Planet Yelnick

Window Dressing Over - Gold Soars?

The last few days of Q3 (last week) are often used by funds to dress up for solid year end reports.  Now that the window dressing week is over, watch for many of these stocks to be dumped next week.   Hence in the Sep/Oct pattern, you often see a rise into Oct, a peak in early Oct, and then the sickening slide.  But not always - the Bush Re-Election Rally in 2004 took off in Sep and never looked back.  But that was a different time.  What to do right now? 

Dollar Blues and the Bush Imperial Adventure

The Dollar is in a world of woe.  Canadian Dollar hit parity.  Euro at $1.40.  Drudge reports the Saudi's may go off the Dollar in the oil trade.  Since our Dollar is essentially backed by oil, not gold, this would hurt.  Is it time for a bounce?  The STU charts how the Dollar has been in a declining wedge, and has spike below the lower trendline.  Final little burst before a sudden reverse? 

The STU Speaks

A lot of you are waiting for the mea culpa from EWI, the eat-crow moment.  Instead, the STU tonight calmly walks through the two main counts from now.  Their prior nested 1-2 count is no more.  No surprise.  But while they could count a single 1-2, with this rally as the 2 off the August low, the purported wave 1 drop from Jul19to Aug16 best counts as a 3 wave not a 5 wave.   It would take a convoluted small-degree 4th wave around Aug8 to find a 5-wave down.  The better count is for the drop from Jul19 to Aug16 to be a 4th wave, with a 5th to go to new highs. 

Hence their prime count has become near-term bullish!  Is this the eat-crow moment?  Not yet .. they expect the current rally to end this week, by the outside turn date of Sep21 (+1 gets to the Yelnick end date of Sep24, the Monday after this weekend).  They see Dow14.3k as a possible level for this Fall Equinox top.  A subsequent drop from Sep24 into October does not mean wave 5 is over, but the STU didn't look very far out.  By the end of this month, we may get the EWI to fall into the Yelnick View of a final Surge Rally into 2009. 

Yves on Gold, the Fed, and Resolution Not-To-Trust Corporation

Yves has a new post on the eve of the Fed rate cut decision.  Whether 1/4% or 1/2% or something else, he expects the Fed to deepen the moral risk of the Greenspan Put.   

Call 911

Today's STU sees a nested 1-2 wave setup for a iii of (3) of 3 to start tomorrow or Wednesday.  (It might have a little down-up to go to finish a little wave ii ABC correction.)   If so, should be a persistent and deep drop at least to the August lows of Dow12.5K. 

Prechter Excerpt: Why the Fed is Such a Lousy Wizard of Oz

I feel privileged.  A second article contributed to this blog by EWI.  Point of this one is that the Fed does not set rates, but responds to markets.  And the markets have told them, time to drop rates again.  Hence 1/4% is baked into the markets right now, and 1/2% is considered pretty likely.  Still, stocks may drop, since this is confirmatory of their current set of worries, rather than ameliorating those fears.  It is rapidly dawning that the Fed may not be able to plug the dike that is breaking.  Flooding the world with more liquidity is but a salve when the problem is the underlying assets - the securitized debt instruments - are poorly understood and may contain vasts reservoirs of toxic debt. 

Enjoy this article, as EWI is now in full swing, finally getting the deflationary market climate that Prechter has been predicting for the past 5 years, well, make that 12 years.  For those of you who enjoy these, EWI recommends you join Club EWIand get access to them for free, plus see a message board with EWI answering reader questions.  Enjoy. 

Market Limbo: How Low Do We Go?

After a wave 2 of 3 correction which broke as an ABC zigzag, we have now entered waves 3 of 3 down.  Wed and Thurs this week were the little waves i and ii setup to the wave iii which hit today.  Pretty classic look, and explained well in tonight's STU.  The corrective C wave topped at 61.8% of A.  If this count is correct, the next few days will show what a iii of (3) of 3 (to use their nomenclature) looks like: wooosh!   Lots of action in stocks, bonds, currencies and gold, discussed below the fold. 

Prechter Excerpt: The Worst Is Yet To Come

EWI is graciously guestblogging, with a look at the spread of the subprime woes into broader credit markets.  Enjoy!

Gold Watch

Neely posted a special bulletin:  Neely expects gold to soar $150 over the next few months.   Yves also believes that gold and the Dollar could soar in tandem - I hope he will guestblog his thinking shortly.  The STU in contrast sees a drop in gold after an ending thrust to end an irregular flat correction, then a wave C drop towards $500.  The divergence may reflect the mixed information about the impact of the subprime fiasco on the broader economy - the Fed reported that its regional Beige Book analysis indicates the toxin is not spreading beyond housing and autos.  Is a rate cute needed on Sep18?  Stay tuned. 

Turn Window Approaching

Tonight's STU has it as a classic ABC correction just ending, and the start of the plunge into the turn window.  Neely has it as incomplete wave structure, but sell!  Neely also expects the 'orthodox' Elliott Wave analysts to be perturbed and perplexed by the last two weeks, but he protesteth too much.  Neely's river has flipped back and forth over the past two weeks, while the STU has held rather firm that the bottom is still ahead.  We seem to be headed for a bottom between Sep12 and Sep24, the depths as still unplunged.  Most troubling for those who think the Fed has taken appropriate steps is that the Dollar has failed to complete an impulse up, and has turned dramatically lower, looking to break below the critical Dollar Index 80 level.  This suggest to me that smart money is betting that the Fed will lower rates on or before their next meeting (Sep18) - keeping the economy going rather than supporting the Dollar.  This may rally stocks in a final surge into 2009. 

Read This Excerpt

For those of you who were unable to read the recent EWT, take a look at this excerpt.  It is a discussion of why the Fed cannot stop deflation, and it is one of Prechter's best EWTs ever.