All the Same Market

For a number of years, the analysts at Elliott Wave International have been proposing that all the markets are moving together in a deflationary environment. The stock markets of the G-7 nations have been moving in lockstep with each other, with the exception of the Nikkei 225 index. It isn't just stock markets that are moving together, we are even seeing commodities (compare the DJIA to the CRB index) and gas prices at the pump move in the same direction as the stock markets of the G-7 nations. One of the latest articles on the subject is here.

Going with the idea that all the markets are moving together in a deflationary environment, there is a strong case to be made that we have completed just the first part of Minor wave 2 up.  This also strengthens the idea of the name "Crisis of the Western World" for the period associated with Grand Supercycle wave [IV], since the bearish social mood is affecting Western Europe, Canada, and the United States (commonly known as the western world) simultaneously.

Here are the charts of the DAX and the CAC-40.

Notice that both the DAX and the CAC-40 rallied in 5 waves from their lows. In both cases, Minor wave 1 down ended in late September 2011. The significance of the 5 wave rally is that a 5 wave structure is never the entire correction, just a portion of the correction. Therefore, the 5 wave rally from the low is the first part of Minor wave 2 up, which is unfolding as a zigzag.

Here are the charts for the FTSE and the DJIA.

Notice that the FTSE and the DJIA both rallied in 3 waves. In both of the cases here, Minor wave 1 down ended in October 4, 2011. Since the stock markets of the G-7 nations have moved together, the 3 wave rally from the low is the first part of Minor wave 2 up. A 3 wave beginning in a larger correction indicates a flat or a double zigzag for Minor wave 2 up. The Zweig Breadth Thrust signal that was triggered earlier this month in the DJIA has turned out to be a bull trap.

A 3-3-5 flat scenario for the DJIA calls for a sharp decline in November 2011 in which the markets fall as fast as it went up from the October 4, 2011 low, followed by a moderately sharp rally in December 2011. After the holidays are over, Minor wave 3 down is poised to start in early January 2012.