Planet Yelnick

Mighty Prechter Calls the Count

Prechter has spoken, and the word is "B".  His latest EWT sees a B wave as the only way to explain the many anomalies right now, such as the excessive bullishness despite the Nasdaq in the dumpster and S&P still well below all time highs.  The indicies are still marching to Fibonacci tunes, which is more characteristic of waves 12 or AB than 45.  The constant-Dollar Dow is way down since 2000, while the nominal Dow is at a new high - this divergence needs to be understood.  Most telling is that the drop is too small (38% in the Dow) to be a correction of 32W5 (49W3 in my count) let alone 1784W5.  Hence - we are still in the great A wave down from 2000!  Subwave a was, and we are now in subwave b.  This means Prechter is still on his Cataclysmic Count, that a massive crash lies ahead.  Let's take a look.

Election Correction?

The current bull run began in Sep04 with the Bush Re-Election Rally.  It began before the election when it was already clear Kerry was a loser.  Until this weekend it was looking as if the Republicans would hold control of Congress.  Their risk was a groundswell surprise as happened in 1994, when the Democrats were confident of holding Congress until Newt Gingrich and his Contract With America shocked them.  Some Demo's had perversely hoped for another bad hurricane or two, to remind voters of Katrina and the wreckage once called New Orleans, but the weather was relatively benign this season.  Hence it has seemed to me this market would not correct until after the election, and only then if the Demo's pull off the same surprise.  Now a new hurricane is brewing - the Pedophile Page scandal is gaining strength.  How does this fit with the current wave count?

Mighty Prechter Still at Bat!

Prechter launched a belated EWT today and gave a great explanation of where we be: still in the throw-over of the ending diagonal.  He sees us in the final wave 5 of the diagonal, and notes an expanding triangle in the 2d wave up of wave 5 - indicating this throw-over will break as a three not a five wave (triangles are the penultimate wave, preceding the final wave), confirming the diagonal count.  Once this slips below the upper trendline, the top is in.  The diagonal also appears in the S&P, which remains at a 73% retrace (the Naz is at 32%) - a long ways to go to hit a new high.  Breadth has steadily worsened as the Dow has climbed, indicating exhaustion.  This diagonal scenario should play out by the end of October, with Oct24 looming as a key turn date.  And if the four year cycle is still operative, the downturn in Q4 or Q1 should be severe.  An EWT worth reading. 

Where We Be

Prechter has a bit of explaining to do, and so he did in the latest EWFF.  He hasn't quite changed his count, but is on the verge of doing so, once the S&P gets to new highs (if it does).  The Dow hasn't yet closed above its Jan00 closing high, nor spiked intrady above its intraday high, but got damn close.  Yes, we can point out that in 1973 the Dow went slightly above the tops in '66 and '68, and then cratered; and that on a constant-dollar basis, is a lot lower today than it was in 2000.  Perhaps more tellling is that the broader indexes are still below the May highs (the EWFF points to the Wilshire 5000), and that breadth indicators are way below the May numbers, both indicating that the rally is in a narrow range of stocks.  Hence it should be no surprise that Prechter expects the top is nigh and the swift dive to follow near.  So where are we in the count?