Newsweek Declares Recession Over!

This rash call from Newsweek will probably make the future headlines, like the 1948 Chicago Tribune's "Dewey Beats Truman!" or the 1980 Boston Globe's "More Mush From the Wimp!" leaked internal headline on a Carter editorial.  After the dead cat bounce off the 1929 crash, the punditry from the President on down declared that recession over, too.  Yet before we declare the top in (ie Newsweek as a contrary indicator), we might wait to wait for Obama to make a "Mission Accomplished!" speech.

What the indicators Newsweek is counting on might be signaling is a W shaped drop.  We have had the first down wave of the W, and might have a slight uptick in Q4 or Q1 where GDP goes positive before we have the second down wave.  This would not be due to a sustained reversal but the stimulus payments kicking in and putting the economy momentarily on life support.  It would fit a stock market drop off an Aug or Sept high, than a seasonal rally from Nov to May riding the rising trend to GDP reports from Q3 and Q4; but then a sinking slide after a Summer of Disillusionment in 2010 as the realization kicks in that we are still in a sinking economy. 

Comments

[DG]

If it's going to be a W, it will be the kind of "W" where the middle spike up won't reach as high as the left hand side peak from which we fell and the right hand side rebound after the peak hits another bottom won't either. It'll probably be like this: l'_____ only that middle tick-mark won't be but half-way as high as the top of the l. Like Roubini says, it'll feel like a recession even after the recovery starts and it will limp along for years, for any number of reasons. I think by the end of it, the 70's will look like a golden age.

[yelnick]

DG, you are spot on. Think of a tilted downward W with a little teeny spike in the middle.

[DG]

yelnick,

This is one time I hate to be right. That's one reason I bury myself in the charts. It keeps me from thinking about the real economy. My generation (Gen X) is about to have a huge chunk of its most productive years go down the tubes. The toughest thing for a person to deal with is the feeling of being unable to be a productive member of society. With the huge unemployment numbers, a lot of people are going to be feeling that stress for a long time.

[yelnick]

DG, I understand. And if the Austrians are right, the more the govt or the Fed tries to keep the bubble going, the more they bury us in a deeper hole. Better to take the pain fast and sharply, like Reagan did in 1982, and come out of it revitalized.

[Bullion-Advisor]

I agree with the W, and I appreciate the post and comments. But I still think the previous post on China this past Saturday is the real story, and it is what's happening in China this Fall that might really grab headlines. China speculation in gold is "rampant" right now.

[DG]

yelnick,

Someone said today about Obama that if he wasn't going to stop digging, even though the country is in a hole, could he at least use a smaller shovel. A little gallows humor, I suppose.

I've been a keen follower of the demographics of this country since the early 90's and the things that have been "on the horizon" are finally here and the outcome is pretty much as expected. There are a lot of Baby Boomers out there a step away from retirement and no money saved (at year-end 2007, the median Boomer had less than $25K in a retirement account and was going to rely on home equity to get through retirement. Ooops.) and they are going to expect my generation to put up with increased taxes to raise their retirement benefits. No way, man.

It's also tough to see what can drive long-term economic growth. Nearly everything that exists in every market is a commodity or near-commodity, with a few low-volume exceptions. Lowering the cost of energy would be a good thing, but I don't know that it can drive top-line growth, it'll either boost margins or, more likely, enable companies to reduce costs to end-consumers (you know that at least one company will start a price war in each industry due to lower energy input costs and the rest will be forced to follow). I see alternative energy as more of a "let's undercut the revenue sources for oil despots" than a huge growth driver in the West, although at the margins it will drive technology and job growth in the West. Thus, I think the whole "green energy" thing is going to be a niche. A rather large one, but not a real needle-mover. It will be worth it just to see the Saudi "royal family" go back to living in tents in the desert, though.

Another, more promising, industry is medical devices and personalized medicine based on genetic engineering. But, this stuff could all get strangled in the cradle by a government takeover of health care financing. Without the ability to get compensated at a fair market rate, some of these items will be too risky to develop. And anything involving genetic information is very risky and opens up all kinds of sci-fi dystopian scenarios (I personally wouldn't mind living in GATTACA, but most people find the prospect terrifying. Pansies.)

The other thing is that we in the West need to get emerging market consumers to start consuming more. One of the problems, though, is that those emerging markets still aren't very stable, so who wants to have a house full of consumer goods if the government can change overnight and you become dispossessed? Better, as the poster above me mentions, to have a stockpile of gold that can at least retain some value if even more chaotic times come to pass, as they almost certainly will.

[vipul garg]

-- newsweek indicates a top is very imminent.
--- we should be looking at china and euro zone. euro is really gonna do something funny.

---- technically,daily charts indicate a top is near or made.we need to break ydays low.
wave strcuture badly needs a top now!!

[Bullion-Advisor]

And then the Shanghai Composite crashes, down as much as 7% an hour ago. http://www.bloomberg.com/apps/news?pid=20601087&sid=aimav8kxcYaY
Maybe we won't have to wait until the Fall to watch the bubble pop.

[Forkoholic Serge]

http://photos-g.ak.fbcdn.net/hphotos-ak-snc1/hs184.snc1/6135_132843186100_18343191100_3508286_4294292_n.jpg

[Patrick]

Echoes of D. Sornette

http://arxiv.org/abs/0907.1827v1

on Shanghai last night

[MHD]

DG
How high would the S&P have to go to scrap his current outlook? I know he has changed degrees, but when does that outlook no longer hold water?
Obama was elected because he promised hope even if reality will be much different. Ron Paul had no chance to get elected because he told the American people what the reality is, and the pain that comes with the solution. Americans had the choice of going to rehab or continue to be a crack whore with the crack provided by Obama and Benny Boy. We chose to stay on the crack. What a surprise!!
Does everybody pay the same with Obama's new health care plan? If someone who doesn't smoke, consumes 2000 calories or less per day, and gets on a treadmill for at least 30 minutes a day, pay the same as a 3 pack a day smoker who gets no exercise, and consumes 4000 calories of crap per day? If true, lets change auto insurance too! The driver who has 50 accidents and 75 tickets should not have to pay more than the Joe Blow who has no tickets and no accidents and should never lose his or her license. I'm sure this makes sense to our brillant president!
If we all started a healthy lifestyle and ended obesity and smoking, would our health care costs come under control?
The pain of not eating endless amounts of Cheetos, no smokes, and not getting the closest parking spot at Walmart is just too much for us Americans.
Our presidents solution for health care will work as good as his solution for our debt. Just print the money to pay for everything. No pain is the name of the game. It's great to live in this fantasy land of ours.

[Upstart]

When the pullback begins, could it be wave C of a triangle that began at the June high? Anything arguing against that scenario?

[Mike McQuaid]

Here's a range that may argue the scenario. $TRAN DJ Tran Index, made a March low reversal into a bull flag thru July 8 into a breakout topping the June high. Fib reverse and extend the last down wave from July 1 thru 8 and the breakout stalled at 162% at 3570 and is now pulling back in a range down to 127% at 3445. So the key is breaking that range to indicate market direction.

[Mike McQuaid]

As a laggard index XLF is stalled at June resistance (May too in this case), so what a nice test case! It's hard to imagine a market rally minus the financials. However if this laggard does beat resistance, it adds up to a strong statement.

[DG]

How high would the S&P have to go to scrap his current outlook? I know he has changed degrees, but when does that outlook no longer hold water?

Neely is adamant about new lows, but how we get there is up in the air.

[QQQQ]

hat do you make of the subtle divergence on the QQQQ?

[VG]

the commodity, euro sell off is interesting today.a harbinger of things to come .
there s a lot of views on china and bubble, but the fact remains is that it is really a 'closed' market, with information , data restricted and manufactured and hence reality hard to come by.
imo euro is the key, which is poised to go down sharply and significantly.so whether china causes it or euro zone , thats not clear but something will and put an end to the baltic index led rally in assets.

[Account Deleted]

DG wht have u been able to do with your cosmetic knowledge apart from giving lectures on this forum and fooling people around.We go into the mkt to make money and not to become lectureres..So mind your tongue before u spill out any more ELLIOT GARBAGE....The length of messages u post suggests that u r left useless by this rally in the mkts with your outdated irrelevant theory. Keep on supporting the theory and keep on getting beaten by the mkt..

[yelnick]

Fork, thanks, I will use the larger picture!

[DG]

VB,

your outdated irrelevant theory.

Can you please tell me what has supplanted wave theory? You seem to have some super-secret key to making money in the markets that you are not sharing with anyone. You do realize that logically for something to be "outdated" and "irrelevant", something else has to have come along after the thing that is outdated and that something else must be relevant to the task at hand, i.e. trading.

So, are you finally going to put up or shut up? Or are you just going to keep sniping like a little puppy biting at a man's heels?

[DG]

DG wht have u been able to do with your cosmetic knowledge apart from giving lectures on this forum and fooling people around.

Who exactly am I "fooling around"? Yelnick posted something about the economic landscape and I responded with some thoughts. If you disagree with those thoughts, say so and why, otherwise stop responding to my posts, you little weirdo.

[VB. If you do not like what you see, GO AWAY.]

>ELLIOT GARBAGE....

VB

If you do not like what you see, just GO AWAY.

You are the only GARBAGE...
mumbling GARBAGE...
mumbling GARBAGE...

[Account Deleted]

DG !!

Who is sick ...U or Me.....U have been constantly wrong in your calls on the mkt using your IDIOT WAVE theory.....Just using superior ridiculing vocab doesnt make u an expeert....It seems u r mentally SICK....and have all the time in the world to waste on a message board.....

[Account Deleted]

DG !!

Todays DOW ans DNP move is one more SLAP on your UGLY Face.....Keep on giving sell calls and mkt will keep on slapping u to the extent that u will then be ashamed to even speak....

[Account Deleted]

DG !!

Todays DOW and SNP move is one more SLAP on your UGLY Face.....Keep on giving sell calls and mkt will keep on slapping u to the extent that u will then be ashamed to even speak....But i knw u shameless fellow will still keep on giving some or the other excuse to justify the upmove...ELLIOT WAVE theory is just a POST MORTEM..Trying to fit the logic that is least wrong....By using your sickening DOOMS Day Scenario induced by some equally sick WAVE counts u have missed an almost 50 % rally in the mkts....but u will still justify it using some or the other sick wave reason...and with a false promise of making the most by taking part in the ensuing fall (which may or may not materialise..

If forever I am going to utter that u will die someday...One day I will be right..Becos someday everyone is destined to die..So whts the big deal in then constantly projecting a fall in the mkts.

Instead shutup and try to work hard to make the most of these moves in the mkt than just living in hopes of a Elusive fall in the mkt.....

[DG]

VB you ignorant fool, this is what I said three days ago:

Jim,

Obviously, you did a lot of work on that. I have a price target on the SPX around the 1050 area in the very short-term and that should cap the rally from the March lows. Time-wise, this should happen very quickly. This is based on my read of current SPX action using NeoWave concepts and methods. I expect new lows beyond that.

Posted by: DG | Monday, July 27, 2009 at 08:12 PM

Thanks for your concern about my mental health, my time management and my work ethic. I really appreciate it.

[VB - obsessed hostalities, terrorist mentality]

VB

you do not belong here.
Your obsessed hostilities qualify for terrorist mentality.

Go fight with Pakistan, instead.

[Account Deleted]

DG !!

Whts the use of that theory that makes u back track on whtever u say in just about few days...may be sometimes even few hours.

Wht u ellioticians need to understand is that Market is SUPREME.But u guys live in a fall elusion that its ur Waves that decide the future outcome.

NEELY in this last report mentioned about Clients calling him and sending him mails asking for a scenario "where wht if SNP956 would be crossed(meaning to say that wht if I went wrong)." This is the superiority complex that NEELY is living in.He thinks he is bigger than the mkt.He thinks mkt has to do wht he thinks it should be doing and that he can never be wrong.Who the hell does he think he is.It is this attitude which made Pretcher face hardships in 80s and I am sure will make NEELY grind to dust in the 10s..

I assure this wave theory will do u damage which will be beyond repair.Still there is time mend your ways.Becos u yourself must be knwing whether u lost money or made money in this rise with a preset notion of a FALL.

Rest GOD can only save u !! MAY god Bless u !!df

[VB - I sympathize you. but you are a shit.]

VB

I do not even read your worthless posting.

You probably were born with poor, low class, and have built hatred to anyone better than you are.

I sympathize you. but you are a shit.

[DG]

VB,

I think you have some deep animosity toward trading in general. I don't understand it, nor do I care to understand it. You need to realize that this is a trading/forecasting blog, for crying out loud. There are a lot of people using a lot of different methods, trying to get an edge on the markets. You rant and rave about who even knows what, but the FACT of the matter is that Neely does beat the market. If there's a reason why I don't take any heed of your continuous and unsolicited advice, that's it. Please, go get your kicks somewhere else.

[DG]

MAY god Bless u !!

One way I would know God is blessing me is if you didn't post any more messages to me.

[DG]

I do appreciate the "God bless" sentiment, but other than that, you really are quite annoying and I don't think you have the slightest idea what trading is and the risks it involves. Risks that are willingly taken on by traders. If you notice, almost every post I make about actual trade opportunities has a price/time condition that says "if this price is reached by this time, I am wrong". That is the best a trader can do under conditions of uncertainty.

Trading with wave theory is like a scientist who is observing nature and trying to generate a hypothesis about what the general rule underlying the observations is. When he thinks he understand the general rule, he then looks for conditions to test his understanding. He puts down a bright line in the sand and says, "If this happens, my understanding of the general rule is either wrong or needs to be refined." That is what a trade is, an experiment designed to test a hypothesis about the general rules underlying market price action. If you, or anyone else, take it as something else, that is YOUR problem, not mine.

If you don't understand what I am saying, read this post again until you do. If you disagree and have a logical reason why, address another post to me with your reasoning. If you don't, just don't bother me any more.

[Account Deleted]

VB - obsessed hostalities, terrorist mentality

My dear friend the fact of matter is USA is the mother of terrorism and its most infamous child is OSAMA BIN LADEN.so Look before u leap

[DG]

VB,

Here's another post of mine from April:

Tom,
On my "hourly" (actually 5 periods of 78 minutes of intraday cash prices) I'm looking at the action since last Friday's high to the late day low on the 23rd as a triangle X-wave of a formation that started on April 8th and ended on April 17th. On the SPY, the triangle ended at 84.15 and the length of the prior rally was 6 SPY points, leading to a target of ~90-93 SPY (1 to 1.618 times the prior rally, since we ended the correction of the rally at a higher point than the low of the correction). What I like about this count is that we got exactly the "thrust" that's to be expected out of that triangle, up to approximately the starting point of the triangle at last Friday's high. By the end of the cash session, the thrust had weakened, though, so anyone looking to trade it short can do so with a stop at yesterday's high or if you're looking to go long, go long a break above that high and look to exit near 90, with a stop at 86.11 SPY. If that triangle I'm seeing is an X-wave of the entire rally since April 1st, which is definitely possible since at the low point of the triangle we'd retraced ~50% of that rally, the target for the continuation of the rally would then be about 99 SPY, which fits Neely's call for a rally to 950-1000, which I think is back in effect, even though he doesn't realize it yet because he doesn't keep intraday charts so he won't have seen that triangle.
Posted by: DG | Saturday, April 25, 2009 at 09:36 AM

[Al from Oz]

How do you avoid Bull Traps and for that matter Bear Traps.
Al from Oz