The Trader Abides

 "The Dude Abides"
 - Jeff Bridges, The Big Lebowski

The market hasn't made much progress since it touched Sp1120 over three months ago. This can indicate a slow topping process, which is consistent with declining volume, although volume should increase at the top. Sometimes the best move is patience. The Trader Abides.

Do our pundits abide? 

Tony C has gone bullish: "This market is certainly not looking bearish at this time." 

Neely has changed his count - a major change. He used to start the current wave from the Nov bottom in 2008, and now he moves it to the Mar low in 2009. He used to think we would crush through the Mar levels; now he indicates that level will hold fo a while. He made a brave call years ago that the 1987 low would not be revisited in our lifetimes, but is not yet that strong on this call. He still expects an imminent drop, and continues to short (and get stopped out), but not to test much more than the July low in the Hope Rally.

The STU sees divergences. The Dow remains below its Jan19 top, and has begun fading while the S&P continues to meander up. The Transports have exceeded their Jan high - a developing divergence under Dow Theory. The Naz has continued to rise, but they explain that away given recent history:

• In 2000, Dow topped on Jan14, Naz waited until Mar24
• In 2007, Dow topped on Oct11, the Naz waited until Oct31

I remain unconvinced. If the Dow and S&P head above their Jan levels, which the S&P is a gnat's breath away from, the divergences abate, not abide. 

Back in Nov 2009 a number of pundits including the STU claimed we were in a topping process, but it seemed premature to call it. At that time I thought we had more to go, and noted that usually at major turns volume increases as stocks rotate from bulls to bears (or the other way). We didn't see it then, nor now. I also remember back in 2006 seeing similar calls, right before we took off to all-time highs. 

In other words, this corrective rally can continue to amble up on modest volume. As we really approach the top, volume and activity should increase, as stocks distribute. 

I jumped down the Elliott Rabbit Hole right before the Jan top to try to figure out where the Hope Rally would end. My estimates were in the range of Sp1158-1170. In terms of time, I thought it would end in late Jan to early Feb, and it topped pretty much at the beginning of that range. Since we seem destined to exceed in all indexes (except maybe the Dow), here are a few timing considerations:

1. Major turns have occurred around equinoxes, which points to Mar19 (Fri) or 22 (Mon)
2. Gann liked both one year anniversaries, and we are at the birthday of the Hope Rally, as well as turns around equinoxes, which point to the next two weeks
3. A triple top formation would suggest a drop now in the S&P, or maybe a slight break above 1150 and then a drop, followed by a final runup to the 1158-70 range. If it continues at the pace of the move since early Feb, this would put it about 12-15 days out, or also in the equinox range.

Carl Futia is using his box technique to give us another cut at timing and level. We hit the top of his box early (more than 25% before the end), and hence he expects some sort of drop before we shoot above the box, but comments that the emini may first run to 1156 before reversing. If you count his days, this drop then rebound is not more than a week and a bit out, putting the top (if at my 1158-1170 range, not the 1200 target of Carl) about 10-15 days out, or into the equinox again:

Comments

[Rick]

Take a look at Dow & S&P from Sept 1976 through January 1977. Looks similar to the last 2 months? An inverted expanded flat (double top). Of interest both periods are about 10 years after the overall trailing PE's peaked in 1966 and 1999.

[Michael]

The "Triple-Witch" expiration next Friday on the 19th could very well provide the high volume "churn" needed for a top. The typical expiration "surge" and position "unwinds" by futures and options stock-index arbitrageurs usually begin on the Wednesday of the week of expiration. That has been the typical historical pattern.

Stay tuned!

[Mamma Boom Boom]

>Neely has changed his count - a major change.<

He is now entering the dark hallway, and soon will turn left into the 'Assimilation Room'.

[cloudslicer]

I did a little analysis on the Nikkei:

http://cloudslicer.blogspot.com/2010/03/quick-look-at-nikkei-long-wave.html

To me this represents the best risk/reward ratio of any major index.

The way I would play a breakout is with a closed end fund JEQ that is trading as a deep discount to NAV.

What do you guys think?

[Francisco Carvalho]

Hey man how are u...

i now that not many people is seeing this but my top is round and is a failed triangle... we will start to make D and miss E... we started A in 1029... till 1150 (corrective).... when everyone expected impulsive wave i told that cenario just could finished in 1070.... than to 1045 was corrective wave B.... we finished yesterday or will finished today C (need to be under 1150)...

i expect some drops from this level to 1080 (D) area or so and when every one expect (the bears expect continuing falls... and bulls expect new highs!!!) something diferent... market turns and will make the end of P2 or B in 1115/20 area (E)...

u can see my charts on my blog.... and the relation with vix (will go up)... and yields (down, price up)...

just my thoghts.... i have your blog in my one since i opened 2 months ago..!!!

http://creepytechnicalanalysis.blogspot.com/

great job man!!!

cheers
creepy

[DG]

This may cause some heads to explode, but I disagree pretty strongly with Neely's statement that the March lows won't be broken, based on structural indications of strength/weakness inherent in his wave count, Degree and pattern size and Progress Label placement requirement rules from "Mastering Elliott Wave".

Time will tell.

[Roger D.]

The Historic Crash of generations awaits us and nobody can see it coming. That's perfect cause history shows that people never do see a severely overvalued market. Stocks have gone up for 12 to 14 months with only 1 9 pct correction and that was the initial break.

"In the land of the blind the one-eyed man is king"

[Think You're Smart?]

Wrong. Most of us see it coming, Roger D. And none of us is rich yet for our insight. Be careful out there. It might take a few decades.

[Roger D.]

"Wrong. Most of us see it coming, Roger D. And none of us is rich yet for our insight. Be careful out there. It might take a few decades."

A example of the blindess and common thought of the day.

When this market breaks and it will,they always do. The momo's and overtly stupid mutual fund managers will stampede for the door,leaving dead trumpetations of the new bull market in it's wake,

Things never change.

Roger

[Simpleton]

I'm with you Roger. Any suggestion as to how to trade the stampede so that I don't lose my arse in the meantime?

[I'd say a little humility is in order]

I don't know about smart, but one would think that a guy who was proclaiming up and down that the January top was "the top", posting chart after chart of what he said were "impulsive" waves down and that we were all "blind" not to see it would have learned a little something from that experience. Well, maybe he didn't, but if he was trading that count, his account balance did.

[Jay]

The above boxed scenario would coincide with what appears to be legs D and E of a 4th wave triangle on the Dollar Index. Considering that both waves 1 and 3 were relatively equal in size, this could portend an extended 5th wave. There is also in Inverted Head and Shoulders forming on the DX, with a projection to just below March's high.

[Hockthefarm]

Yelnick:

"Neely has changed his count - a major change. He used to start the current wave from the Nov bottom in 2008, and now he moves it to the Mar low in 2009. He used to think we would crush through the Mar levels; now he indicates that level will hold fo a while. He made a brave call years ago that the 1987 low would not be revisited in our lifetimes, but is not yet that strong on this call. He still expects an imminent drop, and continues to short (and get stopped out), but not to test much more than the July low in the Hope Rally."

The hard part for a rational person to understand is how anyone could listen with their money to what Neely is saying today, when he's admitted that what he said yesterday is totally false.

And it is not as if he modified his position. Going from crush the March lows to test the july lows speaks volumes about the predictive quality of his work don't you think. Fine, change your view when new information arrives, but let's start to focus on the value of what he does. The guy has nothing on the Global Warming Singers imo.

Hock

[Mamma Boom Boom]

>I disagree pretty strongly with Neely's statement that the March lows won't be broken<

Likewise! Wave counting is not a strong suit of mine, but I don't think it needs to be. If you truly understand the fundamentals, then you will agree that this chart says it all:

http://www.imagebam.com/image/b2a41171586319

And I'm really getting very comfortable in this crowd.

[DG]

Hock,

I don't know if all this will post, but here are ALL of Neely's "public alerts" over the past 4 years, along with a note from me on the outcome of each one. You can go back to each chart and check my comments for yourself if you like. His "big picture" turn calls run at about 75% accuracy. Pulling one, two or even three calls out after they fail and saying that the entire method is a failure is not valid analysis. Again, I don't agree with the current call, but I know going in that the odds are actually against me being right (to the extent that anything like "odds" can be formulated in the market).

March 6, 2006
Dear NEoWave Fan,

If you have interest in the EURO currency, for the first time in more than a year, it is approaching a MAJOR turning point. Consequently, an important NEoWave buy signal should be generated within the next few weeks.

Low-risk/high-potential opportunities are rare in the markets, but NEoWave theory excels at identifying such points when they occur.

RESULT: Euro has not closed below the low of the week of March 6, 2006 again since this email was sent.

May 12, 2006
Dear NEoWave Customers and Fans,

For many weeks I've been warning about a MAJOR top in the U.S. stock market. The size and speed of this week's decline was the event I've been waiting for to confirm the end of the NEoWave Diametric formation starting in early 2003.

This means the S&P has embarked on a 1-2 year bear market consolidation. The early phases of this pattern should present some spectacular trading opportunities. Our clients are already Short the S&P from as high as 1319.75 June.

RESULT: S&P cash declined from 1326 to 1219. Clearly this was not a 1-2 year bear market consolidation, but it was still a winning trade.

June 13, 2006
All NEoWave GOLD customers have been well prepared for this month's collapse in Gold. Customers of the TRADING service have been Short for the last $40, with much more expected (the latest update is attached).

Even if you have missed the current decline, volatility should be extreme for a long while, allowing for a great trading environment.

RESULT: Looks like a mixed bag. This initial trade was probably profitable, but the volatility he forecasted doesn’t really seem to have materialized. I wasn’t trading Gold at the time, so I can’t say for sure.

June 16, 2006
Following more than a month of serious stock market decline, the media is now trying to convince you "the worst is over - everything is fine."

NEoWave theory tells us NOTHING could be further from the truth. The S&P is preparing for a decline even larger than that seen in May! But, as always, to take advantage of such situations, TIMING, money management and stop placement are crucial.

The NEoWave S&P TRADING service has so far successfully guided customers through the S&P's first month of decline. We are now gearing up for the next phase of this 1-2 year bear market. If you want to make sure you are on board and not duped by the media, make sure to sign up immediately. As I warned about Gold recently (right before its massive collapse), there is precious little time to waste.

RESULT: Not an accurate forecast. The market bounced around a bit after this notice went out, so I can’t see how subscribers could have lost a lot.

July 19, 2006
After accurately warning you months ago about a significant market decline on the horizon, conditions are changing dramatically. Following a massive increase in world tension, wave structure (surprisingly) is now implying a MAJOR MARKET ADVANCE could be in the works.

RESULT: Turned out to be the low for almost two years. A great example of Neely changing his mind to go with the flow of the market.

January 31, 2007
PUBLIC NOTICE: A few times a year I warn both customers and the general public of big market events on the horizon. I see two such events about to occur in Gold and the S&P. In Gold, possibly the biggest buying event of the year is just 1-3 weeks away; but, as always, timing, entry and stop-placement is everything. In the S&P, unlike most who are worried this advance is long-overdue for a correction, both wave structure and NEELY RIVER theory tell me the S&P is on the verge of its most powerful, persistent advance of the year. Again, entering at the wrong time, with the wrong stop, and you could sit back and watch the entire move get away from you. If you want to take advantage of these two looming events, I highly recommend you subscribe to both the NEoWave TRADING service on Gold and the S&P for at least the next few months. These are two events you don't want to miss. Sincerely, Glenn Neely NEoWave, Inc.

RESULT: This is the one that I consider a fairly big miss on the S&P. The advance came after the quick drop in February/March. Gold really didn’t do much, either, at least not in the short term.

February 27, 2007
ALL S&P TRADING AND FORECASTING CUSTOMERS

Today's decline in the S&P is the first really large drop we have missed in probably 6 or more years. Since it is occurring at a time completely unexpected, I'm suspicious of its cause and implications. Before I have the proper time to reconsider wave structure, my immediate assumptions is this is due to one of the following:

1. The news out of China could have had a similar impact on the U.S. markets that hurricane Andrew did back in August 1992. The Friday prior to Andrew, no one knew what was coming; by Monday morning, Andrew had caused $26 billion in damage. The opening of the markets that morning caused one of the most bizarre, structural detachments I have ever seen. The decline was structurally unexplainable for weeks. The markets finally had to regroup and things got back to normal.

2. Today's decline, due to its size and speed, is the start of a NEW multi-month bear market (I give this choice the highest probability), which means last week's high is the true end of large wave-A (not the high back in late October) and wave-B has just begun.

3. Today's decline is the e-leg of an Expanding Triangle, which typically creates a panic event, but has been highly exaggerated due to the plethora of bad, national and international news (some surprising, some not).

Please give me until tomorrow's regular Trading updates to decide which is most likely the case.

Sincerely,
Glenn Neely
NEoWave, Inc.

RESULT: Didn’t turn out to be a multi-month bear market. He ended up making a few attempts to short and catch a renewed decline. His Forecasting didn’t really get back on track until the Fall. It would be interesting to see the Trading results from the months of March through October 2007, to see how well he managed the fact that his forecasts were off.

May 11, 2007
MAJOR EVENT ON THE HORIZON
For over a year, my analysis on the Euro has been right on. For the first time since February 2006, a major pattern is about to conclude, producing the largest move we have seen in the Euro in years.

RESULT: Although it isn’t clear from the e-mail, Neely believed that the Euro was topping in a wave-5. That was incorrect. He later did a “local progress label” change and turned wave-5 into wave-3. Again, it would be interesting to see the trade records in detail from this time period.

July 18, 2007
For subscribers of the NEoWave GOLD TRADING service, July has been a very good month! Long from near the lows of the year, and with substantial profits locked in, Gold continues to move higher (as expected). To show you what we've been up to, the latest NEoWave Gold TRADING update is attached.

There is MUCH more action expected from this market over the next few months

RESULT: A huge move up in gold followed, although after a bit of a slow stretch.

September 6, 2007
A little more than a month ago, I warned you that the GOLD market was preparing for a MAJOR advance. The reason for that perspective was based on a clear, Contracting Triangle pattern starting at the high in mid 2006. From a structural standpoint, nearly every piece of this pattern is complete, allowing GOLD to begin its post-pattern "thrust" phase at any time. Based on the size of wave-a of the Triangle (see rectangle), it tells us GOLD will advance more than $150 over the next 3 months!

Current NEoWave GOLD Trading customers are Long Gold from about $20 lower with a locked in profit. But, there is MUCH more to come.

RESULT: Much better timing and a huge move in gold that really followed-through.

October 15, 2007
The last time I publicly warned about Gold's upside potential was August 14 - two days before its lowest point of the year! Since then, Gold has rallied more than $110!

Despite the magnitude of its advance, NEoWave theory tells me Gold is on the verge of ANOTHER, LARGE and even faster advance.

RESULT: This was pretty much the beginning of the rally to above $1000, so Neely was very accurate with this call.

October 29, 2007
WARNING: The S&P's next big decline WILL NOT be retraced, but will lead to many more new lows!

As most of you know, my long-term stock market perspective has been bullish the last 5 years. Until recently, I saw no reason to change my mind. Unfortunately, recent market action is warning (for the first time in 7 years!) that a major top could be forming. As one of the only wave theory based services in the world to have been BULLISH during the early 80's, bearish right before the 1987 stock market crash, BULLISH just months after the 1987 stock market crash low, BEARISH at the 2000 high and BULLISH after the 2002 low, I highly recommend you take this warning seriously.

RESULT: 2 days later, the S&P hit 1552 and has not exceeded it since.

December 13, 2007
During the SUMMER, I repeatedly warned you of the MAJOR advance about to begin in GOLD. Subscribers to the NEoWave GOLD Trading service expected a $200 rally within a few months! As 2007 comes to end, Gold's explosive $200 advance is now history!

If you were a NEoWave subscriber back then, you made a killing on that advance. As a matter of fact, the last time I stayed in New York, one of my good customers invited me to his penthouse suite overlooking Central Park for a "secret" meeting. While there, he handed me a $10,000 check as a "Thank You" for helping him make $700,000 trading in 2007!

So, what's next? Well, GOLD is about to make another BIG MOVE, but this time I'm not going to tell you the direction.

RESULT: Looking at the charts from that timeframe, Neely was clearly looking for gold to go up and was definitely accurate.

January 18, 2008
THE BULL MARKET IS OVER!!!

With today's decline I can finally confirm what I have been warning about for at least 6 months, that the 5-year bull market in the S&P (from 2002's low) is finally over! Monday, January 14, 2008 began a new 4-6 year BEAR MARKET! Maximum downside potential is not clear, but over the next few years, the cash S&P will easily break 1000!

From the above, we can reasonably assume the U.S. will be in a protracted recession. As multiple financial bubbles of the last 1-2 decades unwind, it will seriously impact our economy. Not great news, but better to be prepared than be in the dark.

Next week, to get Weekly and Monthly counts in sync, ALL NEoWave S&P Forecasting customers will get updated charts with an uncharacteristic mid-month release.

Have a great weekend.

Sincerely,
Glenn Neely
NEoWave, Inc.

RESULT: The market drifted a bit higher over the next few months, but basically Neely was correct.

February 27, 2008
EURO CURRENCY NEWS

Over the last couple of weeks, the Euro currency has exploded upward. Today it reached its highest level ever, exceeding 1.5000 to the U.S. dollar for the first time ever!

NEoWave EURO Trading customers have been LONG this wild market, exiting this week and netting over $5400 per contract! I've even attached the most recent NEoWave Euro TRADING service so you can see what we have been doing.

The NEXT event in the Euro is expected to be even more dramatic.

RESULT: Neely was definitely early, but his count that had the Euro topping (he was looking for a top just over 1.50 and the Euro went on a bit higher, obviously), was accurate.

March 24, 2008
As a public service, on many past occasions I have issued general announcements about major market turns in the S&P, Notes, the Euro and Gold.

Today's announcement is on GOLD. Following last week's massive, $130 collapse, Gold has given us EXACTLY the move required top confirm the bull market is OVER!

As usual, with any major market call that is contrary to the public's belief system, this will come as a shock and be immediately rejected by the majority. But, there is no denying Gold has experienced its largest, fastest decline in over 10 years, which virtually guarantees a multi-year correction has begun.

If you want to be prepared for years of DEFLATION, not inflation, and you want to benefit from a rising dollar and falling Gold market, make sure to join before it is too late.

RESULT: Gold still has not exceeded that high, although Neely has now changed his count.

April 3, 2008
In mid January I announced "THE BULL MARKET IS OVER." Since then, the S&P has consolidated in a wild range for more than 2 months. The amazing part is that an increasing number of professionals on TV are talking about the "bargains" to be had. Many also seem to believe January's low (now that it has been "tested) is the bottom of the bear market.

According to NEoWave, this bear market has only just begun! There is so much downside to go that it actually scares me to look at monthly wave charts. Without question, this is the most bearish I have been on the U.S. stock market and economy in my 25 year career. NEoWave structural conditions are so bad that a U.S., or even global, financial collapse is likely within the next 6-18 months.

The last time I was bearish on the U.S. stock market was 8 years ago at the highs of the year 2000. NO ONE believed me at that time, but this time around more are willing to listen. Why? In 2000, at the very start of the bear market, optimism is always high and fundamentals are rosy. Now, 2/3's of the way through this 13 year bear market, psychology has shifted significantly, so the bearish case seems more believable. But, what most people don't realize is how much worse fundamentals (and psychology) will get. Most believe THIS is the bad period. In the not too distant future, we will look back at this "credit crisis" as the good ole days!

Based on how markets and psychology work, the optimism the U.S. public had at the highs in 2000 will be met with an equal level of pessimism near the future low of 2010 to 2012. We've seen how quickly Bear Stearns, a major U.S. corporation, can go from "healthy" to bankrupt. A similar situation is about to occur for the entire U.S. financial system.

Long-term subscribers know that, unlike many of my competitors, I've been mostly bullish and optimistic on the U.S. stock market and economy for most of the last 25 years. Only at the high in 1987, the high in 2000 and the high in 2007-2008 did I have any intermediate-term bearish view. But, this time around I'm more concerned than I have ever been about the U.S. economy and stock market.

RESULT: Again, the market drifted up for a while more, but the entire prediction has come through pretty closely to reality over the past 14-15 months.

May 1, 2008
On March 24, 2008, I released a "public notice" warning "The BULL market in GOLD is OVER"! As usual, many were skeptical and some even ridiculed me for my opinion. But, after watching Gold's bullish sentiment hover in the 90% range for months and months (the longest period I've ever witnessed), it was obvious Gold was in a mania. In March, after dropping almost $130 in 4 days (and producing the largest, fastest decline in a decade), it was a safe bet to assume a new, multi-year BEAR market had begun.

As of today (May 1, 2008), Gold has dropped nearly $200 off its all-time high! This is not exactly the scenario Gold bugs were expecting, especially those silly enough to bet a million dollars on the idea the bull market would continue for years!

Based on Gold's new trend, we should not worry about inflation, but instead about DEFLATION - something most do not think is possible and that virtually no one reading this has any experience with. The coming deflation will devastate the U.S. economy and bring the financial and real estate market's to their knees. At such rare times the ONLY safe place is cash - a financial stance we have been trained to avoid all of our lives.

For those who have followed me for the last 25 years, you know I'm far from a sensationalist - quite the contrary, I've been mostly bullish on the U.S. stock market for most of my entire career. Therefore, I hope you take my warning seriously and prepare for the coming storm.

Good luck,
Glenn Neely

RESULT: Gold rose a bit more and then went down nicely into the Fall and talk about deflation definitely became more prominent.

October 9, 2008
As early as October of last year, I warned customers that our long-held, upside target for the U.S. stock market had been reached and that a top was looming. I maintained that outlook throughout early 2008. Then, in mid January, I specifically mapped out the S&P's price action for the next 4 years (see attachment). That Monthly S&P chart gave two scenarios - a milder, "green" scenario and a more dramatic, "crash" scenario in red.

I'm writing to you this evening to report, unfortunately, that the more devastating "red" scenario is now in effect. No matter how or when the S&P goes about breaking 2002's low, the odds are high it will bottom within 50 points of 600! That requires another 33% decline from current levels, so we are FAR from being safe and no matter how much the S&P rallies over the next few days or weeks, there is much more to come later this year or in 2009.

RESULT: Huge market crash and volatility.

January 6, 2009
A new president will soon be sworn into office, markets are recovering and there is an emerging optimism that the worst may be over. I'd be so happy if that were true. NEoWave structure, unfortunately, tells me the worst is just about to begin. Within less than two months (it could be as soon as a few weeks or even less), the S&P should embark on one of its most violent, scary declines in market history. Wave structure currently suggests a 50% decline (from current levels) is possible in 1-2 months! The markets are not prepared for this; the world is not prepared for this, but we will have to deal with it. The only way this will not occur is if the cash S&P is able to exceed 1006 before breaking last year's low. If 1006 is exceeded, then the future is not clear and I will have no opinion for a while. As long as 1006 is not exceeded, the outlook is dire.

As most of you know, I turned officially bearish on the U.S. stock market in mid January 2008. From that point forward, the S&P moved almost exactly as expected all year. Unlike the last 12 months, the next 12 months will be the most treacherous we've ever seen. The only good news I have to report is that, after the big drop, the bear market will be over; but, by then, no one will believe me and the majority of the public will no longer be interested in the stock market. Mutual fund redemptions will reach historic levels - within 1-2 years, financial business and radio shows will start to go off the air and the public's disgust with Wall Street will be so high that a pandemic of law suits will breakout.

I do not like being the purveyor of bad news, but wave structure tells me 2008 was just the warm-up for what's coming. Please do everything you can to prepare for this major, financial storm.

RESULT: Market was down about 30% over the next two months.

April 30, 2009
In January of 2008, I proclaimed "The Bull Market is Over." Few believed, but 16 months later, it is obvious that call was right on target. In the next few weeks, the S&P is likely to SOAR upward, convincing most the Bear market is over. Oh how I wish that were true. NEoWave structure (an advanced, logical form of Elliott Wave) tells us something very different. What it indicates is almost impossible to believe and will shock nearly everyone, causing most to jump back into the market at exactly the wrong time.

This will be the last, great trading opportunity of this decade (and maybe the next), so you do not want to miss it. The NEoWave S&P TRADING service not only caught nearly every major move in the S&P during 2008, but as recently as this month it was rated by TIMER DIGEST to be in the TOP 3 most profitable in all 3 categories (last 3 months, 6 months and 12 months). Preparation is key to surviving the coming turbulence.

RESULT: Neely got the “soar upward” part correct, as the S&P went up about 14% over the next month and a half. Prediction of a resumption of the bear market has not been accurate.

June 17, 2009
In a public-service statement released today, Glenn Neely announced this prediction: The S&P has formed a major top in June, which will be followed by a large decline, eventually pushing the stock market to record lows for the decade.

In the press release, Glenn explains: "According to NEoWave, a correction began at last October's low; the March-June rally is the final leg of that correction. The March-June rally is now ending, allowing the bear market to resume. During the next six months, the S&P will decline 50% or more, breaking well below 500!"

Click to read the full press release: http://www.prweb.com/releases/2009/06/prweb2537224.htm

Patrice Rhoades-Baum
NEoWave Marketing & Public Relations

RESULT: Inaccurate forecast and subsequent attempts to short have not been profitable.

[Hockthefarm]

Maybe Andy's right:

Dress Rehearsal

February 1, 2010

By Andy Xie

The first decade of the 21st century ended with a near-death experience. But financial markets that collapsed in 2008 have roared back in the decade's closing year, with Time magazine naming Ben Bernanke "Man of the Year" for "saving" the American and global economies. The mood symbolizes the `free lunch forever'ethos of the decade-long party that crashed and burned, only to be bailed out to party again. Bernanke is viewed as a savior because no one wants to take responsibility for what happened and wishes Bernanke could erase the past.

The magic ingredient for resuscitating the financial markets and the world economy has been trillions of dollars of bailouts. That money, not a better economic future, saved the financial markets. It has led to an emerging markets bubble that is supporting the global economy. It will take time for the money to become inflation, but when it does it will show the true cost of the crisis. With the world economy still not structured for another growth cycle, stagflation may stalk the world for a decade.

The two decades following the fall of the Berlin Wall will be remembered as a gilded age. After the ideological struggle of the Cold War, the world embraced globalization and making money in any way possible. The pursuit of profit became the most powerful force shaping the world. Factories were moved to wherever wages and environmental standards were lowest. Local neighborhood shops were put out of business by superstores on the outskirts of towns. Wherever regulation stood in the way, deregulation took its place in the name of efficiency.

This relentless cost-cutting has meant a rising share of income for capital and a declining one for labor. If this trend is left unchecked, deflation will follow to destroy returns for capital, as working consumers have less income to buy the abundant products that capital produces.

Financial capitalism, though, extended the profits firms were making. By shifting capital into paper assets, it killed two birds with one stone. Workers could support their consumption by borrowing against asset appreciation, supporting the returns on productive assets. Capitalists could deploy their surpluses into paper assets, indirectly lending to consumers, rather than physical assets that would hamper returns. This happy combination continued to shift income from labor to capital. The boom laid the seeds for its own destruction. The capitalists were unknowingly paying for their profits by lending to consumers with overvalued paper assets as collateral.

Two decades of income shifting to capital and asset inflation came to a halt last year when derivatives were exposed as frauds rather than ingenious designs that reduced risk to capitalists with no cost. The lower level of consumption in the future will significantly lower capital's returns. And without asset appreciation to supplement lower wages, workers will demand higher pay. Contrary to the popular belief that a weak economy means low inflation, the opposite will occur this time.

The right response to this crisis would have been to nationalize failing financial institutions, restrict speculation with implicit or explicit government guaranteed funding, subsidize employment, and expand unemployment benefits. Capital mis-pricing is the root cause of the serial bubble phenomenon. Reforms that lead to the right pricing of capital would trigger real economic restructuring and lay the foundation for a new growth cycle.

However, the "bubble establishment" had the clout to obtain government bailouts that saved their skins but cost taxpayers trillions. Taking advantage of the public panic in the crisis, they sold the story that only reviving the financial sector could stem the economic slide. It was a lie. Directly supporting the unemployed would have cost a fraction as much, while also stabilizing the economy. The remaining fiscal capacity could be used to support economic restructuring.

This round of financial capitalism won't last. The lag between printing money and inflation may be long in the era of globalization, but it will come. China was a disinflationary force for a decade due to large quantities of surplus labor and over investment; American prices for manufactured goods declined to China's level through factory relocation. This process is over. China's prices are the world's; its production costs are sure to rise as manual labor dries up and land prices rise. China can no longer hold back inflation during a period of rapid monetary growth.

Global inflation will begin to rise next year. Central banks may raise interest rates, but they will be behind the curve – rates will rise slower than inflation. At heart they will want to maintain loose monetary policies to help growth. Raising rates will be propaganda for cooling inflation expectations – fooling savers into holding onto depreciating bank deposits. But procrastinating about fighting inflation will only cause inflation to surge. By 2012, inflation might be high enough to cause public panic. Central banks will be forced to raise rates quickly, and a second financial collapse could follow.

The world had a near-death experience in 2008. It may not be so lucky in 2012.

[The Dude]

Roger is either a very subtle prankster or a schlemiel.

[Mamma Boom Boom]

>It was a lie. Directly supporting the unemployed would have cost a fraction as much, while also stabilizing the economy.<

Man, that guy's hot!

[yelnick]

Hock, your statement "The hard part for a rational person to understand is how anyone could listen with their money to what Neely is saying today, when he's admitted that what he said yesterday is totally false" is too strong. Wave theory, and especially Neely's refinements, assume that many times the wave structure is not really known until after future waves unfold. This is especially so at the point of maximum entropy, when perhaps not even God knows which way it goes next. It is better to change when the waves say so than to stubbornly hold a prior position.

What Neely's change means is that his triangle (he looooves triangles) has more waves to go, whereas previously he thought it was completed. His new view is consistent with that I am calling a potential triple top: a Jan top, a top around now, and a final top off several months. His new count puts the third top off a ways, unlike my recent post. The timing of the final top may make this topping pattern look a little like a reversal of the Iraqi War Triangle with bottoms in July, Oct and March: we may have tops in Jan, Mar/Apr, and then Aug. This is not that far off what I thought might happen in my January predictions.

[DG]

"Wherever regulation stood in the way, deregulation took its place in the name of efficiency."

There were definitely regulatory blind spots, but to say that the financial services industry is "deregulated" is inaccurate. After nuclear energy, I'm sure financial services is the second-most regulated industry.

There was a good post on the regulatory blind spots over at the Baseline Scenario blog:

http://baselinescenario.com/2010/03/05/uncontrolled-lending-to-consumers-spawned-the-financial-crisis/

[upstart]

Where have we seen the pattern of the last 3 days (on the 15-min chart) before in a larger context? If the market makes one more stab down to close the gap it will be 7 overlapping waves in a slight downtrend that looks exactly like the waves of the first 2/3 of 2004 that filled in the gap-like area left behind in late 2003.

[upstart]

I needed to say I was looking at the DOW. But I also note that that 2004 pattern looked like 5 overlapping waves in a shallow downtrend, not 7, and that's what we have in place already with the little pattern of the last 3 days.

[Wave Rust]

Upstart, good one. remembered it after looking back. ( i was much younger back then ;])

30 minute chart looks like "hook'em horns", ready to head for 1120-25 minimum.

The Dude called and said he sees 5 lower degree waves up from the 2/11/2010 low opener spike to 11am 3/10/2010 high. To quote, "Man, it's like the (expletive) one wave of 3 is over, man."

Dude says, "... if you aren't short term bearish, man, somebody will come to your house and piss on your rug, man."

wave rust

[cloudslicer]

Micheal,

Remember I said to check out CLNE. Well well well ... looks like I'll be leaving work early to celebrate.

[cloudslicer]

Micheal,

Remember I said to check out CLNE. Well well well ... looks like I'll be leaving work early to celebrate.

[Mamma Boom Boom]

E-Wave question: How many of you accomplished counters think that the current structure (2007-date) has anything to do with a structure dating back to 1974 or 1982 or 2000-2007? Or any combination, thereof?

[nspolar]

Mamma B B:

I believe the current structure goes back to ~ 1975. Ultimately of course it goes back to the beginning of the index, but per the intent of your question, ~ 1975 for me.

ns

[Dave B.]

1150 SPX will be toast.

[JT]

"A example of the blindess and common thought of the day. Things never change." - Roger D.

What never changes is the fact that you continue to post all sorts of your "perma-bear" drivel on this blog and the S&P futures have been up 10 straight days in a row.

Dude, you sound like the biggest "broken-record" on this blog. I hope you don't trade the markets for a living . . . because you'd be losing some serious coin in all of your denial, and I'm not talking about a river in Egypt!

[DG]

I sure am glad that we're not in a bubble-type environment where the S&P can go up 11 straight days on basically no good news. That would be bad. Well, I mean no good news other than the fact that we haven't had another blizzard. Clearly, that fact alone is worth a trillion or so in market cap.

[Michael]

Investor's Intelligence shows bulllish newsletter writers now at 44.9% up from 34.1% back on Feb. 10th.

The high for this rally was 53.4% Bulls back on January 13th, which happened to coincide with a short-term top and only 15.9% Bears.

The 34.1% Bulls metric also appeared to predict an inflection point, given that it was 3 days after the 1044.50 SPX low.

Seems like there is still more upside to go given the current 44.9% Bulls metric.

[Michael]

PS.

The "measured-move" target of 1154 SPX appears to be within spitting distance. 68 points up from the 1044.50 low, added to the 1086.02 low of Feb. 25th targets a "C=A" at 1154.

[Dave B.]

"I sure am glad that we're not in a bubble-type environment where the S&P can go up 11 straight days on basically no good news." - DG

An utterly absurd statement by someone that continues to think that the markets are highly correlated with fundamental economic news. And you call yourself a technician?

According to your naive logic, the market must have was ALSO been in a "bubble" back in 1982 when it rallied day after day after day on bad news.

[Dave B.]

This chart says it all . . .

http://stockcharts.com/h-sc/ui?c=$NYAD,uu%5Bw,a%5Ddauannay%5Bdc%5D%5Bp%5D%5Bi%5D

Notice how most of your "perma-bear" EW bloggers and posters out there conveniently ignore this most classic and effective technical analysis tool.

[Cary Lloyd]

Any theories on why positive A/D predicts future market gains?

[sherman McCoy]

good point DaveB. The only certainty in life is that doing the exact opposite of Bobby "double short" Prechter is the way to trade. You may lose occasionally, but its the right the way to bet. Elliott Wave is intellectually appealing, but going with the trend(until it ends) is a lot easier. As a great trader once said, "don't fight the tape".

[DG]

"An utterly absurd statement by someone that continues to think that the markets are highly correlated with fundamental economic news. And you call yourself a technician?"

One can step outside the "technician" realm and comment on macroeconomic factors in general, which, I would venture to guess, I am about a million times more qualified to do than you, given my professional background in Fortune 500 corporate strategy and risk management. What did you do before you became a trader? Bag groceries? Drive a bus?

I have spoken positively of EXACTLY ONE type of correlation in the past and that is the correlation between corporate equity prices and the sum of the discounted stream of economic profits for that corporation, some of which is impacted by the broader economy and some of which is impacted by the competitive position and strategic advantages of that individual corporation. Since I was talking about the S&P 500 as a whole in my comment, of course the relative competitive advantages of one company or another would be subsumed under the broader set of macroeconomic factors impacted the ability to earn economic profits over time.

So, if you're going to disprove some type of correlation between fundamentals and stock prices, disprove that one, not whatever correlations you imagine I agree with. That is, assuming you even know what "economic profit" is. I'm sorry that your knowledge of corporate finance is at about the kindergarten level, if that, but that's not my problem.

[Mamma Boom Boom]

Thanks nspolar. We'll see if anyone else has an interest in this subject.

[DG]

"According to your naive logic, the market must have was ALSO been in a "bubble" back in 1982 when it rallied day after day after day on bad news."

And I guess according to your "logic" (I hate to even use that word in conjunction with this comment), the economic situation NOW, after a generational debt bubble, is the same as in 1982.

It amazes me the lengths to which you and the sockpuppet chorus will go to make yourselves look like idiots. Just enjoy your long-side exposure (assuming it's even real, of course) and keep your trap shut. You know that old saying "Better to keep silent and be thought a fool than to open one's mouth and remove all doubt"? Yeah, that saying should be posted on your monitor as a warning.

[GlennLoserNeely]

Blah, blah, blah . . .

Another 12 paragraph "dissertation" by our beloved DG and his frail ego.

Bless your little heart that you don't actually trade the market for a living. You'd never be able to support yourself.

[Wave Rust]

DG,
Serious question:
Will new all time highs in some index change your bearish stance?

What price level of new all time highs in a particular index will change your bearish stance? 5%? more?

Since Value Line is very close to new highs, 55 points, would that matter to you?

VLE also was the first index to make new all time highs after the 2002 low ,,, and by many months too.

wave rust

[Dave B.]

"I sure am glad that we're not in a bubble-type environment where the S&P can go up 11 straight days on basically no good news." - DG

You must live in a cave.

Retail Sales for February had their biggest jump in 2 years!

[DG]

"Blah, blah, blah . . .

Another 12 paragraph "dissertation" by our beloved DG and his frail ego.

Bless your little heart that you don't actually trade the market for a living. You'd never be able to support yourself."

Blah, blah, blah another 3 sentence non-response by whatever sockpuppet it's pretending to be this post.

I love how it's me who has the "frail ego", yet I always cite others' work, precisely because I respect other people's perspective, when providing my opinion.

Funny how that, in your pea-brain, means I have a "frail ego".

[Smart Mature Trader]

You are a pea-brain dumbhead with bad smells. Are you a baby with no money to trade? I don't even know why I care about you!!!

I hate you!!! Hate hate hate you!!!!!!!

[DG]

"DG,
Serious question: Will new all time highs in some index change your bearish stance?"

It wouldn't change my stance that at some point we need to retest the March lows on the S&P, or at least the July lows.

Could that be from Carl Futia's 1200 S&P levels? Sure.

The funny thing is that, if anyone had actually paid attention to what I've posted, rather than what they imagine I've posted, once the October highs were broken in November, the wave count I was working with from the July lows had to be altered and I said that if the decline from the October high was an x-wave, the SPY could reach 118 to 125.

I'm not trying to talk out of both sides of my mouth here, but I think it's completely inaccurate to say that I didn't and don't see the potential for a further rally. You don't see me posting charts day after day right after the close saying "This is it! The top is in!". That's definitely not my approach.

I also posted a couple of weeks ago that of my last 20 trades (at the time) 55% were short trades and 45% were long trades, which is hardly the sign of a "perma-bear".

The moron(s) who post a bunch of trash don't seem to have the slightest clue about these facts (I obviously don't expect them to keep track of my posts) yet are comfortable imagining all kinds of things about what my perspective on the markets is. I always say that criticism of a "guru" or a trading method is fine, but it has to be backed up with facts, not opinion. If the sockpuppet chorus held themselves to that rule, the number of posts they make would be cut by about 99%.

[nspolar]

Mamma B B:

I am curious as to why you asked the question? You must be thinking of something that connects todays situation back to the beginning, and where it might wind up.

ns

[DG]

"Retail Sales for February had their biggest jump in 2 years!"

Is that year-over-year data? Gee, I wonder what might have been happening last February that had people not spending? Hmmmmm, maybe the possible end of the world as the financial system imploded?

Or is it "same-store-sales"? Gee, I wonder what might have happened in the past year to make that number look good? Hmmmm, maybe the closing of thousands of retail locations, so that they are no longer counted in the sales survey, meaning higher sales at the remaining locations?

Dude, off a low enough base, ANY economic statistic can look good.

Do you always take the most superficial view possible of any given data-point?

[Duds]

Trying to be an ewave technician, but still hard to ignore my neophyte macroeconomics classes.
It's hard for me to believe retail sales are strong when inventories are still decreasing. Numbers are numbers but I know corporate accountants swear by inventories as valuation than sales figures.
Whatever, we could all go on and on about other fundamental data.

My frustration is how "C" waves of any short duration degree don't seem to be finishing. And the hook up is painful. Funny how Money supply for April is being decreased. Will "C" waves finish like in 2008 and earlier?

Oh, and we are NOT at all time highs! Check out Oct. 2007. And you can still be a Bull or Bear depending on your time horizon. Trend from '07 - Bear. Trend from '09 - Bull or Bull Trap B-wave?
Reread excerpt from Robert Rhea 1934 about 1929 in ewave principle.

May your trading be disciplined

[G2]

DG

Serious question - why do you bother with this blog given the personal flak your presence here generates? Is it because you feel the need to "educate" non-believers in the Neely method?

[David]

have posted an update for the spx for those interested...

http://www.tradeyourwayout.com/2010/03/spx-60min-chart-update-are-we-there-yet.html