Saturday, June 30, 2012

More Precursors of Climate Change

As with last year, we continue to see more and more precursors of the coming climate change even as people continue to remain complacent on the issue. The effects of man-made climate change that we are seeing now is just a preview of what we will see during "The Great Tribulation" when the effects of man-made climate change start unfolding in full force.

As I demonstrated here and here, man-made global warming unfolding in full force will be one of the defining characteristics of Supercycle wave (c) down (2076 - 2118) within Grand Supercycle wave [IV], which is one of the big reasons why the term "The Great Tribulation" is warranted.

Recent events in the Unites States sets the scene for the effects of man-made global warming:

1 -- A number of massive wildfires are burning out of control in Colorado, causing the evacuation of 32000 people from a number of small communities along the Waldo Canyon area. The wildfires started on June 9, 2012 mostly from lightning strikes. The fires have burned over 200,000 acres and destroyed over 600 homes. The massive wildfire was made possible by a lack of precipitation as the area received only 13% of normal precipitation during the 2011-2012 winter. A few days ago, President Obama toured the state and sent in federal resources to battle the fires.

2 -- After one of the warmest springs on record, a large portion of southern and central United States is currently being plagued by a scorching heat wave with over 1000 records falling so far. There are a few people that are recognizing the connection between rising temperatures and man made climate change with NBC Washington's chief meteorologist commenting "if we did not have global warming, we would not be seeing this".

3 -- It's still early in the 2012 Atlantic hurricane season, but there is already damage being done. Rising temperatures are not the only consequence of global warming, as recently demonstrated with Tropical Storm Debby (2012) drenching the Florida coast with over 2 feet of rain and causing massive flooding and opening up numerous sinkholes.

As the abuse of resources, particularly fossil fuels, continues to take place under the political influence of the Koch-ALEC cabal for the sake of making a larger profit, the cumulative effects of unrestrained consumption of fossil fuels continues to unfold. The concentration of carbon dioxide in the Arctic recently exceeded 400 parts per million. The concentration of carbon dioxide in the atmosphere was at 275 parts per million at the start of the late Industrial Revolution (Supercycle wave (III) up (1859 - 1929)). It is very likely that the abuse of resources will continue unabated until the oil supply crash takes place in 2017.

The "Green Technology Revolution" will affect the timing of when the full force of man made global warming will unfold as alternative energy becomes the dominant source of energy in Western Europe, Canada, Japan, Australia, Brazil, and South Korea as Supercycle wave (b) up (2042 - 2076) unfolds. Utilization of alternative energy will slow down the progression of man made climate change with less carbon dioxide poured into the atmosphere. As demonstrated in an earlier post, alternative energy will never get a foothold in the United States due to the strong political influence of Koch Industries and the American Legislative Exchange Council (ALEC), so the abuse of fossil fuels (particularly coal) is expected to continue in the United States throughout Supercycle wave (b) up (2042 - 2076) and even a portion of Supercycle wave (c) down (2076 - 2118) as well.

There is already recognition of the reality of man made global warming amongst the scientists. Unfortunately, it will be a very long time before everyone else realizes that man made global warming is real. Here is a long term chart of the DJIA showing when the "point of recognition" will come:

It is very likely that the "point of recognition" associated with man made global warming will take place at the center of Cycle wave I down (2076 - 2082) within the larger Supercycle wave (c) down. The "point of recognition" will result in the "Global Warming Panic" in 2078 as people finally realize that global warming is for real.

We are a long way from the "point of recognition". As recent news demonstrates, the vast majority of people are still in denial when it comes to the reality of global warming:

1 -- The Rio + 20 summit, which was supposed to hammer out solutions to the coming climate crisis, ended in a complete failure with nothing accomplished.

2 -- There is denial even at the White House, as demonstrated by President Obama's recent approval for building the southern portion of the Keystone XL pipeline and the approval of offshore oil drilling in the Arctic with the belief that an oil spill could never happen.

3 -- The Chamber of Commerce and utility companies are actively waging a campaign against increasing renewable energy standards in Michigan. This is likely just one of many such campaign battles being fought to stop alternative energy from getting a foothold anywhere in the United States.

The implications of man made climate change are very real. As the full force of climate change unfolds, the global availability of arable land will eventually be affected. During Supercycle wave (c) down, it is very likely that nations will go to war to secure control over arable land and habitable land. The possibility of war as a consequence of climate change has been discussed in an article titled "Memorial Day 2030". This would not be the first time that civilization would be dramatically affected by climate change -- Recent archeological evidence points to climate change as the primary cause of the fall of the ancient Indus civilization between 3900 and 3000 years ago.

The effects of man made climate change will almost certainly continue well into Grand Supercycle wave [V] up (2118 - 2296) with sea levels continuing to rise during that time. However, it is very likely that positive social mood during that time will allow human civilization to adapt to the changing climate.

Saturday, June 23, 2012

Life After Obamacare

All eyes are now on the US Supreme Court, which is soon to hand down a decision on the constitutionality of "Obamacare", the health care reform law passed by the Obama Administration back in 2010 after a year. The vast majority of people expect the US Supreme Court to hand down its decision some time in the last days of June 2012, yet the ruling could, in theory, come any time between now and November 2012.

According to Intrade, there is a 77% chance that the mandate will be struck down by the high court. However, the probability that the rest of the law will remain intact will depend heavily on when the ruling is handed down as a couple of charts of the S&P 500 will show:

Scenario 1 -- Health Care ruling handed down in June 2012 (Optimistic scenario)

Bear market rallies end on good news, and a Minor degree bear market rally should end on great news. We are on the verge of completing Minor wave B up (Oct 2011 - June 2012) of Intermediate wave (W) down, so a Minor degree bear market rally is about to wrap up if nor already completed.

A scenario where the mandate gets struck down, but the rest of "Obamacare" is left intact would be seen as great news by the American people, especially those that have already benefited from the new law. A scenario where a ruling in favor of "Obamacare" takes place as Minor wave B up reaches completion would work very well for a Minor degree bear market rally ending on great news.

Scenario 2 -- Health care ruling handed down in October / November 2012 (Pessimistic Scenario)

There has been a lot of debate about what would happen if the US Supreme Court strikes down the entire law. The issue has been debated on CNBC, Yahoo news, and Huffington Post, as well as countless other places. One thing that is certain is that if the entire law is struck down, the fallout would be massive as millions, if not tens of millions of Americans that have already benefited from the law will suddenly have the rug pulled out from under them. Given the bearish social mood that is in play now, this is a recipe for a backlash and even a full blown panic. There are already predictions of a full blown panic if the entire law is struck down as outlined in the article, making the case that the panic could hit doctors and providers as well.

There are already a number of economists and analysts that see striking down the entire law as bullish for the stock market. If the entire law is struck down, the ruling would most likely be handed down in the October / November 2012 time frame when the center of Minor wave C down is in play with a bearish Intermediate degree "point of recognition" reached shortly afterwards. The result, of course, would be the "Panic of 2012" as a massive backlash unfolds in the aftermath of the ruling.

No one knows when the US Supreme Court will hand down its ruling on the constitutionality of "Obamacare". Although the outcome of the ruling will certainly matter for the millions of Americans that are benefiting from the law in the short term and the intermediate term, the outcome won't matter on the longer term. The health care in the United States is on an unsustainable path with an insurance death spiral currently unfolding. As I demonstrated here and here, it is only a matter of time before the entire health care system collapses with the collapse most likely to take place between 2015 and 2020, and the collapse will happen regardless of which way the US Supreme Court rules on "Obamacare".

Saturday, June 16, 2012

Increasing Turmoil in Europe

Social unrest has been on the rise in Europe with hot spots in Greece, Italy, Spain. All eyes are on the June 17, 2012 elections in Greece and their possible implications, but financial hardship has also been increasing in Spain and Italy.

As suggested in the previous blog entry, Spain's banks got a $125 billion (100 billion euros) bailout on Sunday afternoon (June 10, 2012). The bailout news resulted in a short lived euphoria that fizzled out by the end of the next day. The IBEX 35 gapped up by more than 5% only to close the entire gap within a few hours. All the other markets (including the US markets) also gapped up in the hours before trading on Monday (June 11, 2012) only to close their gaps by the end of the trading session.

The IBEX 35 tells the story of increasing social unrest and financial hardship in the peripheral nations of Europe that continue to unfold since the Greek debt crisis started to unfold in April 2010.

Here is a long term chart of the IBEX 35:

The IBEX 35 was created back in 1992. Since inception, the index peaked at around 16000 in April 2007 before starting the bear market trend that is still in force today. The index has fallen to a low of around 6000 last month before starting another bounce.

Here is a closer look at the IBEX 35 from 2009 to today:

Like all the other markets, the IBEX 35 reached a Primary degree low point in March 2009, which would be the end of Primary wave [1] down. The low point was followed by a bear market rally, Primary wave [2] up, that lasted less than a year and took the index from the upper 6000s to just over 12000. The IBEX 35 has breached the March 2009 low and the deflationary downtrend appears to be picking up momentum. The best count for the IBEX 35 is that a series of 1s and 2s is unfolding. A small wave 2 bounce is in progress now, which will quickly give way to new lows. The main count as shown on the intermediate term chart indicates that the center of Intermediate wave (1) of Primary wave [3] down will soon be reached.

The center of Intermediate wave (1) of Primary wave [3] down in Spain, Greece, and Italy is very likely a key event, as it will result in the "Panic of 2012". The coming point of recognition will likely result in Spain and Italy both needing a bailout, yet Spain and Italy are both too big to bail out. Without a bailout, Spain and Italy will default on their debts, resulting in a global ripple effect that rips apart the economies of the Western World, bringing out the next stage of the "Crisis of the Western World".

There are already a lot of precursor events unfolding that are indicating that the "Panic of 2012" will take place in Europe in the near future:

1 -- Nations in Europe have been hit with a barrage of credit downgrades in the last few days. On June 13, 2012, Spain's credit rating was downgraded by Moody's from A-3 to Baa-3. Just one day later, Spanish 10 year bonds hit the key 7% level. On Friday, June 15, 2012, Moody's cut the credit rating of 11 European banks and said that more downgrades will take place of Greece ditches the euro.

2 -- Italy's 10 year bond yield is also on the rise, hitting 6.25% and threatening to make the burden of the $2.5+ trillion debt an even heavier burden to carry as interest payments on the debt continue to rise.

3 -- The June 17, 2012 elections in Greece have been hanging like a dark cloud with many central banks gearing up for another round of intervention with the European Central Bank possibly cutting interest rates and Britain's central bank possibly infusing the markets with more money. Given the strong level of bearish social mood present in Greece, the most likely outcome of the election is a government that is plagued by strife and discord to a degree where a cohesive government is impossible.

4 -- The IMF (International Monetary Fund) has been urging Spain to raise its VAT, reduce salaries of employees, and reduce pensions and housing deductions as a solution to its debt crisis.

5 -- The Greek election has also resulted in substantial involvement of the EU as German officials continue to make a push in Greece for voters to keep the conservatives in power with all the usual fear-mongering -- a vote for the left would imperil the euro.

The larger Grand Supercycle degree bear market is already having an effect in Greece, and will soon have the same effects in the rest of the Western World. So far, Greece has proven to be a good leading indicator of what will unfold in the rest of the Western World as "The Great Deflation" continues to unfold. Greece's power grid is already starting to come under pressure and stress, in addition to the barter markets that started to come up last year. Also under pressure in Greece as a result of the bear market is the nation's health care system in which the debt crisis threatens to bring about the collapse of the nation's health care system as hospitals and clinics face possible closures as the financial crisis worsens. The events in Greece all point to a scenario where economic and living conditions in the Western World will decline to the level of the 1930s, some nations reaching that point sooner than others.

Saturday, June 9, 2012

Final Thrust In Progress

The wait was longer than expected but the final thrust that has been in the forecast is finally materializing. The last leg of a Minor degree triple zigzag, Minor wave B up (October 2011 - June 2012) is finally unfolding. The DJIA fell over 1000 points during May 2012 in what would be the last phase of a Minute degree x wave. The thrust is expected to unfold in a very sharp and rapid advance that ultimately unfolds in three waves. The final thrust should be completed on around June 24, 2012.

Here is an updated intermediate term chart of the DJIA:

The triangle count for Minute wave [x] (the second x wave) is still technically valid for the DJIA, but no longer fulfills the "right look" guideline. The preferred pattern for the second x wave is a complex structure (expanded flat - double zigzag - zigzag) that started on March 18, 2012 and ended on June 5, 2012. This count works very well in achieving reconciliation between the S&P 500 and the Wilshire 5000 going down in 5 waves from the peak, but the DJIA going down in just 3 waves from the peak.

The S&P 500, the Wilshire 5000, and the DJIA all fell below the lower trend channel line (the lowest blue line on the chart) on June 1, 2012 on a 90% down day after struggling to hold the trend channel line as support. Several days later, the indexes all reclaimed the lower trend channel line on an 87% up day and then managed to hold the trend channel line as support on Friday (June 8, 2012), which made the case for a final thrust up stronger.

The upside target for the final thrust is 13340 - 13625 for the DJIA and 1415 - 1452 for the S&P 500. An additional indication for the upside target is an inverse head and shoulders pattern that is forming, which is potentially pointing to 13350 as the upside target for the final thrust in the DJIA and 1375 for the S&P 500. The final thrust should be completed on around June 24, 2012 with Minor wave C down (June 2012 - June 2013) to commence afterwards.

Here is an updated longer term chart of the DJIA:

Notice that the triple zigzag, Minor wave B up, is well contained within the trend channel lines with the exception of the brief throw-under that occurred a short time ago. The longer term chart shows the "five waves down" that is expected to follow once the last zigzag is completed.

The small complex structure that unfolded as Minute wave [x] (the second x wave within the triple zigzag) is a smaller version of what appears to be unfolding on a much larger scale.  The current larger structure that is unfolding, Primary wave [X] (2011 - 2016) of Cycle wave x (2009 - 2021) of Supercycle wave (a) (2000 - 2042), appears to be taking a similar wave path, as shown on the chart:

Our equivalent position in the fractal is arrowed on the chart, along with the projected times for the most important high points and low points in the fractal.

As the final thrust unfolds, exuberant optimism is expected to take center stage (see the previous blog entry). The underlying social mood proved to be too elevated for Gov. Scott Walker of Wisconsin to be thrown out by voters on the June 6, 2012 recall election in spite of a criminal investigation involving one of his closest aides that is now in progress. The fact that Gov. Scott Walker won the recall by essentially the same margin that he did in November 2010 is indicative that the bullish social mood now in play is currently conferring the governor a "teflon coat".

Even as exuberant optimism takes center stage, undercurrents of bearish social mood associated with the decline of the stock market during Primary wave [X] (2011 - 2016) down is brimming under the surface:

1 -- Greece is on the verge of running out of cash. The rapid depletion of cash is due to tax revenue drying up as banks stop lending, the government runs into tough challenges collecting back taxes, and declining wages across the board means less tax revenue. There is also speculation that Greece will leave the European Union.

2 -- The Spanish debt crisis takes another turn for the worse when its credit rating was downgraded by three notches, from "A" to "BBB". A number of Spanish banks are also in serious financial trouble and a bailout of the banks appears to be on the horizon.

3 -- There is also speculation about a "Fiscal Cliff" (a term coined by Fed chairman Bernanke) that is set to take effect in January 2013 as a result of a half of a trillion of dollars worth of tax cuts and spending boosts expire at the end of the year. Considering that social mood will have gone south to a considerable degree (look for the DJIA to fall below 10000 by the Nov 2012 election), strife and discord is the most likely outcome as both the GOP and the Democrats stubbornly hold their ground and refuse to come to a compromise on the issue.

4 -- The Federal Reserve is prodding Congress to spend more money to prop up the economy. This is a potential game changer development as far as perceptions of the Federal Reserve's ability to keep deflation at bay is concerned. There is still a widespread belief (particularly among those that are bullish) that the Federal Reserve has the ability to prop up the stock market indefinitely through quantitative easing.

As the final thrust unfolds to its peak in around June 24, 2012, exuberant optimism continues to have dominance. Once the thrust is completed, markets will decline for the rest of the year. As markets decline, the economy and job market will follow the markets lower.