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« A Depression is Not Just a Bad Recession | Main | Ground Hog Market Still Spooked By Shadows »

Friday, January 30, 2009


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Forkoholic Serge

Actually if fractal repeats 2009 will most likely be most similar to 2008

low in Feb-March,
rally into summer,
decline into November

2010 on the other hand may have at least 9 month or more rally
We may actually see Dow 10K for the last time in 2010


Interesting, so would you put us effectively in wave 1 down again rather than 5 of the prior decline?

Hank Wernicki

Serge ................. Nice chart and I'm looking at a similar outcome for 2009



Hank Wernicki

Within the next 8 trading days Gold and GLD are going to crash

This forecast is based on the 8 and 16 day wavelets


Hope your right Hank, I've been eying that one as well, and see what you see.

I see it coming a little sooner than later.

Forkoholic Serge

unless I missed a fork I count us in Wave 5 from May08 top, not Oct07 top
Alt count - B of 4

Here is my hypothesis for a long term (assuming we repeat the same fractal over and over and over and over again lol )


Forkoholic, that's great thanks! Interestingly the SET is clearly still in the five wave decline from May, check out this tracker:

Either way, whether we are currently in the impulse down from October or still from May it seems as though we could currently fit about equally well into either a completing wave 1 of 3 of 5, or wave c of B of 4 back down towards the bottom followed by another push back up in C. Either way we're going back down for now, fun times. Love your site, keep at it!


Lots of assumption that we're still in decline to new lows. If that is so, all the Fibonacci pointing to 2008 was meaningless, which is possible, but not the most likely, IMO. Also, the 22-week cycle aligns nicely with the 11/08 low, and the January pullback makes sense as the half-cycle of it. I'm looking up.

Canadian Money

DJIA Index Feb. 2, 2009...broke its November low this morning.

After some of the large cap components like UPS and FDX broke new lows, the Dow Transport Index just broke below its November low this morning. This appears to eliminate any possibility of a wave two correction as part of a larger rally.

I also see wave and volume patterns that suggest the other US and Canadian Indexes will likely follow on the heels of the DJTA Index.

The volume patterns for the TSX Comp and Nasdaq are not as well defined as the others but it's there as well.

The DJTA Index may turn out to be this month’s canary in the coal mine. If the DJIA Index breaks a new low then we have a Dow Confirmation of a continuing bear trend.


Hank Wernicki

Here's the chart :

On the home page


Glenn Loser Neely

I am a loser!

Forkoholic Serge

To all you forkoholics out there
Evolution of "034" fork or Where the heck is Wave 4?


Glenn Loser Neely. Please get a life. You have become more tiresome than Dow Predator's predictions.

Best regards,


the guy who blames neely for his anguish

I have a compulsion! I cannot pay for psychotherapy and I am not sure it will work, anyway!

I am a loser!

your point?

Glenn Loser Neely

Why are you still subscribing Neowave?

What's your point "repeating" Neowave does not work?


I would like to suggest that a posting requirement be imposed that would require all posters to be over 14 years old so that discussions may be more mature, and beneficial.


neely says short ES at 857, 10 point stop:
...seems like he's been wonderfully correct with the treasuries short from late december, and he was negative on the stock market into the mass quantities of bulls who appeared new years day weekend.......


Hey loser are you also a boozer, or just a loser because of a habit of being a bit of a snoozer?


If this is a 3 of (5), it's quite the slow starter.

Again, I'm not sure that economic news is going to take this market down. Companies are missing earnings, giving terrible guidance or no guidance and not going down. Macro environment data is terrible, but market's not going down. Unless we lost 1.5 to 2 million jobs last month, I doubt the employment number's going to take it down. Consumer credit companies are reporting record charge-offs and forecasting more losses, but that's not taking the market down. The Fed/Treasury will mortgage three generations of Americans to prevent another Lehman, so it's doubtful that a large bankruptcy will take the market down. Obama's pulling back from the "Buy American" clauses in the stimulus, so it seems like trade war is off the table to take the market down, too.

Process of elimination, it seems like terrorism will be what takes the market down. That's the only event type of significance that doesn't seem to be already priced in or a non-issue. I've been hoping that we'd just go down on the economic news, but so far, no dice. Part of it is that I'm losing patience, but the other part is genuinely trying to figure out what the catalyst for any of these bearish counts will be.

Hank Wernicki

848 Sell

Francis Schutte

Apparently there are still a lot of analysts over there who only look at the price of GOLD expressed in Dollars. By failing to check the price of gold in Euro's, Sterling, Ruble, South African Rand, Iceland Krona, Candollar, Aussie, they are making huge mistakes!
Cycles sometimes work, but sometimes they don't...most of the time, they don't work when you expect them to work and vice versa...


DG I have a hunch that at some point this year a big fifth wave shoe will drop in the west that won't be caused by events here. Third world markets have been contracting faster and further than in the west, caused by their populations being well aware of just how bad things are there. We think we have it bad, but in China factories are being shut down and deindustrialisation is occuring at a far more explosive pace. Here however everyone keeps on running with the myth of emerging markets, for example when talking about our most stable companies are those with exposure to China/India etc because they are somehow insulated from what is going on. And they're still being predicted fairly high economic growth rates, when it's more likely that once the figures are released just a little further down the road they'll show huge contraction especially considering how much they are reliant on collapsing energy prices and disappearing western demand for their tat. As always everyone talks of the emerging world as though it's a new paradigm, but third world investment bubbles have built up - and burst explosively - over all the same arguments (and more) since the start of colonialism. The truth is that these countries have always been by far the most economically risky but nobody seems to be cottoning on to that. Even Prechter who's being treated as the prophet of it all has been saying at every stage that the coming depression will see an historical transfer of wealth from west to east. It all seems hugely speculative, giant cities built out of cards. Although it's just a hunch, I suspect that something big is going to occur fairly shortly in one or more of these new powers maybe along the lines of the Iceland default only on a much bigger scale...



I just don't think those markets drive our market, but that it's vice versa. Even when China was down hard earlier in 2008, the US market held up until Lehman's bankruptcy. The event I'm thinking of, if it's going to take us under 500 S&P, almost certainly has to originate in the West. It could be Britain doing an Iceland, but I doubt it could be Taiwan doing an Iceland. Maybe if China did, though. Even then, timing-wise, I'm talking that we need to make new lows in a week or so and I don't think China is that close to something of that magnitude.

Donna Kline

If you have concerns about the 'stimulus' package:


True, if we're only half way through and about to drop the other half that soon then my suggestion wouldn't be enough. If the decline is viewed as an impulse and the next stage is a wave 5 then - being the mania phase - fifths don't usually go that far as they are caused by everyone getting ahead of themselves. Of course if it is going to become a more complex correction it's a different ball game. I don't see how the market could foresee terrorism though...


Jan. 19 count has been working like a champ

Al from Oz

500 on the S&P and 5000 on the Dow here we come.


I reached my terrorism "conclusion" more by process of elimination than directly, on the assumption that there needs to be some important event to drive a decline of 20+% in the S&P 500. Once again this morning we see that terrible macroeconomic news isn't met by declining prices, but wave structure says prices will decline. If prices move enough in the upward direction, eventually the proposed structure, i.e. "the wave count", forecasting future declines will change to a structure forecasting upward price acceleration, but that seems extremely unlikely at this point, i.e. nothing in the wave structure since the November lows screams that was the bottom.

There could be other economic factors that end up as the catalyst, like if the "bad bank" proposal isn't greeted well, but that thing is already such a clusterfark that it would seem to be priced in that it will be poorly structured and won't work. Look at the report showing TARP overpaid by 30% on the equity it bought in banks, so that's a huge black hole already and I assume a "bad bank" will be just as much of one, despite the change in administrations. The "stimulus" plan, too. No one can possibly think it will do much of anything for the real economy, although it will put a lot of Democrats to work as a political payoff for their votes, at the expense of wealthy Republicans' future tax dollars, which will decrease Republicans' consumption, netting out as a wash.

So if the economic news won't take the market down, the most likely suspect is terror.


DG I do understand why you don't see what further economic events could drive another collapse, I just don't see how an event like terrorism can be foreseen that precisely by the markets. I mean as I understand it wave structure is caused by patterns of economic behaviour repeating themselves throughout history. So in an impulse you'll get a wave 1 caused by the first traders recognising a change has just occured, followed by a a wave 3 which is where everyone else is admitting that the early birds were right, and finally the wave 5 advance, which is where participants are becoming either overly jubilent or panicking and overreacting depending on whether it's a bull or bear led impulse. So if you can see a market ending a third wave advance then you can expect that the market will first retrace a little in recognition that the trend is shortly coming to a head, followed by a final movement as the speculators buy into the excessive mania of the bull market/become panicked that the world will end towards the end of a bear market. And we can predict that this will occur because human psychology is so repetitive and predictable. The reason it keeps repeating is because so much of our behavior is generated by the unconscious directives of the phylogenetic psyche (Jung's collective unconscious). But how could wave patterns ever be caused by a completely unforeseen external event like a terrorist attack coming out of the blue? Surely the market can't anticipate such an event in advance, especially on such a specific timescale? One would expect that such events should distort wave stucture instead...

Robert Prectier

Neely is a genius.


I'm not so sure these types of events are "completely unforseen".

In any case, if wave structure "implies" something massive, working backwards to the fundamental event becomes a sort of analytical puzzle.

Here is what happened in the stock market in the days immediately following each of a variety of "terror" (or at least extremely "unexpected") events (pulled from in an article written right after September 11th, before the markets had reopened.)

Day 1 Day 2 Day 3
Pearl Harbor -2.93% -2.84% -0.27%
Cuban Missile -0.82% -1.86% +3.35%
JFK -2.89% +4.50% -0.34%
Lusitania -4.55% -4.61% +4.03%
Oklahoma City +0.68% +0.55% +0.93%
Kuwait -1.20% -1.92% -3.32%
USS Maine +1.11% -2.14% +0.57%
Russian coup -4.95% +2.54% +1.29%

So, some of these led to significant reactions, while others seem not to different from random days in the market, but my guess is that the ones that did lead to significant reaction had a wave structure leading up to the event that "allowed" for a significant reaction. That's what I'm saying could be in play here.

Prior to September 11th, Neely's wave count indicated that a big drop was on deck. When the markets re-opened after September 11th, there was a ~14% drop over the next week. Of course, none of these events played out as extremely in the stock market as the 1987 crash, which was not associated with any particular event, but was associated with a very different wave structure (terminal diagonal, again going by Neely's count at the time, which did allow for an extremely large drop in a short time).

Neely is looking for sub-500 S&P before the end of the first quarter, which is now 7 weeks and counting down. That's a minimum 42% drop in 7 weeks from today's high. The drop from September 1st 2008 to November 21st was approximately the same size and included all of the financial angst we all witnessed. My contention is that the market believes the Fed/Treasury have things "under control" and there won't be another sequence of financial events happening like that again, or that a similar set of events wouldn't cause a similar percentage drop. Even if BAC or C were to go kaput just like Lehman did, I doubt it would cause a 42% drop at this point. So, what could? Again, I'm putting on my Sherlock Holmes cap and looking "through a glass, darkly", but I can't see a strictly "economic" event that could make us drop so much at this point, although I hope I'm wrong.

Also, it's possible that the market "forsees" things of this nature in the evidence/considerations that pile up in the days and weeks running up to the event. The fact that Al Quaeda and Taliban forces have had relatively unmolested control of a large swathe of Pakistan in which to train for a while, the Israeli-Palestinian flare-up that has once again enflamed passions in the Muslim world, the change in Presidential administrations and the inevitable difficulties of transition, as well as the fact that Obama has not exactly looked like a stud his first few weeks in office, the strategic "moment of opportunity" for the terrorists caused by Western financial weakness, and the long interval since the last attack in the US, to name some key considerations. The "smart money" sells into the bullishness, causing the weak advance we've been seeing, based on these factors. Then, when the event that these factors facilitated happens, the smart money buys, helping to spark the next advance.

Hank Wernicki

Today's ( Friday ) Forecast:


2//06/09 -- A Fractal Trade and Forecast

The DOW Soars 217 Points

The S&P 500 Rallies Over 22 Points

" Great Call " ... M.

Are you kidding me? You come here almost every time the market makes a big move and post your "prediction" after the fact.

I'm sure "M" made a ton of money, though.


Quite fascinating. So what you are really looking for is one sudden shock within the next few weeks to act as a trigger.


Well, I guess you can toss the 3 of 5 count. Hope those who traded that count didn't get hurt too bad. And lets see about Neely's recent action. A friend of mine who subscribes to his service said a few days ago that his view is a big collapse 50%+ by the end of February. Well today's action certainly helped that prediction. Wow....that's like a 25+ point drop in the S&P for the next 15 days. Good luck with that prediction I said to my friend who follows Neely. Even Bob P. prediction that the feds would not be so stupid as to destroy their balance sheet and take in all the bad debt seems to be wrong. Never underestimate the stupidity of politicians with the exception of Ron Paul.



I guess so. I'm trying to reconcile the news flow that I'm seeing with the wave counts that seem most likely. Regardless of which "waver" you follow, almost all are looking down, with various degrees of severity. I would never "predict" some kind of external event unless the economic events didn't seem to be having the effect the wave count says they "should" have. A failure of the political winds to blow favorably for the market could end up being the catalyst, but I'm staying open to ALL possibilities.

MHD, as I usually do, I will defend Neely. Even though he does think that we are going down quickly (below 500 by the end of the 1st quarter, to be exact), he got subscribers out at break-even on Monday, on a short entered on Friday, when we didn't go down quickly enough for his liking and then he sat out the rest of the week until today, when he went short in the 850 range. None of Neely's subscribers should have lost any money this week unless they were following their own trading strategy.


A treasury market dislocation would do the trick...

Forkoholic Serge

today's CPC(ok 1/cpc) higher high may suggests we're still in Wave 4

Forkoholic Serge

Found an error in my 2010 forecast. 2010 will suck!
Updated chart
Dow 10K Goodbye party is this summer 2009


DG... my friend said one of Neely's longer range forecasts had the S&P below 500 in the first 2 months of 2009, and a recent update did not change that forecast. He also said he has been losing money trying to catch the end of what Neely calls an x-wave if I'm correct.I might be wrong, but a move below 500 by the end of March or February seems pretty far-fetched if you ask me. Again, all I can say is....good luck with that trade cause you're going to need it!


A treasury market dislocation would do the trick...

Posted by: enfinity | Friday, February 06, 2009 at 10:36 PM

I've seen some commentary making the argument that if the stimulus bill passes, Treasuries will suffer big time, so maybe. I'd rather it happen that way or any other way, so long as it happens. I've been waiting for this x-wave to end since the middle of December.


Lots of interesting predictions here and gutsy people making them. Great stuff.

How about we add a little rigor to the process?

How about we start to keep track of how people call the stock market over, say, one week periods? A simple UP or DOWN. One week later I'll summarize the results.

Let's start with whether you think this week will see the S&P 500 UP or DOWN?

I'll go first. I say DOWN.




Yes, that is Neely's forecast. It has been since we didn't rocket off the bottom in October, basically, based on the logic of how he views trend changes.

That said, if your friend is following Neely's trade entry and exit recommendations, since November 5th, which was the day Neely first said he thought that we'd be under 500 early in 2009, he should have been able to make 47 ES points on Hourly trades, 120 ES points on Daily trades and 101 points on Weekly trades, so I'm not sure what is happening. Neely is short right now on all time frames with a relatively nearby stop.

It's funny because I go back and forth about this trade. Obviously, hardly anyone is expecting the S&P to go that low and the people who do expect it often have been either perma-bears or are "cranks" of some sort or another. On the other hand, the wave count makes sense and things do tend to happen when no one expects them to happen, right? How many people were expecting the Euro to rally so hard in November/December? Or for gold to dump so hard in October? And even though a lot of people were calling a bond top in December, there were obviously a lot of people still buying them to drive rates as low as they went.

Part of me also doesn't want it to happen because it will obviously mean mass displacement and suffering, yet if this forecast is right I will walk away with more money than I'll have ever made on any trade and my risk right now is about 25 ES points. This trade, the inevitable rebound from 500 to at least 750 and re-test of 500 could set me up for life all in a span of 6 months, even as the rest of the world goes to hell in a handbasket. Or, I could be right about the potential catalyst, i.e. a terrorist attack, and, since I live in a city that is definitely going to be on any terrorism target list, I could die in the attack and never get to see the rewards of having been on the right side of the trade.

Lots of cross-currents in the markets right now, to say the least.


Within the next 8 trading days Gold and GLD are going to crash

This forecast is based on the 8 and 16 day wavelets

Posted by: Hank Wernicki | Friday, January 30, 2009 at 07:13 PM

So I guess that would be on Monday then - watch out gold bugs.

848 Sell

Posted by: Hank Wernicki | Wednesday, February 4, 2009 some time after Market close.

Hmmm, that worked out well, but at least you were able to redeem yourself:

Friday, February 06, 2009 at 04:32 PM - after market close - Hank actually predicted that the Dow would soar on .... Friday.

Brilliant Hank! You are simply the best, after Steve Hochberg himself, of course.


Eventhorizon, I don't see you sticking your neck out. Try it. Otherwise it's not very sporting to insult those who do.

DG, you, too. Let's get some predictions we can check



Down. But, I would have said that last week, too, and been wrong.

Right now, the market can't go higher than 1006. If it does, I won't be as bearish.

Short on weakness or rallies that approach resistance.

Forkoholic Serge

Actually I have to say Dow will try to get to 11K or maybe even 12K
this summer. Lows in March and here we go - THE OBAMARAMA SURGE HAS ARRIVED, PEOPLE!
China may almost double by summer
Last time to sell real estate. Party like there is no tomorrow! :))

Hank Wernicki

Evidence is supporting a SPX Top if the Friday's Close is not taken out on

Monday's Open


Thursday/Friday price action appears to confirm that we are still in wave 4. As such it seems most likely that the markets will continue to move higher this week.


Hi Reggie,

No, I don't stick my neck out - that invites a beheading! But then, I am not claiming to have a crystal ball, nor am I charging others for my wisdom. I find the level of confidence expressed by a pundit whose calls on this blog have been 50:50 at best, to be laughable.

Hank would have more credibility, with me at least, if he would explain the reasoning for his calls and express something less than 100% confidence.

I have tried exploring his web site - I don't think I have seen such a chaotic (irony) professional website since the late 90's. Perhaps there is some fractal logic to it that escapes me. Let me correct myself, Nick Taleb's website is similarly disorganized - maybe I am just fooled by that one's randomness! Or perhaps it's just something that goes along with this field of endeavor - you know, chaos and all that.

As far as the market goes ... all I know is it's a bear market and one day in the future it won't be. I have a couple small index shorts that are underwater .5-3% and a long oil position that is more-or-less breakeven. That's as far out as my neck goes right now. How about yours?

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