Yves on the Greenshoot-Fed Sacred Fed Bull Died Fat and Happy

Or, how wave 4 is rolling over…

 
The obvious sometimes stands clearly. You face it and prepare for the outcome.  We stand at a juncture that would have you believe  in the coming outcome. But wait - lets take a quick journey into what seems to dominate my observations and you can determine the best course of action for yourself.

We have continually watched monetary aggregates and they are contracting. You will notice from the M2 chart divided by the monetary base a drop. This is significant and comparable to the 1930’s. The complaint would be the same as to banks sitting on a monstruous pile of cash but not lending it. The tradional behavior of the consumer to start saving instead of buying also compounds this problem. M2 decceleration cannot lead to inflation. The Fed cannot force the banks to lend and monetizing bonds will continue to aggravate the only asset  that people have en masse their household. An inflationary outcome is tantamount to financial hara kiri. The bonds vigilante will strike hard and mortgages will keep rising, killing any stabilization that is in process. The impact of the recent rates hike will be felt in the stock market in the next few months.

Given the choice to protect housing or stocks, the Fed will surely realise to go the real estate way. A liquidity trap as such is deflationary. The money base also doubled in Japan after the stock bubble collapsed and to no avail the economy kept contracting.

Are bonds finishing the C wave or are they in complete fast and furious 3rd wave?  This is the question we did pose in the article May 2nd. If the Fed gets it, they stop buying and monetizing the debt then it is a C wave.  

On the next graph, the spread of the discount rate to the rate of the long Treasury has never been so wide.If you had bought on a few occasions where the spread was wide as 4% between both, the resulting trade would be a winning one on most occasions.

Unless you are suggesting the Fed raises rates by about 2% over the next 24 months then buying treasuries would not be a great investment. On the other hand if you believe that there is little room for the Fed to move, then long bonds are an even better bet. There is a fine line that the Fed is walking and a slight tilt of strategy can undo with great dammage what they have built so far.Mild deflation is the preferred outcome and necessary one.

We have sold all of our inflation hedges that we owned for the last 2 months.We are turning to deflation trades or unwind. Possibly the greatest misunderstanding in the lift off of all markets singularly correlated is a function of investment demand and not real changes from supply/demand. Realise that all markets cannot possibly beat to the same rhythm for a prolonged time. Those correlations will unwind and support real bull market where there is cause for that.

We have held for a while our position of a rare 4th wave at this juncture. The last move up does look impulsive but is part of an ABC ABC 12345 pattern. The pattern still holds to the rules established. The implication is for a 5th finishing wave that will complete a bigger A wave down. The general area of the March low is the objective. It could be truncated or extended. I will be looking for an equivalent 3 standard deviation in sentiment measures to call the bottom if that was to occur. We are looking to short the market on the wave 2 of 5 and not before since window dressing could still be part of present activity.

The bull market ate too many greenshoots and died of natural causes.  Often bull markets roll over from their own weight.

Yves Lamoureux, Investment Advisor, Blackmont Capital Inc.
 
The opinions contained in this report are those of the author and are not necessarily those of Blackmont Capital Inc.. Every effort has been made to ensure that the contents of this document have been compiled or derived from sources believed to be reliable and contains information and opinions which are accurate and complete. However, neither the author nor BCI makes any representation or warranty, expressed or implied, in respect thereof, or takes any responsibility for any errors or omissions which may be contained herein or accepts any liability whatsoever for any loss arising from any use of or reliance on this report or its contents. BCI is an independently owned subsidiary of CI Financial. CI Financial is a Canadian owned diversified wealth management firm, publicly traded on the TSX under the symbol CIX. Blackmont Capital Inc. is a member of CIPF and IIROC.

Comments

[Hank Wernicki]

I was off for the drop on Friday, it was today

http://www.elliottfractals.com/default.asp

[EN]

Nice sell-off today. I bet Neely will label his E wave as having ended with this move down from Friday.

[Hank Wernicki]

Monday June 22nd
7:04 pm

I have a buy for the ESU9 at 889 tonight

887 Stop

2 point Risk

5/21 11:00 am 2 hour generator bottom

[Virginia Jim]

Thanks Yves, your experience is appreciated.

I've been burned on early entries before because I run the Black Swan option strategy. Its like my golf swing, I need the delay to set it up right. If you're right and I later see the light, I'll be entering on the first correction and, hopefully, VIX won't reprice away the decay I avoid by waiting. At the moment I'm short some Rydex 2X Inverse funds but largely in ultra safe fixed income (not US Treas) awaiting deflation. I'll add the options juice via my mad money when I feel the power.

But I really do like the "Puetz Crash Window" which officially begins July 1 and ends August 10 to find the final top to 4. Mssrs Taleb, Mandelbrot, and Puetz orchestrated me a highly levered (9000 cts 38 October 38 puts on QQQQs that I bought at $.14 to .32 on Sept 19 and closed $9 intrinsic at October expiration) windfall last September 29 and I've been retired and tradeless since. We'll see if they can pull that off again. But, if it were predictable, it wouldn't be a Black Swan/long tailed event, would it? May God bless the Black Sholes / normal distribution options writers. Taleb/Mandelbrot walk on water.

Good luck, Jim

[Yves]

Jim, even on secondary top with time decay the MM will lower the price substancially
coz they are convinced the uptrend resume.You will in fact pay a lower price for the same option but at a more advanced time in the rolling top process and at a point where it will accelerate down faster than time decay.thats how you squeeze them in the close to the money options

Yves

[Yves]

http://books.google.com/books?id=lQ0OEmzM9tsC&pg=PA119&lpg=PA119&dq=running+flat+elliot+wave&source=bl&ots=nqkmxM7Awh&sig=eyN3kb77s1a6jUaYuzCfyuHbyY0&hl=en&ei=_SBASuSHFNaMtgfv86iOAQ&sa=X&oi=book_result&ct=result&resnum=2

all you ever wanted to know about expanded flat , regular flat and running flat and did not know where to find it .......
Elliott wave principle
By Alfred John Frost, Robert Rougelot Prechter

look for figure 1-38 to 1-41 and in that area

Yves

[Forkoholic Serge]

>But, if it were predictable, it wouldn't be a Black Swan/long tailed event, would it?

There are no Back Swans, fractal predicts everyting. ask Hank!
:)

[Virginia Jim]

Yves, thanks, I'm reading (I've read it before many, many times, but chapters beyond #4 or 5 did not get a lot of my attention-I get dizzy). I've got several copies of EWP having it studied in grad school and a bunch of the free copies (one for every time I dropped EWI service and then re subscribed).

Fork, Mandelbrot asserted that fractal geometry was the only way to understand hidden order in chaotic non linear reality (I don't know that he has succeeded any better than anyone else). Elliot Wave is a 'living fractal' methodology that didn't get much Mandelbrot attention. I've seen Hank scarily accurate during last fall's 'disorder.' I'll attest (with regrets that I missed some of his calls) to that. My recollections of his recent calls (from what I've seen on this site) have not struck me as working out very well. You probably have a better grasp of his track record. A lot depends on the time frame in getting the parent fractal correctly identified (I think). I guess when you're in the right time frame, things might work well but when you're not, you're not. I think Taleb would say its not so much how much you think you know, its how much you actually know. He puts economists and financial analysts in the category of people who think they're experts but aren't very expert. I think I'll just appreciate my current good fortune and the ability to listen to a lot of experienced viewpoints all in the context of the very expensive lessons Mr. Market taught me over the years.

Have a great evening everyone, Jim

[anon_aka_TERA BAAP]

Wednesday at 2:15 we may see the biggest SPIKE higher that history will ever record...

The mark will be IMPRINT in bear's mind for the REST of their natural lives!

it feel GREAT being only Bull!!

HAHAHAHAH

[idiot]

Idiot.

[DG]

Wednesday at 2:15 we may see the biggest SPIKE higher that history will ever record...

Yeah, maybe.

As I remember, you showed up on this site at some point in late April. You do realize that the market has gone basically nowhere since then and that someone playing the role of an ultra-bear would have made just as much money as you claim to have made going long every dip by shorting every new high?

That fact alone makes you sound foolish.

Plus, you don't even seem to have the slightest awareness of Bernanke's situation. If he placates the stock market with stories about economic recovery, he tanks the bond market. If he props up the bond market to keep rates from exploding, he can only do so by talking down the economic prospects, which will hurt stocks. Who do you think Bernanke cares more about, the bond market or the stock market? Both of them are drowning and he's got one life preserver. Who is he going to choose?

[Mike McQuaid]

SPX daily chart, running correction B label May 11 is followed by a flat. Label the flat a wave at May 21, b at June 11 and c is still underway. Figure an even chance that this chart reverses at 879 the support of the a wave label.
Todays action tagged the lower Bollinger band and slipped under the golden cross that occured today, so the chance for bullish action is still manifest.

[Forkoholic Serge]

I'll be selling couple of my old dusty technical analysis books.
if anyone is interested send me a pm.
http://forkoholic.spaces.live.com/blog/cns!233C658FDE78D41A!700.entry

[vipul garg]

yves,
looked up figures 1.38-1.41.
didnt find anything in those flat structures.
you need to reexamine the flat.
you cannot actually count that C of your flat as an impulse ?B is way too deep for an expanded flat on that degree.and in no way can an expanded flat be directly followed by a 5th wave decline , if one has to label one.

[vipul garg]

" I think Taleb would say its not so much how much you think you know, its how much you actually know. He puts economists and financial analysts in the category of people who think they're experts but aren't very expert."

Virginia Jim,
couldnt agree with you more.(and Taleb)

[Taz]

I think the B of Yves' expanded flat is OK in terms of its dimensions.

An expanded flat or triangle are the usual patterns found in wave 4.

This is from prechter so neely followers may have something different to say

Taz

[vipul garg]

taz,
B is 1.38 of A.on that degree, it is not acceptable to have an expanded flat situation with C being 1.6 of wave A. those are not acceptable.
forget about C being not impulsive.
its behaviour, structure and logic not prechter or neely here

[Jim]

Hey Tartan, can I get a copy of the QoW as well.
address: jimoliveira2001@yahoo.ca

Thanks a bunch
Cheers

[Wavist]

I get you DG, these markets take some toll.

[Wavist]

I think Taleb would say its not so much how much you think you know, its how much you actually know. He puts economists and financial analysts in the category of people who think they're experts but aren't very expert.

And Taleb would be another perfect candidate.

[Taleb]

Up yours.

[Glenn Loser Neely.]

Who is Taleb?

Is he a terrorist?

Glenn Loser Neely

[Yves]

http://economicedge.blogspot.com/2009/06/alternate-elliott-wave-possibility.html

a little explanation of psychology of the running flat or expanded after the article

Yves

[Upstart]

Again, the rally counts complete in the DOW as a simple zigzag. Wave C began in late April and counts perfectly with alternating corrections and if you draw the trendlines from the ENDS of 1-3 and 2-4, as I believe Elliott recommended, wave v of 5 of C ended the other day right on the trendline, after 3 attempts in June to move above it. Furthermore, the decline moved below the lower trendline and returned to kiss it goodbye two days ago. Keep it simple!

[vipul garg]

yves,
running flat would have been totally acceptable.
its not a expanded flat in sp500 as labelled because that is against logic and behaviour.
when market gets into an expanded flat psychology , it does not straight away reverse ( into 5th wave decline)
so if you are labelling with expanded flat(its not a flat) , market must make a new high.
since you look very convinced that market is not going to make a new high, expanded flat in that label must not exist.

[Mamma Boom Boom]

Have all of you read Mauldin, today?

http://www.bushongbusiness.com/webbbs/index.cgi?noframes;read=18133

[Hank Wernicki]

Tuesday June 23rd
3:38 pm

Tonight's e-min trade comment :

The Fractal Conditions : THIS STOP IS CALCULATED ON A " 2 HOUR CHART "

Any other chart frequency will give a false reading

887 Stop -- intraday Low for the night traders to go Long on the ES

Breaking 887 is a " Reversal " to go Short

890 now

2 point Risk to go Long

[Hank Wernicki]

I have 30 New EWP books the originals. If anyone wants one let me know ( free )

Hank

I keep the one that Bob signed .. sorry

[Forkoholic Serge]

>Have all of you read Mauldin,

nope, stopped reading that sucker a year ago.
stopped reading period ;-)
read only TS stuff

[Thor's Hammer]

T.S. Elliott?

[Forkoholic Serge]

my brunk keyboard - TA - "S" & "A" near by ;-)

[Puravida]

Freudian slip?

Maybe Serge has always wanted to be
Pentameteroholic Serge?

Ah, maybe now we can begin...

[Mike McQuaid]

SPX running correction scenario anticipating action above 908 as a break of the downtrend line drawn from June 11 to 23. Sustained action above 908 will label June 23 as wave 2 and establish evidence the pattern is complete. The bullish trend will continue given these developments. Probably an even chance the pattern follows this description.

[Dog Whisperer]

SPX will top out midday around 912 and fall hard into close. Tough few weeks lie ahead for bulls.

[james]

Why?

[Dog Whisperer]

Don't know why it will happen.

If you're asking why *I think* it will happen, the answer is my model, which is basically regression with various class 4 CAs, predicts it.

Just started applying it to stock market last week and it is working.

[Rob]

It works for me, Dog Whisperer. The 61.8% Fibonacci retracement from Tuesday's low to 927.09 is 912.49.

[Mike McQuaid]

NDX chart posing as a large hurdle for the bearish scenario. Gapped up today after pulling back 62% of the May 26 to June 11 rally and bounced off of the 50dma plus the lower Bollinger band. This chart fits the running correction scenario off the March low.
The bears are thick yet their evidence is diminishing and getting increasingly strained.

[Dog Whisperer]

NDX will fall hard today, too, Mike. It's now 1:39 pm.

[PL]

"SPX will top out midday around 912 and fall hard into close. Tough few weeks lie ahead for bulls.

Posted by: Dog Whisperer "

Nice call

[Hank Wernicki]

$COMPQ UP 27 Points hmmmm I guess the fractal worked today :-)

Hank

[Hank Wernicki]

Jim,

1st Quarter 75% Accurate -- Performance

Hank

not bragging here ... just stating a fact

all trades are fully docomented and time stamped on a spreadsheet

[DG]

Hank,

No offense, but Madoff sent out fake trading records so detailed that no one caught him for decades doing a multi-billion dollar Ponzi scheme. Post-Madoff, the idea of documenting on a spreadsheet as some kind of verification seems naive.

Some third-party verification of your trades would be nice. Neely's got an archive and subscribers who can vouch for his trading record in real-time, so it's not as if we have to take his word for anything.

[Wow]

TERA BAAP said:
Wednesday at 2:15 we may see the biggest SPIKE higher that history will ever record...

Yup, that was unbelievable!

[hallucinating]

2:15 we may see the biggest SPIKE

are you hallucinating or did you get a bad tick in your chart?

[VirginiaJim]

Hank, congrats. Like I said, I followed some of your excellent calls last year but have caught only spotty signals this year.

Jim

[anon_aka_TERA BAAP]

you stupid bears think its funny because the market only rose 5 points today..ok, well then where's the "big CRASH" that you clowns keep saying is going to happen??

all i see is the market consolidating ABOVE 900, ABOVE both the 50dma and 200 dma, while also the golden cross 50 has crossed OVER 200!!!!

i bought some GDX on the dip to add to my positions in XOM, WFC, GS and SPY..

we go higher, this is looking just like all the other minor corrections since March 6th, and it is almost over!!

we go higher

[Forkoholic Serge]

DG,
Hank is great, his method is great, so shut up!

Comparing Hank to Madoff is so sick & stupid on your part, I just lost respect for you! Haven't u just created a blog to discuss Neo stuff? So go there!

[DG]

Serge,

Last I checked, only Yelnick has the right to ask someone to leave.

Anyway, I didn't say Hank was lying, I said I don't accept the "proof" he's offering as sufficient and that in this era when a new scam in money management is unveiled practically every day, I would advise others not to either. In the big picture, all that means is that I'm not convinced he's making 75% winning trades unless I can see something tangible.

It's like the saying, "In God we trust. All others bring data."

[John]

DG,
I think your last 2 statements were uncalled for.