Saturday, April 2, 2011

Predicting Primary wave [3], part 3

In the last post, we established that Primary wave [3] of Cycle wave c of Supercycle wave (a) will last 5 years and bring the DJIA down to 2185 and the S&P 500 down to 218. Furthermore, we also established that Intermediate wave (1) of Primary wave [3] will have a duration of 13 months.

Now we turn our attention to Intermediate wave (2). Here's the chart that is used to predict Intermediate wave (2).

DJIA, 1930

There are a number of observations about the pattern.

1 -- The pattern is a zigzag.
2 -- The model suggests a fibonacci relationship between Minor wave 2 (of Intermediate wave (1)) and Intermediate wave (2) in terms of duration. The large zigzag pattern lasted 2.7 months (3 time units) and the smaller zigzag pattern lasted 0.9 months (1 time unit). The model predicts that Intermediate wave (2) will have a duration of 8 months.
3 -- The model suggests a relationship of equality between Minor wave A and Minor wave C in terms of amplitude and duration.
4 -- The model suggests that Minor wave A of Intermediate wave (2) will have 78.6% of the length of Intermediate wave (2).
5 -- The model suggests that Minute wave [i] of Minor wave A of Intermediate wave (2) will have 38.2% of the length of Intermediate wave (2).
6 -- The model suggests that within Intermediate wave (2), Minor wave A will last 3 months, Minor wave B will last 2 months and unfold as a flat, and Minor wave C will last 3 months.

Within Intermediate wave (2), we have a price target of Dow 10215 for Minor wave A, Dow 8600 for Minor wave B, and Dow 10820 for Minor wave C. Intermediate wave (2) is expected to retrace 61.8% of Intermediate wave (1). The price target for the S&P 500 at the end of Intermediate wave (2) is 1130.

Here is the chart showing the projected wave path of Intermediate waves (1) and (2):

DJIA, 2009 - 2013

Intermediate wave (2) represents the last stand of the bulls. Optimism is expected to grow over time during this period, although it won't reach the lofty levels achieved at the peak of Primary wave [2]. From a socionomic perspective, Obama will win a second term because the stock market (and therefore, positive social mood) will be rising when voting takes place in Nov 2012.

The rest of Primary wave [3] is projected in the same fashion, although I won't go into detail at this point.

Here's another chart showing the model used to predict the rest of Primary wave [3].

DJIA, 1930 - 1931

The model suggests that Intermediate wave (4) will have a relationship of equality with Intermediate wave (2) in terms of duration. The model also suggests that Intermediate wave (1) is the smallest of the three impulse waves that compose Primary wave [3]. From the model, the price targets and durations follow.

Intermediate wave (3) will last 15 months and take the DJIA down to 4300.
Intermediate wave (4) will last 8 months, form a flat, and take the DJIA up to 5600.
Intermediate wave (5) will last 16 months and take the DJIA down to 2185 and the S&P 500 down to 218.

Here's our updated picture for the "Great Deflation" period:

Supercycle wave (a)      2000 - ???,                    "The Great Deflation"

Cycle wave a              Jan 2000 - Oct 2002,    Dot-com bubble bursts
Cycle wave b              Oct 2002 - Oct 2007,   Stock market and housing bubbles
                                                                      (Housing bubble bursts in 2005)
Cycle wave c              Oct 2007 - ???,             Stock market, credit, commodity,
                                                                      junk bond, and student loan
                                                                      bubbles burst

Primary wave [1]       Oct 2007 - Mar 2009,    Stock market and oil bubbles burst
Primary wave [2]       Mar 2009 - Apr 2011,    Early Obama Administration Period
Primary wave [3]       Apr 2011 - Apr 2016,    Late Obama Administration Period.
                                                                 Credit, junk bond, gold, silver, and
                                                                 student loan bubbles burst

Intermediate wave (1)    Apr 2011 - May 2012,   Resumption of deflation
Intermediate wave (2)    May 2012 - Jan 2013,    Last stand of the bulls
Intermediate wave (3)    Jan 2013 - Apr 2014,    United States defaults on its debt. 
                                                                     Deflation accelerates.
Intermediate wave (4)    Apr 2014 - Dec 2014,   Dead cat bounce with increased
                                                                     social unrest
Intermediate wave (5)    Dec 2014 - Apr 2016,   Major banks collapse, causing
                                                                     large scale bank runs

Primary wave [4]           Apr 2016 - ???,        Consolidation period with unrest
                                                                  and chaos
Primary wave [5]           ??? - ???                 Palin Administration Period

In the next post, we'll look into the 45th administration period. I am going to make a bold prediction here -- Sarah Palin will be the next president of the United States. The socionomic model actually supports this scenario.

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