed B or X wave. I think this might be how Zoran may have seen it with all the overlap.
Interestingly, R N Elliott's grand supercycle count was due to end this year. He was expecting supercycle wave V to run 70 years from 1942 and roughly equal wave III give or take a couple years. Could be the call of the millennium if it happens.
Posted by: Virgil | Friday, February 03, 2012 at 08:41 PM
When will Prechter fall on his sword and admit that we're in a new bull market?
http://chartistfriendfrompittsburgh.blogspot.com
Posted by: Chartist Friend from Pittsburgh | Thursday, February 09, 2012 at 05:44 AM
Hi Duncan- just emailed you about Second Market. Not sure if i have the right email id.
Posted by: Ashish Agarwal | Thursday, February 16, 2012 at 06:27 AM
Very interesting article. I like the fact that you put the graph to explain what you are saying, it makes even people like me, who doesn't know economics that well understand what your saying :)
Posted by: digital options trading | Wednesday, February 22, 2012 at 07:57 AM