Yves: Wave 4 Has Been Still On

Yves latest opinion, that the five-wave count off the Mar9 low has been wave C of (4).  Yves will appear as the featured guest on:  Fox Business TV, The Closing Bell, from 15:00 to 16:00 and Bloomberg TV, Taking Stock from 17:00 - next Thurs, Apr9. 

His opening paragraph discusses sentiment, and why a real bottom is full of skeptics, not bulls-in-waiting, ready to pounce.  He goes to discuss the macro economic factors which say a recovery is not yet in sight. He expects a down wave, and the next drop will indicate which count: a C wave in 3 waves down or a 5th down with impulsive action.

Heading toward the exit one last time

If you are an experienced player then you can agree with me on this last bottom.   It was an anti-capitulation bottom.  Rarely have I seen sentiment reverse so dramatically on a bounce as this one.  It would be a first as behavior suggest that all participants can call the bottom at the same time.

It is looking to me more like the precursor of the next and last bottom to come. Monetary aggregates can often ascertain direction. Right now they are pointing down.  All the efforts put in by the Fed and Treasury have no chance to work.  The banks are to blame explicitly. They are sitting on a monstrous pile of money earning interest.  They have a moral obligation to lend that money which is intended in the first place.  This situation needs to be changed since money measures are dropping or slowing down. We cannot achieve any sustainable recovery without a real money multiplication effect. This differs from throwing debt at debt to get started.

Many measures in fact have lost the ability to influence direction, namely: term investment option, term auction facility and repurchase agreement. The magic hand of the Plunge Protection Team has been cut off.

We are bringing back wave 4 as this last 5 waves bounce correspond to a wave c of a running flat.  It is also deducted from looking at various other markets with and without the greenback influence. My liquidity index remains on sell.  We are preparing our list to buy on the next opportunity that present itself.  We will not shy away  from using all forms of leverage at our disposal to massively buy.

Yves Lamoureux, Investment Advisor,   Blackmont Capital Inc.

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. The comments and opinions expressed in this letter are the result of work done by Yves Lamoureux. They may differ from the opinion of Blackmont Capital Inc. ("BCI") and should not be considered as representative of BCI, belief, opinion, or recommendations. The statements and statistics contained herein have been prepared by sources we believe to be reliable but we cannot represent that they are complete and accurate. This material is published for general information only. BCI assumes no liability for financial decisions based on this information. Readers should obtain professional advice before applying any ideas mentioned to their own personal situation to ensure their individual circumstances have been properly considered.  BCI is an independently owned subsidiary of CI Financial Income Fund. CI Financial is a Canadian owned diversified wealth management firm

Comments

[Account Deleted]

Hello yelnick!! I met your blog few months ago and I can say this is an excellent place to discuss ew theory. I think this Yves count a bit improbable and its not consensual. The other day you asked for suggestion for we readers. I use to visit the blog of these guys here and I believe they have a good interpretation of the market structure. One of them is from France http://www.marketoracle.co.uk/UserInfo-Eric_Chevrette.html and the other is from India http://www.tradewithramki.com/ They dont use to post daily but in time before any turn.

[Forkoholic Serge]

Wave Rust, da bear,
What if it's neither 1974 nor 1938? ;-))

Just looks at June 500 or 600 strike open interest

P.S. There was a report on Bloomberg .... but I'm not telling ;-)

[Forkoholic Serge]

>Rarely have I seen sentiment reverse so dramatically on a bounce as this one.
What r u talking about? ;-)) Wake up, Yves
sentiment is rising since March 2008! in fact it surpassed 2007 top levels already!
http://forkoholic.com/images/cpcproj2009.jpg

[Forkoholic Serge]

>The magic hand of the Plunge Protection Team has been cut off.

PPT became Venus de Milo ;-))
http://en.wikipedia.org/wiki/Venus_de_Milo

[Virginia Jim]

Why not an ending diagonal? Would indicate a new low.
http://stockcharts.com/h-sc/ui?s=$SPX&p=60&yr=2&mn=0&dy=0&id=p89252275098&a=164155281&listNum=7&listNum=7

[Canadian Money]

No Obama Rally?

One possibility is that this bear market could end without ever forming a "large B wave". Under the rules and flexibility of the EWP this bear could take the form of a double or triple three zig zag (ABC X ABC or ABC X ABC X ABC). With this scenario, all the bear rallies may be relatively small and no larger than what we have seen to date.

CM

[Yves]

Sentiment is being compressed as in a triangle.Even with lower lows it never spiked up .Backwardation of the Volatility curve suggest more surprises ahead not behind.

Yves

[Yves]

CM, I have labelled the move from top as ABC with an intermediary X (x-y-z) and the resulting C in progress.A-B are done .Intuitively it does look like a running flat and compares well to certain Japan pattern.In effect if you are right we could get caught with an extra move down.

Yves

[Wavist]

Well I've repeated my original analysis from January on here several times. As I saw it then we had two possibilities, either a retest of the lows in wave B of 4 to be followed by wave C of 4 back up and then another large decline in 5, or alternatively a quick truncated wave 5 followed by a strong move upwards, in either:

1. Wave 4 of the decline from October 07;
2. Wave 2 to correct the entire decline, to be followed by Wave 3 down again;
3. Wave 1 of a new bull market, the three wave corrective decline from December 1999 being over.

I believe now as then that the most likely is that we are still within Wave 4, as these are the most deceptive of movements and whilst it doesn't look so happy on SPX /DJIA it is nonetheless a perfect count for the Nasdaq/NDX, ASX and Nikkei. Even if we have just completed wave 5 - in which case wave 4 formed a contracting triangle that completed back on 6th February - it remains prettier as wave 5 of 3 than larger wave 5 a la Forkoholic, especially on the Nikkei and FTSE.

Anyway wherever we are I'd say it's a pretty deadly time for taking speculative positions at the moment. If I did have to take a punt though I would expect price to move higher at least in the short-term.

[Forkoholic Serge]

Sentiment is rising ;-)
http://www.forkoholic.com/images/cpcsto033109.jpg

[Mamma Boom Boom]

Most likely, c of 2 is underway. Target 740-750.

If this is correct, 3 will instill religion.

March gave a 17% gain off my March 11 'BUY' signal.

Information that puts money in your pocket.

Disclaimer: $&)(($%)*&__&00

[Taz]

I concur with Yves at this conjecture.

The level of bullishness is without parallel in the current bear market according to my proprietary sentiment indicator which has worked very well during this bear market.

And there was only a mild level of fear at the present bottom.

Add the two together and the market is an accident waiting to happen.

To top it all off, we only have three waves down into the recent bottom here in Australia.

Our top 20 stocks may have already completed a wave 4 up via a flat.

If our top 200 stocks are completing an expanded flat then we have another 6-7% of upside before we roll over. I am open to the idea however that they may be in a wave 3 down of a ED.

A running flat is an interesting possibility. It would fool the majority of Ewers and that is exactly what is required with so many following EW these days. I have always said the efficacy of technical analysis is inversely correlated to its popularity.

I know not many people follow the Aussie market but it is a key tell that most equity markets have not bottomed.

Ignore it at your peril

Taz

[Yves]

Taz, markets like Oz and Canada are showing stronger corrective waves >>flat as opposed to running<< only because they are less diversified than US.My idea of a running flat was intuitive only because the B wave was not perfect in the daily frame but shows up great in a weekly frame.Cheers Mate and good work on the Ozzie mkt sentiment indicator.

Yves

[Taz]

Thanks Yves.

The Big Australian, BHP, has already broken last weeks lows.

With BHP accounting for circa 10% of our key index, as BHP goes so too our market.

Taz

[da bear]

DJIA 7,500 should be the key.
one way or another...

[KRG]

Yves : Great post as always. Where do you think the C will end and your intuitive target on the 5 to follow?

The credit spreads have started to compress (atleast here in India)and I believe that this is one of the forerunners for an equity boom. This is I guess obviously linked to the money velocity you had referred to above

Cheers

KRG

[Upstart]

? for you much more experienced guys than me: Can't a market become all sold out without a hard capitulation? Carl Futia thought the market was all sold out at the March low. Wouldn't an ending diagonal be one example of this?

[Yves]

KRG , the area of 5,500 looks favorable to satisfy both counts.If as you can suspect , monetary velocity does not pick up then a possible X wave again leaves room for further downside with potential bottom in aug-sep.CDS should have bounced on the recent bad plan and the negative deflation loop is not breaking down yet .

Yves

[Cornelius]

I agree Yves every time we have seen a decoupling between Credit Market and Equity Market, the one that was right was Credit, probably this time will be the same, we have seen this movie before.

[Yves]

Cornelius, the best part of the credit default should be in credit default swap.We have not touched the tip of the iceberg yet and people "feel" its the bottom.It says more to me about the lack of understanding of the size of this derivative black hole.

Yves

[Cornelius]

exactly, take a look at CDO´s, and after summer plenty of callables of lower tier 2 are joining to the party....

[Wavist]

Upstart in theory yes, but that would make this the first time in recorded history that the market has bottomed with such bullish sentiment. Wherever you look, at market breadth, put/call ratio, investor sentiment surveys, it all tells the same story - investors are more bullish today than at the market top in October 07. Whilst it's true that the strong growth has still only retraced a small part of the overall declines, sentiment today is stronger now than it has ever been in recorded history, and this indicates that the market is setting itself up for another giant dump rather than a new bull market.

[Donna Kline]

Yves -

Does your liquidity index turn bullish ONLY after x amount of days of sell off? Is time a factor? What if we go sideways for a month?

Keep us posted.

Donna

[Upstart]

Thanks very much, Wavist. And that's pretty amazing, considering what the 2007 top was like.

[Wavist]

It sure is, and a week ago breadth's 10 day MA was almost double its previous all time high!

[Yves]

Upstart, I might offer perhaps a view as to why this needs a capitulation.If you ask about a bottom without capitulation then I believe yes it is possible but only if this is a matter of wearing out market participants.This is not the case since we have been coming down extraordinarily fast.There is clearly greater forces at work and for most its not been spelled out.I am clearly nervous about geopolitical forces at work and the coming impact.

Yves

[Yves]

Donna K, time is not a factor and market technicals are not a factor either.

I have a dynamic forecasting model of monetary influences along with various players behavior.I model most action of the Fed and Treasury as well.This is why I wrote that up to recently some of those effects were not working any more and yes in regular times this would have generated a tradeable buy signal.I am most concerned with deflationary forces picking up speed and this is why my model deferred to not trade up this last move.It is a decision taken by algorithm as to the degree of risk taking.It is also designed to give you a lead time.People are often surprised I sell strenght and buy in weakness before seeing turns .

Yves

[da bear]

so it is possible that the bottom looked like the 1938 low and this rally could look like Spring 1930.

WOW! This bear market is like a bad horror film that steals all the other horror movies' ideas and plot lines...

da bear

[Tom CZ]

rpt again>

this huge US government deficit policy has to show its price in value of dollar when not in value of rate cause thats backed by FED so called QE ~ need buyer of US debt ~ policy. The fall in buck will show its price in inflation transmissed to equity prices in their denomination ~ mean their rise. It is not so long ago I suggested to pay 10y CPI exp. which was around zero and now stadnig around 1.35% - we should have much mroe space to 7-10%.

Tom CZ

[golden]

For those looking for `market capitulation' to end the bear market, you may be looking for the wrong signpost.

Capitulation tends to happen during secular bulls, not bears. Scary, sharp declines that push the `weak hands' to the sidelines.

There was no capitulation at the June 1932 low, there was no capitulation at the August 1982 low, and there is unlikely to be one when this secular bear ends in 2011. Secular bear markets end on apathy and indifference where most of the market participants have left the stage. CNBC will be a water-down version of itself by then (with a much small viewership), the WSJ will likely be in some sort of financial distress and announcing layoffs, and BARRONs/Fortune Magazine/and others will likely have 1/2 the subscribers as before.

These are just `some' of the signposts I'll be looking for.

[Howard]

Yves,
Could you explain what you mean by 'backwardation of the volatility curve'?

Thanks,

Howard B.

[Yves]

Howard , a normal curve of the VIX would show contango.The same principle you get in the oil market to describe an upward sloping forward curve in the futures market.So the price of delivery would be higher for a future price than the spot.We have now the reverse on the curve of the Vix.It would imply the market prepared for a volatility surprise.This is one indicator of my liquidity index.

Yves

[Howard]

Yves,
Thanks for the quick reply. I understand why a futures market can be in contango as the cost of carry adds to the forward prices. Buy why should the VIX follow the same rules as a physical commodity? After all, the VIX has no carrying charges.

I read the VIX backwardation differently. To me it means traders think the volatility will lessen over time, since it is lower in the future then both the nearby futures price and the cash VIX.

Howard

[Mamma Boom Boom]

>>>Most likely, c of 2 is underway.<<<

'Not' a c wave! Short term, it's a concern. Medium term, it changes nothing.
-----------------------------
Oil traders may consider looking at the short side.
-----------------------------
You heard it here first. Is that good? (he..he)

[Len Delvagio]

Martin Armstrong called the July 20 1998 top.

His model pointed to another big top Feb 24, 2007 and he was about 7.5 months early.

His model pointed to a big low on March 23, 2008 and he was about 11.5 months early.

His model predicts a top on April 20. Will he hit again? Will he be several months early? Does anybody give a s**t?

[Upstart]

Thanks Yves. And let me thank you for generously sharing your ideas here.

[golden]

Len,

Your Armstrong dates are incorrect. His 8.6 year secular tops were December 1989, July 1998, and January 2007 (all great calls). His next secular economic/equity low is around May 2011. The counter trend `bounce' concludes in this time period (Aprilish as you mention).

[Len Delvagio]

I found websites that show top at 2007.15, bottom at 2008.225, and top at 2009.3

Did Armstrong change his predictions? Are these sites wrong? The peaks and valley drawing marked with those dates appears to have been constructed by Armstrong, himself.

Are you placing any bets near the end of the month, golden?

[Yves]

Upstart , thank you !

Len , Armstrong top is 21st of April and next bottom is 13th of June 2011

Yves

[Tartan]

Neely clearly thought that a particular wave formation was unfolding last night when he issued his emergency update to short the S&P. He called off the trade in the nick of time early this morning. I actually made a few ES points getting in and out of this trade.

I am trying to figure out what he thought was occurring. Does anyone have some insight into what wave pattern he thought might unfold?

[Tartan]

Using NeoWave analysis, if the movement from the S&P 666 low to today’s high is a still unfolding ABCDE “Reverse Alternation Contracting Triangle” (as yesterday’s NeoWave.com Daily plot suggests) then we are still in wave C. Wave C will also be the high point of this pattern.

Under this interpretation A terminated at 801 and B terminated at 761. The movement from 761 could be unfolding as an Expanding Limiting Triangle as defined on page 5-41 of Mastering Elliott Wave. This interpretation would unfold as an (a) wave followed by an abcde expanding triangle as the (b) wave followed by a shortish (c) wave to finish off C for the ABC pattern from 666. Wave’s D and E would follow but both would be lower than C.

The structure would be:

(a) terminated at 821 on Mar 23

a terminated at 787 on Mar 25
b terminated at 830 on Mar 26
c terminated at 775 on Mar 30
d terminating at 845 to 850 (estimated) about Apr 3
e terminating at 750 (estimated) about Apr 7. This would also terminate (b)

(c) terminating at 820 (estimated) about Apr 9. This would also terminate C and would be a “medium term” high.

Thoughts?

[DG]

Tartan,

Expanding Triangles can't be b,c or d waves of larger triangles, according to 5-31.

Typically with Neely, if you don't know what pattern he sees, just assume it's a triangle or diametric. I was kind of surprised his initial stop was above the market's recent highs, although it could just have meant that he saw a triangle and by measuring wave c relative to wave a and that put a limit on how high wave e could go and that was his stop point. When that "wave e" found support and started moving back up so quickly early today, it got out of whack and hence his calling off the trade.

[Tartan]

DG: Thanks. I appreciate your "coaching" :-)

[DG]

Tartan,

It helps me too, because I have to go back and think about what I've read in MEW or what Neely has said on other occasions about different methods he uses.