Why Financial Air Raids are about to start …

Guestblog from Yves Lamoureux, Investment Strategist, Blackmont Capital, and TV personality from the show Les Affaires.com.  In a recent show he sounded the air raid siren, and has backed out of the market, currently 40% cash.  HE submitted an article to Barron's on February 8, calling the top as in.  This was posted on his site on February 19 - at the top.  So give him credit.  Here is his most recent view on the market.

We have been having fun since the beginning of the year with the analogy of dancing on the Titanic. We are on record for holding 40% cash since the start of the New Year.  We quickly recognized that problems were accumulating. We waited for the right time to write our essay Big speculators… are they about to hurt you. We decided to submit the work to Barron’s on the 8^th of February. We never hoped to make the top of the pile but are quite content with the exercise. We then proceeded to the translation for our internet site and posted the work on the 19th.  The top was made and we are hopeful that we will get full credit for calling the top.

What top are you asking? The top of the liquidity mountain!  The essay we did points to recognizing a structural problem as opposed to an economic problem. This is one of the reasons we went long Yen at the bottom.We were looking at the initial tipping point related to the Japanese currency in the whole financial arrangement. We did get the tipping point. It came from the Pacific Coast in the form of very intense seismic activity on the Cascadia’s fault line 3 weeks prior to the top. The initial leg down in the Dow is clearly that  of a 5 wave structure. The counter trend is also very well defined as a zig zag. It did hit the top of the corresponding 4 wave. We are now faced with a 3 wave down or a C wave.

By doing thrust analysis what we found was that this first move being equivalent to the drop in the spring has generated 20% of comparable anxiety. To hit bottom we need to see 100% thrust. We favor that this wave is wave 3 of a larger correction labeled A. Our analysis of flows positioning and velocity speeds forces you to adjust your wave count prior to the move. We find we have better success in the wave count if at post priori you adjust for those elements. Let me give you an example.  The sudden gains of gold to $ 690 generated a strong thrust signal. I was convinced that this particular wave was a 3^rd wave that would carry to $760.  I quickly reassessed the count knowing well that it made the move continuation not likely. We sold accordingly and rewrote the count for a series of 1, 2 waves. Wave 3 would therefore lie ahead with an $800 target.

I am a perennial bull when it comes to things that go up. I believe one way of being naturally short stocks is to be long “things”. Preferably Oil, Gold & Yen. In our essay we pointed at the carry trade as culprit. There are of course more problems to come. This is what we will find out in the “price discovery”. The Yen will take time to unwind. Especially given how fashionable it had become for Japanese investors buying Uridashis. At the point of recognition we will still have another 50% move to unwind the trade. It is exactly at the time of maximum anxiety that investors will repatriate funds invested overseas. This could become an enormous problem for all markets. Confidence cycle analysis points down to 2011. Of course derivatives are  another bomb waiting  to be dropped . 

Stay tuned we will hear next the cargo plane door’s open….

Disclaimer:  opinions and projections contained are of the guestblog author and may not represent the views of Yelnick, Blackmont Capital (BCI) or any other organization.The information contained herein is for information purposes only and this report is not to be construed as an offer to buy or sell any securities.Neither Yelnick, BCI nor the author accepts any liability whatsoever for any loss arising from use of this report or its content.

 

Comments

[aa]

DG,
Where are Neely's rules on 1/2/i/ii counts? If in MEW, which chapter/page?

Thanks

[rdneu56]

Yves who... ?

[DG]

AA, in MEW page 8-13, figure 8-9. It's a small point in the big scheme of things, but indicative of the more rigorous logic of Neely's rule-based wave counts.

[shawn]

Yelnick, would you mind posting the link to Yves Lamoureux blog?

[yelnick]

http://www.lesaffaires.com/lesaffairestv.fr.html

[prechteris a ... (Ithink you got it...)]

Ok

Again at EWI they stick their head out:
http://www.elliottwave.com/features/default.aspx?cat=emw*aid=2941*time=pm

with a prediction of 3rd wave down lying ahead. Whenever I saw a 3rd wave count from them in anything (stockindices, metals, commodities, sex behavour etc) it was wrong. Not one hit. Never. It is save to buy the stockmarket. Why:

1. Prechter and co get it wrong anytime and
2. The PPT is at wortk with the central bank (unlimited funds) - they won't let it down - too much at risk. Rather they risk hyperinflation .....

[rdneu56]

Alas, my school French is inadequate to properly place this pundit. However, I have a hunch that would be well placed on a list of chronic bears even though he seems to be babbling about being bullish on commodities in the excerpt above. Of course, the utility of such a list would be to avoid acting upon any advise dispensed by the chronic bears and thus to avoid serious damage to one's finances. The top 3 of my chronic bear list are Prechter, McHugh and Fleckenstein. I welcome additional nominations!

[george]

i am bullish after all ....on puts.

i continue to remain bullish on the puts
on several stocks that are ready for the
junk yard.

good trading,
george

[yelnick]

a better link to Yves that includes written material
http://www.lesaffaires.com/article/0/experts/2007-03-09/435654/panique-sur-le-titanic-.fr.html

[Yves]

posted to rdneu56

HI, There is actually 3 great forces at work to prime up equities now......

namely the strengh of the worldwide economy on a strong uptick now for the last 4 weeks.....I known its not what you hear but it is
what I see you can verify with the baltic dry index....

the second force is the actual speed of repurchase agreements the repos between the Fed and large banks this is kicking in BIG
this is massively bullish for stocks

and the 3rd force at work is the massive short side

As soon as we find the bottom I will post my findings and buy tons of stocks with the 40% cash we have on side

For now I prefer holding gold and oil but will switch to stocks on the next drop

I hope this helps.....

[ibhappy]

There appears to be quite a few sophisticated investors and I've enjoyed the intelligent commentary and remarks.

Just wondering if I could get some advice on a bear market portfolio for my 401K/IRA accounts.

Here are some funds I'm considering for my portfolio:

Long-Short Fund: HSGFX
Income Fund: HSTRX
Global Bond Fund: OIBAX or PSAFX
Managed Bear Fund: BEARX
Mutliple Asset Classes: PRPFX
Natural Resources: ICENX

I'd appreciate any comments on the fund selection as well as recommendation for allocation. I'm 46 years old and looking to retire in 9 - 14 yrs.

Thanks!

[Yves]

I am working on a few gems of data mining and will try to post very shortly.First question I would ask is how much cash % do you have. How much stocks % .One of my favorite if I play the downside is QID

[Charles Romano]

I have about 420K in my 40lK/IRA Accounts.

Allocation is:

19% HSGFX
7% BEARX
13% Insurance Contracts yielding ~ 5.7%
Balance in Short-Term Treasuries yielding ~ 4.5%

[Yves]

Charles , I suggest you look at FXY Yen currency trust shares

you will basically add some asset theoretically that has no correlation
to stocks or bonds but notice that each drop recently in the mkt has been accompanied by yen strength...