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« Bubble Trouble | Main | The Baton is Passed from CleanTech to the Social Mobile Web »

Wednesday, November 24, 2010


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Happy Thanksgiving to all. Be safe.

Account Deleted

S&P 500 Futures chart

I've Been Prechterized

I'm thankful that I stopped subscribing to EWI back in 1993 after they cost me a bundle.


stock ideas

that is such a touching video. :) His guitar rocks.


Cool vid. I am going to stand by a long position if we get down to the 200 day ma.

Deciu Dumitru

Marvelous mix and interact with the listeners


SENSEX, Scandals & Socionomics!

In my last update on the SENSEX - "Kimchi Curry, anyone?" - we were at a cross-roads. Along with its maternal twin, the Seoul KOSPI, the index looked vulnerable for a correction. Instead, the Sensex took off to test all-time highs, with the Korean brother not far behind. The test failed & a sharp correction ensued. Price is just about to reach a significant trendline around 18,800 (as highlighted in the chart), with promise of a short-term bounce at least. Upside capped by congestion at 19,800.

Wave Count & Supports

In the longer-term, it is possible that we have finished 5-waves up since 2009, as illustrated on the chart above. If so, we are potentially looking at a bigger & longer correction here. Possible fibonacci retracement levels - 23.6% & 38.2% - are roughly at 18000, and 15600 respectively. They are also strong historical support levels and thus great buying opportunities!

Alternative Bullish Count: Waves 3 & 4 could be nested i & ii waves in an extended wave 3. In this case, we may not see 18000, and the SENSEX may continue higher to all-time new highs from here, Jakarta style!

Sensex, Scandals & Socionomics

According to the emerging field of socionomics, stock market prices are the result of the social mood of the population in question. During periods of negative social moods (bear markets), some of the biggest scandals & frauds are unearthed. There are countless examples in history, with the most recent high profile case of 'Bernie' Maddoff.

"India has been rocked this year by a series of corruption scandals that have embarrassed the ruling Congress party, rattled markets and delayed reform bills as the opposition stalls parliament. "... Read more. All during the recent attempt of the Sensex to get out of the bear market slump, and picking up steam during the recent declines. Feel free to research & point out any other examples in other parts of the world. You will be suprised how predictable these outbreaks can be.

All the best!


Y: A big thanks to you for maintaining this engaging blog

I would look forward to your increased attention to chaos/fractals. BTW, any fresh thoughts on the K-wave pushed back by the Ben presses and choppers?

da bear: I read somewhere that Pretcher promised to change his Gold count above $400, but later on conveniently shifted to a Dow measured in gold.What is his latest count on Gold?



trendlines: the last upmove in sensex seems to have been in "threes" (mid 2010 onwards) ; may therefore go into an expanding triangle mode if it were to be the fifth

vipul garg


if the sensex has ended 5 waves, or the way you have labelled , then sensex will have to drop to 14000 or so very soon, which is the absolute minimum.

more so degrees of correction are not right in your labels , so you may want to reassess your count.

but yes , even though the consensus on sensex is bullish,it will scale new highs soon.

Wave Rust


India is having the growing pains of a democracy - out with the old; in with the new. Corruption is ubiquitous, always has been - from dictatorships to democracies.

Look for the bright side of that sensational growth.

SENSEX is getting ready to rocket up ,,,, just like Vipul said. Respectfully, I think your wave count is way wrong. Your '2' is an '(E) of Primary C of Cycle II' (imho) ,,,, start with that as origin.

wave rust

Wave Rust

great video and a great idea of how universal music really is.

on your last post & comments, you said VC and tech were getting frothy.

I guess the Facebook froth is real, and that may be why Accel sold 20% of its original $12 million investment for 10% ownership of FB, for $35 Billion. What's the 5 year ROI on that one? :)


wave rust


KRG, fractals it is then. As the the long wave, we are so clearly in a K-Winter that it makes me smile at those who denounce the use of such analysis. The long wave folks expected and predicted this disaster; almost everyone else where shocked, shocked! there was gambling going on by the banksters.

Check out Steve Keen's website, debtwatch. He has a really compelling analysis which I have previously discussed that looks at change in debt as the core driver. He starts with this:
- aggregate demand (AD) drives GDP
- AD = consumption + Investment + change in debt
- change in GDP is highly correlated to the change in change in debt

Why change in change in debt? During the bubble, debt increases of course. The second derivative, the change in change in debt, always goes up during a credit bubble, which means investors are piling on at an accelerated pace. It shows a bubble - the signature is acceleration of debt. When it peaks and the bubble bursts, the change in change in debt - call it delta delta debt - plummets. His data shows the rise of delta delta debt prior to 1928/2007 and the drop after are close matches, as is the impact on GDP.

This fits the Long Wave:
- during K-Fall, debt increases, and at the end, it increases at an accelerated rate
- during K-Winter, debt collapses, and at some point at an accelerated rate

This time around the collapse of debt was consistent with 1928-1930, and then we slowed the process with the Stimulus. Delta delta debt is still negative, but the rate of drop has turned up, meaning slower. Yet the debt remains. So under the Long Wave, it will still need to collapse. All we have done is kicked the can down the road.

BTW another signature of the bubble is how the use of debt changes from business investment to speculation. This shows up in the percent of GDP that goes to banksters vs goes to wages. Wages drop as bankster profit rises. This is vivid in the US stats from 2003-2007. Sad,a ctually. As the bubble is used for speculation, wages get compressed. Steve Keen has a model where he plays out the endgame. Wages go south as bankster profits go north. The speculative fever wipes out the middle class.



Washboard Chas! Great stuff.

Can't believe the decisions that Ireland is making these days:

BRUSSELS (AP) -- European Union nations agreed to give (EURO)67.5 billion ($89.4 billion) in bailout loans to Ireland on Sunday to help it weather the cost of its massive banking crisis, and sketched out new rules for future emergencies in an effort to restore faith in the euro currency.

Mish has been doing some good reporting on this lately. It would be really interesting to see Iceland pull out of its funk early, just as the Irish get crushed by self induced debt. I just can't believe that the Irish people are going to let this happen. Seems like a huge price to pay for a peter pan bond market of zero risk.

Oh well,


Hock, Mish has a point about choosing to bailout German banks over bailing out Irish citizens, although it is not clear the Irish could live with it. I sit in Cali-forn-nia and if they stiff the bond market they are dead ducks. Cannot finance any of those exorbitant union contracts ... If the Irish drop the Euro and go back to whatever their currency used to be, their borrowing costs skyrocket beyond that 6.7% coupon. The problem was created when the Irish lived beyond their means & the govt foolishly backed all the private loans to bailout borrowers. Iceland did NOT do that and are better off; also had kept their own currency. My advice to the govt would have been to get a reduction in the debt owed in exchange for some sort of deal. I am sure they tried ...

Fascinating issue of how to restructure the global financial system. The problem with fiat currencies is now obvious: the debt keeps piling on until it cannot be serviced. How to reduce the debt? There is nothing to exchange it for, so the can gets kicked down the road and the problem simmers and gets worse.

1) Under gold, you could at least liquidate debts via a gold exchange. Consider the impact if the Treasury (not the Fed) issued gold-back bonds priced at $8k per oz in exchange for (say) 5x the debt against the current Dollar value. Potentially the whole pile of $50T Dollar debt could be exchanged for $10T of nee Dollar debt, some of which is gold-backed.

2) Keynes had this idea of a Bancor, a synthetic currency as a reserve that was not any individual country. Say we use SDR's for that purpose. ireland floats bonds under its own currency priced in SDRs, and partially backed by SDRs. If the PIIGS persist in bad policies, their currencies drop vs the SDR, as they should, while Germany's goes up. This might work of the SDR is sufficiently backed.

The Bancor could avoid the avoid the Triffin Dilemma, of the reserve currency country exporting its policies. In Europe, it means the austerity of Germany gets exported to all the PIIGS. Worldwide, it means the prolificacy of the US get exported, causing inflation, as is now occurring under QE2.

Account Deleted

Respected Trendlines !!

I think u seriously need to revisit ELLIOT WAVE Theory and study it thoroughly.Neowave by Glen Neely will help u more.

Your count on Sensex of 5 waves up from Mar09 is nothing more than Kiddish.You seem to have forgotten to notice that Sensex has taken 20 month long time to reach the Jan08 high as against the fall of 14 months in 2008.It clearly indicates that the current upmove in sensex is not an IMPULSE move.Instead its just B wave with JAn08 to MArch 09 being the A Wave.


Account Deleted

Dear Vipul !!

Interesting to note that u see NEw highs in Sensex.Can u please post your count on Sensex.

Thanx in Advance

Account Deleted


what is your current view on US dollar Index.Has it bottomed and looking for a decent rise up.Asking u this cos it seems to have a direct co-relation with world indices.If Dollar strengthens then can we safely assume that a TOP in SNP500 and also worldwide indices is in.

Thanx in advance

Account Deleted

ES Triangle pattern:


Thanks Y:

"The problem was created when the Irish lived beyond their means & the govt foolishly backed all the private loans to bailout borrowers."

Agreed and nothing has been solved.

I remember my first day of university. The head of the Engineering Dept came in and told us to shake hands with the person on our left and right. He then told us that 1 of us would graduate. Turned out he was bang on.

A friend of mine made a mid life career change and started teaching at a technical college. He flunked 3 kids and was promptly summoned to the department head's office. He was asked why he couldn't teach. He was then told where money came from to pay his wages and to make sure he taught well enough to never have to flunk anyone again.

In hind sight with 25+ years of experience it is clear to me that a great service was done to the weedouts in my day. They were given a chance to make a much needed career change very early in life.

By contrast, weedouts today are treated like blobs of shlit floating in a tank and going no where.

Kind of like the Irish imo,



VB, Dollar Index has clearly bottomed, and it seems to be a major bottom as we saw in 1978, 1995 or just a couple of years ago. Each time the Dollar rose not because of US strength but other-currency weakness. Dollar just fell slower! Core drivers this time around are Euro, China & QE2:

- Euroland is obviously in a world of hurt, and the Euro could drop a lot more

- China is tightening and suffering a horrific internal inflation, raising a real risk of a huge bubble bursting much like Japan 1989. The yuan would drop against the Dollar, pushing it up, but a bigger impact would be the peak in emerging-market speculation. Where does the hot money go then?

- QE2 is more complex. It should weaken the Dollar but it is under political backlash and is less aggressive than it could have been. I think the backlash is also intellectual - the initial rush to judgment that it would trash the Dollar turned out to be overblown as market participants figured out what the Fed was actually doing - flattening the middle of the yield curve. If the US economy continues to skip along a bottom, the flat middle won't do much to change business lending, and hence won't be that inflationary. Instead it continues to push liquidity into speculation.


Hock, great story! The lies are all around us. We breathe the fetid air of elevated expectations & entitlements. Moral hazard to an ultimate degree. That air needs to be cleared before the economy can really recover. That is what the K-Winter is all about.


With all of these BEARISH developments, why is the US equity market rallying back today???



JT, I think that was short covering.


JT, we remain in a sideways move, with support at 1173. Held today. Ceiling so far has been 1200, but I wouldn't be surprised with a move into 1210


I've had about 4 flights in the last month or so and haven't seen any of this:

If this is really happening, Bin must be shlitting himself with laughter.


Wave Rust

what's this I hear about a failed auction of chinese bonds?

I thought china was the walmart of debt. And now people are beginning to think their debt may be less reliable.

oh the shame!

wave rust

the rest of the correction from 1220 is just ahead


Re: The Irish

Now this makes sense:

I won't be holding any Euros


Hock, liberals have been yelling for 8 years that we are losing our freedoms. Conservatives were ok with fed monitoring phone, net use, library use, illegal prisons, torture, yet when a light pat down or a x-ray machine , which by the way was proposed by Chertoff - a secretary of Homeland security under Bush.

Now, I agree that we would be better off with Israeli type of security at the airports, and taking off shoes or not, or having a 4oz bottle of body lotion vs 30z does not increase likelihood of security breach. Or that the body scanners will catch someone set to sneaking in a box of box cutters in their ass.

Vipul garg

This rate maynot just come again soon


Sibrane, liberals yelled about the Patriot Act when Bush was Prez; now they are quiet. Conservatives kept mum until Obama was Prez, now they are shocked, shocked! our liberties are being lost. A pox on both their parties. Obama's failure to lead is one of the main criticisms of his Presidency, on this, on being slow to react to WikiLeaks, etc. etc. He should fire the head of Homeland Security, stop the groping, and hire retired police officers to scan the lines and pick out the suspicious characters.

Wave Rust

control of the internet is the only thing that can get oblahblah re-elected.

net neutrality before christmas or die! go you FCC socialists!

it's the patriot act for the internet.

will it require facebook to become a two-faced community?

wave rust

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