tag:blogger.com,1999:blog-70633315809684281782024-03-21T00:09:15.917-07:00The Great Bear MarketSocionomics, The Elliott Wave Principle, and the coming hard timesAVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.comBlogger140125tag:blogger.com,1999:blog-7063331580968428178.post-1642000814266730712013-03-31T16:59:00.000-07:002013-03-31T16:59:42.320-07:00The First Crack in the Dam (of Confidence)The bailout drama in Cyprus had created an atmosphere of uneasiness and suspense in Europe for the last two weeks. The significance of the events has been dismissed by most people, even economists and political pundits, all pointing out the fact that because Cyprus makes up just 0.2% of the European Union's GDP, that the damage to the larger Eurozone would be minimal. However, the economy is global with a lot of working parts integrated together (and has been that way since the 1400s, but society is more connected now than back then), meaning that when one part sustains damage or goes down, a chain reaction can happen.<br />
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As will be demonstrated here, the drama in Cyprus is much more serious than many would think. What happens in Cyprus affects the European Union, and eventually, the entire Western World. The next phase of the "Crisis of the Western World" is approaching. The drama in Cyprus started when the two largest Cypriot banks became insolvent and needed a 10 billion euro bailout.<br />
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The stage for the <a href="http://en.wikipedia.org/wiki/Cyprus_financial_crisis">Cypriot financial crisis</a> was set with excessive exposure to the Greek debt crisis (through investment in Greek treasury bonds, which have been considered junk bonds) and the downgrading of the Cyprus economy to junk status. Moody's had downgraded the credit rating of Cyprus to junk status on March 2012, citing the need for the Cyprus government to inject more capital into the banks. In June 2012, Fitch downgraded Cyprus bonds to BB+, no longer qualifying as investment grade as far as acceptance as collateral by the ECB is concerned. A short time later, Cyprus requested a bailout from the European Union's <a href="http://en.wikipedia.org/wiki/European_Financial_Stability_Facility">Eurpean Financial Stability Facility</a> or <a href="http://en.wikipedia.org/wiki/European_Stability_Mechanism">European Stability Mechanism</a>. <br />
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The drama started on March 16, 2013 when the European Union agreed to a 10 billion euro deal with Cyprus. In the first action of its kind, the part of the terms of the bailout is a so-called "wealth tax" that takes up to 10% of deposits for all domestic bank accounts.<br />
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1 -- <a href="http://orldnews.nbcnews.com/_news/2013/03/17/17345457-cypriots-asked-to-surrender-up-to-10-percent-of-bank-balances-in-return-for-eu-bailout?lite">News of the "wealth tax" sparked a mini-bank run in which people attempted to pull their money out of the banks as fast as they can</a>. Many local ATMs ran out of cash in a matter of hours. With the sudden scarcity of cash in Cyprus due to the bank closures, <a href="http://w.zerohedge.com/news/2013-03-20/cyprus-atms-low-cash-credit-card-payments-refused-medvedev-compares-europe-ussr">many businesses have stopped accepting credit card payments</a>.<br />
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2 -- <a href="http://www.reuters.com/article/2013/03/19/us-cyprus-parliament-idUSBRE92G03I20130319">The Cypriot government rejected the terms of the bailout on March 19, 2013</a>. In the aftermath of the failed vote, <a href="http://globaleconomicanalysis.blogspot.com/2013/03/regularors-prepare-for-run-on-cypriot.html">The Cypriot government declared a bank holiday that would eventually last over a week</a>. When the banks re-opened on March 28, 2013, <a href="http://www.bbc.co.uk/news/business-21963462">capital controls were were already in place setting limits on how much money can be withdrawn</a> along with the deployment of police in the streets amid the fears of a bank run. <br />
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3 -- <a href="http://theeconomiccollapseblog.com/archives/this-is-what-it-feels-like-to-have-your-life-savings-confiscated-by-the-global-elite">When the bank holiday ended in Cyprus, the damage was already done</a>. Many businesses and aging retirees saw their savings wiped out by the "wealth tax", losing as much as 80% of their life savings overnight.<br />
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<a href="http://www.nbcnews.com/business/economywatch/bernanke-cyprus-poses-no-major-risk-u-s-banks-economy-1C8975365">Many politicians, economists, financial analysts, and news pundits have shrugged off the drama in Cyprus as "not a big deal"</a>. The significance of the events in Cyprus is not recognized by most people. Confidence is an ironic thing --- it takes decades to build, but it takes only a few days to tear it down. Confidence is a very important part of keeping the banks fully functional. With the "wealth tax" genie now out of the bottle, <b>the first crack in the dam (of confidence) has formed</b>. The "wealth tax" has already caused some real damage to people in Cyprus and it has also caused many people in southern Europe to question whether their savings accounts and checking accounts are truly safe.<br />
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When people no longer feel that the money they have in the banks is safe, they become more likely to pull it all out. There is a reason why people stuffed their money under their matress in the 1930s during and shortly after the Great Depression (hint -- over 9000 banks imploded from 1929 to 1932).<br />
There are very strong indications that the people at the top of the pyramid are oblivious to the cracks in the dam of confidence (see above). When a dam develops a crack, it becomes weakened and the cracks get larger over time. Eventually, the entire dam gives way and bursts.<br />
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There are already indications of more cracks in the dam of confidence that could form in the future:<br />
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1 -- <a href="http://globaleconomicanalysis.blogspot.com/2013/03/slovenia-under-pressure-risk-of-next.html">Banks in Slovenia are in need of billions of euros of fresh capital and are struggling with bad loans that equal a fifth of the country's economic output</a>.<br />
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2 -- <a href="http://globaleconomicanalysis.blogspot.com/2013/03/canada-discusses-forced-depositor-bail.html">There is already discussion of depositor haircut provisions for systemically important banks in Canada as part of the 2013 budget</a>.<br />
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<b>The first crack in the dam of confidence has formed</b>. Over time, the cracks are expected to get larger, weakening the dam over time. When the dam bursting event takes place, the result is a full scale bank run throughout the Western World. The dam bursting event is most likely to take place in 2015 or 2016 and will start in Europe before spilling into the United States and Canada. The "tax wealth" genie is out of the bottle and it is going to be very difficult for people in high places to put it back in.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com10tag:blogger.com,1999:blog-7063331580968428178.post-2335490915512226782013-03-10T19:18:00.000-07:002013-03-10T19:18:28.412-07:00The Mother of All BubblesIt is very obvious that the credit bubble is still expanding even as it already exceeds the South Sea and Mississippi bubbles in size, magnitude, and duration. The credit bubble that is in play throughout the Western World (not just the United States) is literally the mother of all bubbles. <b>The credit bubble did not burst during the "Panic of 2008"</b>, in fact, the bubble is over 40% larger than it was in 2007.<br />
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The credit bubble formed in 1974, at the start of <span style="color: magenta;">Cycle wave V</span> (1974 - 2000) up and continued to expand in size and area of influence. As we approached the peak of <span style="color: #45818e;">Grand Supercycle wave [III]</span> (1784 - 2000), a series of smaller bubbles started to form. With a very long topping process in play, we have seen a series of smaller bubbles form and pop in succession even as the mother of all bubbles, the credit bubble, continues to relentlessly expand.<br />
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Here is a long term chart of the DJIA from 1997 - 2021 illustrating the topping process and the bubbles:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhy3quGfYPzVIvV0jwnJNvwPBSgJIZehc3y0MabjjuwN-zvz7dhqzWTk8Pz6tO4TSHjGSQpRpykipjMbnIi6vRCobJxwlBPOpVeC7kjBm4b3Faz2iAkqAzAImGUubQAv23fQ2VlKoju4bp9/s1600/DJIAChart03082013A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="253" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhy3quGfYPzVIvV0jwnJNvwPBSgJIZehc3y0MabjjuwN-zvz7dhqzWTk8Pz6tO4TSHjGSQpRpykipjMbnIi6vRCobJxwlBPOpVeC7kjBm4b3Faz2iAkqAzAImGUubQAv23fQ2VlKoju4bp9/s400/DJIAChart03082013A.jpg" width="400" /></a></div>
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As the chart illustrates, the first of the smaller bubbles to form and go parabolic was the dot com bubble, also known as the tech bubble. The Nasdaq went parabolic in 1997 and shot up to a peak of 5132. <a href="http://en.wikipedia.org/wiki/Dot-com_bubble">More information on the dot com bubble is here</a>. The bubble popped in 2000, ushering in the first stage of the Grand Supercycle degree bear market and associated major depression in the Western World. The DJIA and S&P 500 also peaked in terms of gold and PPI at the peak of the dot com bubble, and the peak has not been exceeded since. The aftermath of the bursting of the dot com bubble unfolded during <span style="color: #f1c232;">Primary wave [A]</span> of <span style="color: magenta;">Cycle wave a</span> and lasted roughly 34 months. The Nasdaq reached a low of 1108 on October 2002.<br />
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In 2003, The Bush 43 Administration and the Federal Reserve attempted to re-inflate the dot com bubble. With the credit bubble relentlessly expanding, the housing bubble started to go parabolic with the government taking part in the bubble. George W. Bush, during the 2003 state of the union address, said that "everyone should be able to afford a house". The parabolic phase of the housing bubble unfolded during <span style="color: #f1c232;">Primary wave [B]</span> of <span style="color: magenta;">Cycle wave a</span> in which the DJIA soared to over 14000 and the S&P 500 hit 1576. While the DJIA reached new highs in nominal terms (DJIA/$ ratio), it remained well below the 2000 high in real terms (DJIA/gold ratio and the DJIA/PPI ratio). The housing bubble popped during the 5 year rally. <a href="http://en.wikipedia.org/wiki/United_States_housing_bubble">The popping of the housing bubble, and the sub-prime mortgage crisis that followed</a>, would play a strong role in ushering in the "Panic of 2008", which unfolded during <span style="color: #f1c232;">Primary wave [C]</span> of <span style="color: magenta;">Cycle wave a</span>.<br />
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In 2009, the Obama Administration and the Federal Reserve started its attempt to re-inflate the housing bubble. The Obama Administration has thrown more than $7 trillion in cheap money into the economy, and the Federal Reserve has done a series of QE programs since March 2009. The money has pretty much stayed at the top of the pyramid, pumping up equity and commodity markets as well as causing the college bubble, the social media bubble, the Apple bubble, and the Google bubble to go parabolic. The current reflationary period, <span style="color: #f1c232;">Primary wave [A]</span> of <span style="color: magenta;">Cycle wave b</span>, is unfolding as a double zigzag with a projected peak in June 2014.<br />
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The rally off the March 2009 low is corrective and the rally has been unfolding with declining volume, with volume spikes during the Flash Crash and the large pullback in August 2011. The chart illustrates the bear market rally:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigqTYcQv7njyb8uIEYgfMZnZCo8n_Amx2qGjdS1_Lv-zA_QJL49RB5GV2bvsn-YZcwaRgQHfW_SR5krQO2X2Y_qL3WWZO8HV3OOEGFhd8jn24g8xMzoQtYuU6qKqXjOxHo4A-CBkS0UtRG/s1600/DJIAChart03082013B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="346" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigqTYcQv7njyb8uIEYgfMZnZCo8n_Amx2qGjdS1_Lv-zA_QJL49RB5GV2bvsn-YZcwaRgQHfW_SR5krQO2X2Y_qL3WWZO8HV3OOEGFhd8jn24g8xMzoQtYuU6qKqXjOxHo4A-CBkS0UtRG/s400/DJIAChart03082013B.jpg" width="400" /></a></div>
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<b>In bull markets, volume rises as the market rises, and falls during pullbacks</b>. Volume is a very important momentum indicator. Even as the DJIA rose to new all-time highs in nominal terms, the DJIA is still far below the 2000 and 2007 peaks in real terms with the DJIA/gold ratio at 45.9 in 2000, ~16 in 2000 and it is at ~8 now.<br />
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Markets are expected to pull back for a few months, then soar again as the final stage of the Apple Bubble unfolds from July 2013 to June 2014. The chart of Apple illustrates the final stage of the bubble:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwbxiM4vEm05F2SH-EaZxBWNFtI8b5CQWgYhuiUTtVmlTGafPyAV2j_W52y7ArHbCrezE9-TF_vIiyrIGgOq4hDgvBLeEwjZtIasZ38abvfQZ_obEqXq7UaPZ0XVrEWmvFC3MV9eELoKil/s1600/AppleChart03082013.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="230" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwbxiM4vEm05F2SH-EaZxBWNFtI8b5CQWgYhuiUTtVmlTGafPyAV2j_W52y7ArHbCrezE9-TF_vIiyrIGgOq4hDgvBLeEwjZtIasZ38abvfQZ_obEqXq7UaPZ0XVrEWmvFC3MV9eELoKil/s400/AppleChart03082013.jpg" width="400" /></a></div>
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Apple's stock should fall to a low of $350 a share in July 2013. The structure is clearly corrective, unfolding as either a double zigzag or a triple zigzag. The final stage of the Apple Bubble is expected to unfold as an epic melt-up in the company's stock. Apple is a global corporate bellwether in the same way that the South Sea Company was a global corporate bellwether in the 1700s, so the influence of the bubble will be global. The melt-up is expected to have a very powerful influence, with many tech and social media companies taken along for the ride. The implication of the epic melt-up is a very powerful rally in equity markets with the <b>DJIA hitting 17500</b> and the <b>S&P 500 hitting 1900</b> at the peak of the Apple Bubble. <a href="http://www.thebubblebubble.com/social-media-bubble/">It is worth noting that social media has morphed into a full blown bubble of its own</a>, and Google has also turned into a bubble as well.<br />
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The Apple Bubble is expected to burst around June 2014 -- at a Kondratieff Cycle high point. The bursting of the Apple Bubble is expected to trigger the bursting of the Goggle bubble and the social media bubble, and the ripple effect will rip the job market apart throughout the Western World. The bursting of the Apple Bubble will usher in <span style="color: #f1c232;">Primary wave [C]</span> of <span style="color: magenta;">Cycle wave w</span> (2000 - 2019) in the Nasdaq and <span style="color: #f1c232;">Primary wave [B]</span> of <span style="color: magenta;">Cycle wave b</span> (2009 - 2021) in the DJIA and the S&P 500.<br />
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With a lot of three wave structures in the Nasdaq since the March 2009, the rally from the March 2009 low in the Nasdaq is very likely unfolding as an ending diagonal, as this chart shows:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7IfNaNX0Qx3Unc7M-izJx8iEOvuIU6_6KSClUp6mnV3cqTJMdfuqe2TECH1YlwzW1V4GVuSL8yviDa-A41Gig7Q_0WIVmlJta1_VDSdojCrkwv195-795vFPnV0xiJS7XiGjmJtdNruu6/s1600/NasdaqChart03082013A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="228" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7IfNaNX0Qx3Unc7M-izJx8iEOvuIU6_6KSClUp6mnV3cqTJMdfuqe2TECH1YlwzW1V4GVuSL8yviDa-A41Gig7Q_0WIVmlJta1_VDSdojCrkwv195-795vFPnV0xiJS7XiGjmJtdNruu6/s400/NasdaqChart03082013A.jpg" width="400" /></a></div>
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The longer term chart of the Nasdaq shows a Cycle degree zigzag in progress, likely the first part of <span style="color: #38761d;">Supercycle wave (a)</span> (2000 - 2042) in the index, which should unfold as a double zigzag:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjybPBKsHFj588hlR9UQXqGRvzdaArnULOy57aZFM0VerHG1AHXEul-G8wirGc6skUw77mrW7RGewHb6p8OHyB0U_CY3a5fCkM916tU7bLPDshbuR3-0l39iQtjxiCoYnV1cBDSROISEx_V/s1600/NasdaqChart03082013B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="228" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjybPBKsHFj588hlR9UQXqGRvzdaArnULOy57aZFM0VerHG1AHXEul-G8wirGc6skUw77mrW7RGewHb6p8OHyB0U_CY3a5fCkM916tU7bLPDshbuR3-0l39iQtjxiCoYnV1cBDSROISEx_V/s400/NasdaqChart03082013B.jpg" width="400" /></a></div>
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The Nasdaq from 2000 clearly builds the case for the Apple bubble, the Google bubble, and the social media bubble bursting in 2014, while the college/student loan bubble and the credit bubble continues to expand all the way to the end of the "extend and pretend" phase of "The Great Deflation".<br />
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The mother of bubbles, the credit bubble, will continue to expand all the way to the end of <span style="color: magenta;">Cycle wave b</span> (2009 - 2021). Rising interest rates, combined with the continued addiction for debt throughout the Western World, will eventually cause the credit bubble to burst, which would also trigger the bursting of the <a href="http://www.thebubblebubble.com/college-bubble/">college / student loan bubble</a>. Just before the bursting occurs, the DJIA will reach 18750 and the S&P 500 will reach 2100. The bursting of the credit bubble will usher in the third phase of "The Great Deflation", <span style="color: magenta;">Cycle wave c</span> (2021 - 2042) of <span style="color: #38761d;">Supercycle wave (a)</span> (2000 - 2042) in which a deflationary collapse of the economy throughout the Western World unfolds in full force.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com2tag:blogger.com,1999:blog-7063331580968428178.post-69828608121529038892013-02-12T20:48:00.000-08:002013-02-12T20:48:44.872-08:00The Road to Plutocracy AcceleratesWith all eyes on the state of the union speech by President Obama with the speech focused mostly on the economy, more evidence continues to emerge that the gap between the top 1% and the bottom 99% continues to widen at a very fast clip. The internals continue to be consistent with being in the second phase of "The Great Deflation".<br />
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The real story of President Obama's economic policy is <b>gold</b>, which was at around $600 an ounce at the start of the Obama Administration Period, which then rose to a high of $1921 an ounce before entering a long consolidation period. Gold is getting ready to explode higher, <b>poised to go to $2000 an ounce and beyond in the very near future</b>. The intermediate term chart of gold illustrates where we are with a leading diagonal in progress:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOTgePzFTdb8L19FSnH5JMy74Hm5j1GkbivMzXQfbpH62eU01xQBf09POlvycaaGk4jB1KszS1GCqe9UOb1JdUhSQrzw_LJHaVh_gXS_8j1p9LD24STW6gTioA8HO2Wm48CZk2S61wH94-/s1600/GoldChart02122013A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="252" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOTgePzFTdb8L19FSnH5JMy74Hm5j1GkbivMzXQfbpH62eU01xQBf09POlvycaaGk4jB1KszS1GCqe9UOb1JdUhSQrzw_LJHaVh_gXS_8j1p9LD24STW6gTioA8HO2Wm48CZk2S61wH94-/s400/GoldChart02122013A.jpg" width="400" /></a></div>
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Gold has been recognized as money for thousands of years, going all the way back to past civilizations such as the Roman Empire, the Babylonian Empire, and the Assyrian Empire. There is a reason why gold has been on a tear on President Obama's watch : trillions of dollars of economic stimulus that has been pumped into the system since 2009, starting with the $787 billion stimulus package passed in February 2009, has devalued the dollar, therefore resulting in chronic inflation. <a href="http://www.cnbc.com/id/100454861">In the aftermath of the state of the union speech, platinum shot up over $10 an ounce to over $1700 an ounce and palladium shot up over $2 an ounce to over $770 an ounce, a 17 month high</a>. <br />
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Trillions of dollars of economic stimulus <a href="http://www.nbcnews.com/business/economywatch/us-economys-contraction-just-brief-pause-1B8174851">could not stop the nominal GDP from going into the red with a 0.1 % annual rate of decline in nominal GDP (GDP / $ ratio) during the last quarter of 2012</a>. We are in the declining portion of the business cycle, with the low point to be reached in the 2016 - 2017 time frame. Factoring in the actual rate of inflation as per shadowstats.com, the real GDP (GDP / actual CPI ratio) declined at a rate of around 5.1% a year in fourth quarter 2012, and production of goods and services in the United States has fallen below 1982 levels.<br />
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For all the economic stimulus pumped into the system during the Obama Administration Period, the money has pretty much stayed at the top of the pyramid. Last year (<a href="http://thegreatbearmarket-avbursch.blogspot.com/2012/04/update-on-road-to-plutocracy.html">see this post</a>), the top 1% had captured 93% of nominal GDP growth since the false recovery (that does not exist in real terms) started in late 2009. As evidence that the top 1% continues to pull away from the bottom 99%, <a href="http://www.huffingtonpost.com/2013/02/12/top-one-percent-income-gains_n_2670455.html">the portion of the nominal GDP growth that has been captured by the top 1% since the start of the false recovery is now at 121%</a>. Not only has the road to plutocracy continued during the Obama Administration Period, but the process is accelerating. The rate that the gap between the rich and the poor is widening in the United States is accelerating as evidenced by the top 1% capturing 121% of nominal GDP gains. This means that the middle class is on the road to extinction <a href="http://theeconomiccollapseblog.com/archives/35-statistics-about-the-working-poor-in-america-that-will-blow-your-mind">with 35 statistics to prove the point</a>.<br />
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Inflation will continue to reign during the second phase of "The Great Deflation" with the second phase, <span style="color: magenta;">Cycle wave b</span> or <span style="color: magenta;">x</span> within <span style="color: #38761d;">Supercycle wave (a)</span> down (2000 - 2042) to continue until 2021. While the second phase is in play, inflation will continue to accelerate. Look for President Obama to push for more economic stimulus in the future with all the stops pulled out starting in 2014, especially as the nominal GDP and the job market goes farther into the red. This is very bullish for precious metals, especially gold. Gold is in the midst of <span style="color: magenta;">Cycle wave V</span> up (2001 - 2021) of a larger supercycle degree advance. It is quite possible that President Obama will pull all the stops out in terms of pumping economic stimulus into the system in the 2014 state of the union address, vowing to take all necessary steps to prop up the economy --- this could easily correspond to the center of <span style="color: magenta;">Cycle wave V</span> up in gold in which a powerful "third of a third" event takes place in which gold shoots up as much as $400 an ounce in a single day.<br />
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Chronic inflation is also expected to result in rising unemployment, now at 23% (according to shadowstats.com) as businesses and corporations take steps to remain profitable. With a large degree bear market unfolding, the mantra for businesses and corporations continues to be "limits and conservation", and the latest development <a href="http://globaleconomicanalysis.blogspot.com/2013/01/meet-baxter-robot-out-to-get-your.html">is the use of robots to perform tasks in the place of human workers</a>. As robots continue to go down in price and become more advanced, it will be more and more intuitive for businesses and corporations to replace human workers with robots in a corporate culture dominated by a "limits and conservation" mentality. Science fiction, as depicted in <a href="http://en.wikipedia.org/wiki/Phantom_2040">Phantom 2040</a>, <a href="http://en.wikipedia.org/wiki/I,_Robot_%28film%29">I Robot</a>, and <a href="http://en.wikipedia.org/wiki/Borderlands_2">Borderlands 2</a>, which all feature the use of robots in the corporate work force, is fast becoming science fact. The replacement of human workers with robots will also have the effect of widening the gap between the top 1% and the bottom 99%.<br />
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A plutocracy is still in the forecast for the United States, starting in 2042 and continuing until 2076, consistent with the expected character of <span style="color: #6aa84f;">Supercycle wave (b)</span> of <span style="color: #45818e;">Grand Supercycle wave [IV]</span> in terms of economic internals in which only a very small cross section of the populace takes part in the return to prosperity after "The Great Deflation" climaxes in 2042.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-59058803999594734962012-12-28T22:50:00.000-08:002012-12-28T22:50:45.453-08:00The Fall of ObamaAll the indicators are now pointing to President Obama approaching a peak of monumental scale with a massive decline (in the "Obama brand") to follow in the aftermath. The peak appears to be imminent if not already upon us. The DJIA, the S&P 500, and the Wilshire 5000 are also indicating a peak of monumental size is in the making as well as <span style="color: #f1c232;">Primary wave [A]</span> up (2009 - 2012) has run its course with a massive wedge collapse in progress.<br />
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Obama's approval rating is currently at 54% (and peaking), having rose from 48% just before the 2012 elections, but still forming a lower high relative to the May 2011 peak in which Obama's approval rating reached a high of 61%. The lower high is in play in spite of the markets putting in a higher high relative to May 2011.<br />
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A few days ago, President Obama was named "Person of the Year" on Time Magazine and appeared on the magazine cover. The magazine cover picture can be seen <a href="http://www.msnbc.msn.com/id/34418425">here</a>. The <b>Magazine Cover Indicator </b>is a peaking signal --- it is an indication that the "Obama brand" is approaching a peak of massive scale and a multi-year decline is imminent.<br />
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Here is a chart of the DJIA with the <b>Magazine Cover Indicator</b> event labelled:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh1U5PxPzqux-ESmZCPyU2PoP5AC5Z-HA7vPILoPOUZj_MlrqYSeqfFxfqN_6uqLxWvoteKgT5OMDLvZhRSu5pcqwY09K7yi1I2aHs2UHTKUtRbPZfB5UkZ2pAkzeJvwMTyFHLwEqzjDW2/s1600/DJIAChart12282012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="263" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh1U5PxPzqux-ESmZCPyU2PoP5AC5Z-HA7vPILoPOUZj_MlrqYSeqfFxfqN_6uqLxWvoteKgT5OMDLvZhRSu5pcqwY09K7yi1I2aHs2UHTKUtRbPZfB5UkZ2pAkzeJvwMTyFHLwEqzjDW2/s400/DJIAChart12282012A.jpg" width="400" /></a></div>
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Notice that the event occurred close to the peak of <span style="color: lime;">Minute wave [b]</span> up within a larger double zigzag structure. Since the event, the DJIA, S&P 500, and the Wilshire 5000 closed down roughly 2% for the week with the DJIA declining 158 points earlier today.<br />
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The primary count still favors the double zigzag structure for the wedge collapse, <span style="color: red;">Intermediate wave (A)</span> of <span style="color: #f1c232;">Primary wave [B]</span> down (2012 - 2016), with the double combination (expanded flat - x wave - zigzag) structure being the alternate scenario. The proposed <span style="color: lime;">Minute wave [b]</span> within <span style="color: #3d85c6;">Minor wave W</span> has retraced 90% of the proposed <span style="color: lime;">Minute wave [a]</span> in the Wilshire 5000, but still well short of the 90% threshold for the DJIA and the S&P 500.<br />
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The implication of a wedge collapse in the stock market is a fast decline in social mood. With social mood going south fast, approval ratings will also take a big hit with Obama's approval rating possibly falling below 30% by June 2013. On the short term, the United States is facing a "<a href="http://en.wikipedia.org/wiki/Fiscal_cliff_debate">fiscal cliff crisis</a>" with President Obama and John Boehner desperately hoping to reach a deal on taxes and spending before the clock expires. The United States is also facing a "debt ceiling crisis" as well with the $16.4 trillion debt limit on the verge of being hit (if not already there) with the <a href="http://www.huffingtonpost.com/2012/12/26/timothy-geithner-debt-limit_n_2366583.html?utm_hp_ref=timothy-geithner">Treasury Department using accounting maneuvers to buy time for Congress to act on raising the debt ceiling</a>. A rapid increase in bearish social mood due to a wedge collapse is expected to result in increasing strife and discord between President Obama and John Boehner with a dangerous game of chicken involving the US economy once again in play. The best case scenario is for the can known as the "Bush Tax Cuts" to get kicked down the road once again. The worst case scenario is for the United States to actually go off the fiscal cliff due to strife and discord in the political arena with austerity measures in the form of tax increases and spending cuts to go into effect as soon as we enter the year 2013. It is possible that going off the fiscal cliff (if it were to happen) will lead to another credit rating downgrade on US government debt as we approach the climax of <span style="color: red;">Intermediate wave (A)</span> of <span style="color: #f1c232;">Primary wave [B]</span> down on June 2013.<br />
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In spite of the fiscal cliff drama and the debt ceiling about to be hit, the American populace is still very optimistic about Obama's accomplishments in the years ahead, with many already comparing Obama to FDR:<br />
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1 -- <a href="http://blogs.aljazeera.com/blog/americas/fdr-versus-obama">FDR vs Obama</a> -- "Obama invokes FDR in his convention speech". The American populace already see Obama as a parallel of FDR.<br />
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2 -- <a href="http://www.politico.com/news/stories/1211/69834.html">Politico -- "Obama Channels Teddy Roosevelt"</a>. Even centrist Republicans are displaying optimism on Obama's future legacy. This shows that the bullish optimism is broad based and not confined to the liberal factions in the American populace.<br />
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3 -- <a href="http://suite101.com/article/comparing-barack-obama-to-franklin-d-roosevelt-a88931">Suite 101 -- "Comparing Barack Obama to Franklin D Roosevelt"</a>. Even in early 2009 with the climax of <span style="color: magenta;">Cycle wave w </span>(2000 - 2009) of <span style="color: #38761d;">Supercycle wave (a)</span> down (2000 - 2042) unfolding, people were still very optimistic that Obama would be the new FDR.<br />
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Comparisons to FDR are a product of linear extrapolation. With the 2012 election completed with Obama winning a second term, just about everyone is making large extrapolation leaps with the prediction that Obama will have an FDR type of legacy in 2017. The tendency for large extrapolation leaps is yet another peaking signal, along side the "Magazine Cover Indicator".<br />
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The "Obama brand" is expected to collapse in the coming years as <span style="color: #f1c232;">Primary wave [B]</span> (2012 - 2016) of <span style="color: magenta;">Cycle wave x</span> (2009 - 2021) unfolds with the peak about to be reached before the multi-year decline starts. During the wedge collapse, <span style="color: red;">Intermediate wave (A)</span>, Obama's approval rating is expected to fall to the 28% to 32% range by June 2013. During <span style="color: red;">Intermediate wave (B)</span> up, which should unfold from June 2013 to June 2014, Obama's approval rating will get a sizable bounce, but put in a lower high (low to mid 40s approval rating) relative to the current approval rating peak of 54%. During <span style="color: red;">Intermediate wave (C)</span> down from June 2014 to June 2016, markets are expected to embark on a massive waterfall decline. With Obama's approval rating falling to the low 20s by 2016, bearish social mood is expected to result in the GOP attempting to get Obama impeached starting in 2015 -- the impeachment is expected to be successful in the House, but expected to fail in the Senate (Democrats will be united in keeping Obama in power). <b>Obama's approval rating could easily fall below 20% by the time the 2016 election takes place</b>.<br />
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<br />AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com1tag:blogger.com,1999:blog-7063331580968428178.post-17405635735125054012012-12-16T01:20:00.000-08:002012-12-16T01:20:06.028-08:00Hard Times, Not End TimesAs we approach the fateful date, December 21, 2012, the doomsday phobia continues to grow. With social mood going south again with the retracement of the 2 year bearish rising wedge in the DJIA, S&P 500, and Wilshire 5000 in progress, the doomsday phobia is likely to grow more and more pervasive as we go through the last few days before reaching December 21, 2012.<br />
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Here is an updated chart of the DJIA, showing the retracement of the rising bearish wedge in progress:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidW29O6SjehTDAJVyWvtwAKnZ3yGMbNtXLg_Qgn5CNXbtwNdItp8DZVYWKzWUNdYW3sXCg0B6xKNb0-lzi56n_AsGURcJAxfVQ3vJuloWnxIFsI_xh5DWwGiNiTWE1ehlqG8t8PjwiY4cf/s1600/DJIAChart12152012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="262" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidW29O6SjehTDAJVyWvtwAKnZ3yGMbNtXLg_Qgn5CNXbtwNdItp8DZVYWKzWUNdYW3sXCg0B6xKNb0-lzi56n_AsGURcJAxfVQ3vJuloWnxIFsI_xh5DWwGiNiTWE1ehlqG8t8PjwiY4cf/s400/DJIAChart12152012B.jpg" width="400" /></a></div>
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The primary count is that the wedge collapse is <span style="color: red;">Intermediate wave (A)</span> down of <span style="color: #f1c232;">Primary wave [B]</span> down (2012 - 2016) of <span style="color: magenta;">Cycle wave x</span> up (2009 - 2021) with the wedge collapse unfolding as a double zigzag. There are other possibilities, of course, on how the wedge collapse could unfold, as it could also unfold as a zigzag, triple zigzag, or even a double combination structure (expanded flat -- x wave -- zigzag). The double combination scenario would involve the markets putting in a marginal new high (the rally off the November 2012 low point is clearly corrective) before commencing lower to complete <span style="color: #3d85c6;">Minor wave W</span> down as an expanded flat, which would be followed by <span style="color: #3d85c6;">Minor wave X </span>(any corrective pattern) and then <span style="color: #3d85c6;">Minor wave Y</span> down unfolding as a zigzag.<br />
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Here is a chart showing the wedge collapse in detail:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhzE6sTKROJS00kW-TRwp10-S-tDVL9xbDnMXaQ4HpRj_7lTg7SYXllYGWfRScv46QM-dsSHXdF7rpZ1t8ZgJxPV6R6uR2Ujq0nOqEARnfVDsL4MZH54DdxNlTicI08F-_9WoLGcJbu6TCh/s1600/DJIAChart12152012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="262" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhzE6sTKROJS00kW-TRwp10-S-tDVL9xbDnMXaQ4HpRj_7lTg7SYXllYGWfRScv46QM-dsSHXdF7rpZ1t8ZgJxPV6R6uR2Ujq0nOqEARnfVDsL4MZH54DdxNlTicI08F-_9WoLGcJbu6TCh/s400/DJIAChart12152012A.jpg" width="400" /></a></div>
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Markets may be able to find support at the area shown by the red box. The support level is very significant because it is the level associated with the most recent Zweig Breadth Thrust signal. Losing this level as support is considered bearish, so the markets are expected to hold the level (11000 - 11250) as support for at least a short time. However, the larger bear market trend will be in control, so the support level is expected to be lost quickly as <span style="color: #3d85c6;">Minor wave Y</span> of the double zigzag unfolds, which would then be followed by a full retracement of the 2 year rising bearish wedge a short time later.<br />
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As we approach December 21, 2012, the doomsday phobia is already in full swing, of course augmented by social mood going south at Primary degree within a much larger bear market. In spite of <a href="http://www.nasa.gov/topics/earth/features/2012.html#mayans">NASA debunking the 2012 doomsday scenario</a>, <a href="http://news.yahoo.com/video/whoknew-strange-phobias-end-world-025014290.html">there are still at least 1 out of every 10 people that believe that the world is ending</a> just days from now.<br />
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Here is a Google Trends chart from 2004 to present with the search term "2012 apocalypse"<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhd6a5qM2XxaNB_hF_QexEz9WElGixUgglaY1M7w6_T1CddAQd58dMAQoUuN7G7ohg7JS0-GmLKkvWR2nzz_8OT7dQROw32vzAomJqGDV4OIhwcGWMYKUXsM9qETMVqoefq344Rg8krqBO5/s1600/GoogleTrendsChart2012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="130" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhd6a5qM2XxaNB_hF_QexEz9WElGixUgglaY1M7w6_T1CddAQd58dMAQoUuN7G7ohg7JS0-GmLKkvWR2nzz_8OT7dQROw32vzAomJqGDV4OIhwcGWMYKUXsM9qETMVqoefq344Rg8krqBO5/s400/GoogleTrendsChart2012A.jpg" width="400" /></a></div>
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Here is a chart showing the trend in the last 90 days (the trend is up):<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEje_TrGmb_6FWj2Ap0Z5u3NKRpHBRQGTkHUzhnTF63uCECzGO9pSuZIkOJhATLZkej-3y1g0cTAhraXk-E9fxHErRGi5LskSbaqio22N0i46kue3FMLg5zM7-ZdxIihzpaG2_2Jra1BGC_r/s1600/GoogleTrendsChart2012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="128" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEje_TrGmb_6FWj2Ap0Z5u3NKRpHBRQGTkHUzhnTF63uCECzGO9pSuZIkOJhATLZkej-3y1g0cTAhraXk-E9fxHErRGi5LskSbaqio22N0i46kue3FMLg5zM7-ZdxIihzpaG2_2Jra1BGC_r/s400/GoogleTrendsChart2012B.jpg" width="400" /></a></div>
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Bear markets bring hard times for humanity. <b>But there is a great deal of difference between hard times and end times</b>. The Grand Supercycle degree bear market that started unfolding in 2000 is going to result in hard times for many people, but it certainly won't result in the end of the world or the end of human civilization. People were able to weather through the last bear market of comparable magnitude (<span style="color: #45818e;">Grand Supercycle wave [II]</span> down (1720 - 1784)) and human civilization was never in danger of coming to its end back then. <b>We will still be here in 2013</b>, and for that matter, human civilization will still be around when the bear market ends in 2118.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com3tag:blogger.com,1999:blog-7063331580968428178.post-51831560585701539412012-11-27T16:41:00.000-08:002012-11-27T16:41:22.193-08:00Skyscraper Indicator Signals a TopFor the third time in less than 15 years, the <a href="http://en.wikipedia.org/wiki/Skyscraper_Index">Skyscraper Indicator</a> is issuing a peaking signal. The indicator was pioneered in January 1999 by Andrew Lawrence, research director of <a href="http://en.wikipedia.org/wiki/Dresdner_Kleinwort_Wasserstein">Dresdner Klienwort Wasserstein</a>, showing that the world's tallest buildings have risen on the eve of economic downturns.<br />
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In the last 15 years, the skyscraper indicator signaled a top in 1997-1999, 2007, and now. A chart of the DJIA of the last 15 years with the important events labelled puts it in perspective:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj055D3CmLMkfY1pZDkqeOqKaIAFUbYjG14kA4dobniCqEL6k6KGSE2QmHe-36BGb5tMgWn6XRzuhyphenhyphenIRwpQGysat_IWRvq3M-INQ62VeECojbWy8Os4BEDy1Eno5U0ldl4D577s15IJdLe8/s1600/DJIAChart11212012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj055D3CmLMkfY1pZDkqeOqKaIAFUbYjG14kA4dobniCqEL6k6KGSE2QmHe-36BGb5tMgWn6XRzuhyphenhyphenIRwpQGysat_IWRvq3M-INQ62VeECojbWy8Os4BEDy1Eno5U0ldl4D577s15IJdLe8/s400/DJIAChart11212012A.jpg" width="400" /></a></div>
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As the chart indicates, the Petronus Towers in Malaysia were built in 1997 with a height of 1461 ft (448 meters), indicating that a large degree peak was imminent. The completion of the towers was quickly followed by the <a href="http://en.wikipedia.org/wiki/Asian_financial_crisis">Asian Financial Crisis</a>, a small taste of the economic major depression that would follow less than 3 years later. Just 2 years later, an even larger building, the Taipei 101 in Taiwan was built, soaring 1671 ft (512 meters) high. The completion of the Taipei 101 was closely followed by the end of the Grand Supercycle degree advance that started in 1784 and the beginning of the economic major depression, the "Crisis of the Western World".<br />
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A long topping process has been in progress since the onset of the Grand Supercycle degree bear market, with exuberant optimism stubbornly holding its ground. After the initial decline following the bursting of the dot com bubble in 2000, the DJIA, the S&P 500, and the Wilshire 5000 rallied to new highs in 2007. Just before the 2007 peak was reached, a skyscraper of unprecedented height started to take shape in Dubai as the Burj Khilifa rose 2717 feet (833 meters) into the sky upon completion. Shortly after the building was completed, the "Panic of 2008" struck the western world. The "Panic of 2008" climaxed in March 2009 at the end of the first phase of "The Great Deflation".<br />
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As we entered the second phase of "The Great Deflation" in March 2009, exuberant optimism returned within a year. Three years into the bear market rally, at the top of <span style="color: #f1c232;">Primary wave [A]</span> of <span style="color: magenta;">Cycle wave x</span> up (2009 - 2021), China is planning to build the world's tallest skyscraper in just 90 days (!). <a href="http://gizmodo.com/5962070/china-will-build-the-tallest-building-in-the-world-in-just-90-days">The new building, Sky City, is planned to be 220 stories, rise 2749 feet (838 meters) high, and be completed around March 2013</a>. As with the other two peaks, the construction of the building is expected to herald a multi-year decline in the stock market as well as a multi-year decline in the job market, which will be <span style="color: #f1c232;">Primary wave [B]</span> of <span style="color: magenta;">Cycle wave x</span>.<br />
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The second phase of "The Great Deflation" is expected to end in 2021, which would be the end of <span style="color: #f1c232;">Primary wave [C]</span> (2016-2021) of <span style="color: magenta;">Cycle wave x</span> (2009 - 2021) up. The second phase could easily climax with nations, states, cities, and even corporations, endeavoring to build skyscrapers well over 3000 feet (920 meters) tall just before the onset of the third phase of "The Great Deflation", <span style="color: magenta;">Cycle wave y</span> (2021 - 2042), in which a massive deflationary collapse unfolds in full force.<br />
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<a href="http://www.businessinsider.com/skyscraper-index-skyscrapers-signal-financial-recession-2012-1#want-more-bizarre-economic-indicators-13">The Skyscraper Indicator has proven to be a very strong predictor of impending economic downturns, going all the way back to the 1800s</a>. Here is a longer term chart of the DJIA showing the correlation between the building of skyscrapers and stock market peaks:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJEzMI7IC0mDujj8_WO1tmiRrB8ETSBvir8hpEOP1z77xptwlMgrAZauzBN01uqgqfiWn1ki59tzebNgKAVwW3OJDudcVtN2EcMOskrdPgRH-71CuY1oFx0Jj1L_9SzK-9J14As5_Up1hD/s1600/DJIAChart11212012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="263" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJEzMI7IC0mDujj8_WO1tmiRrB8ETSBvir8hpEOP1z77xptwlMgrAZauzBN01uqgqfiWn1ki59tzebNgKAVwW3OJDudcVtN2EcMOskrdPgRH-71CuY1oFx0Jj1L_9SzK-9J14As5_Up1hD/s400/DJIAChart11212012B.jpg" width="400" /></a></div>
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As shown in the chart above, when the Skyscraper Indicator issues a peaking signal, the peak is Cycle degree or higher, with the accompanying economic downturn being a major recession or larger. Due to the 21 year topping process that has been playing out since the onset of the bear market in 2000, social mood has remained very optimistic. With the construction of a massive skyscraper in China on the table, the indicator is issuing a peaking signal and another down-trend is imminent if not already in progress.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com2tag:blogger.com,1999:blog-7063331580968428178.post-55340900096501638142012-11-10T18:18:00.000-08:002012-11-10T18:18:13.075-08:00The Next Phase of the Apple BubbleThe next phase of the "Apple Bubble" has commenced. After peaking at $704 a share in late September 2012 and completing the ending diagonal that started in late May 2012, the retracement of the ending diagonal is in progress. The retracement of the ending diagonal is unfolding quite fast with two important support levels already taken out on the way down. In spite of the fast decline, there is a case to be made that the "Apple Bubble" did not burst and that new highs will be reached in the future.<br />
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Here is a close-up chart of Apple, showing the ending diagonal and the retracement in progress:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPCHGFj2t-zUA7p87e-r6Thjvz6wK_Te6DLnBFEJvD7z323padtj9TDExnmaVbhZoJESZcUnLCsfArV_z-vkJI-wpSYyDNeBMY5Ai0G4eJy_4LM2_B6jMiTUP-3yBcjsh6RnQhLDnHxoVf/s1600/AppleChart11102012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPCHGFj2t-zUA7p87e-r6Thjvz6wK_Te6DLnBFEJvD7z323padtj9TDExnmaVbhZoJESZcUnLCsfArV_z-vkJI-wpSYyDNeBMY5Ai0G4eJy_4LM2_B6jMiTUP-3yBcjsh6RnQhLDnHxoVf/s400/AppleChart11102012B.jpg" width="400" /></a></div>
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The first important support level that was broken after the peak was reached is the lower trend channel associated with <span style="color: #3d85c6;">Minor wave 5</span> of <span style="color: red;">Intermediate wave (3)</span> up. A clean break through the lower trend channel was the first sign of a trend change at Minor degree from up to down. The second important support level that was broken is the lower wedge line associated with the ending diagonal. Notice the acceleration in selling pressure that took place after the lower wedge line was broken -- this is very indicative of a wedge collapse in progress.<br />
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A close examination of the structure of the decline from the peak shows that the structure is corrective. <b>This means that the "Apple Bubble" has not burst yet, and the bursting event is still in the future</b>. The wedge collapse is unfolding as a double zigzag, meaning that it would be wave A of a triangle or (much more likely) an expanded flat. The structure is most likely <span style="color: #3d85c6;">Minor wave A</span> of a larger expanded flat. Within <span style="color: #3d85c6;">Minor wave A</span>, <span style="color: lime;">Minute waves [w]</span> and <span style="color: lime;">[x]</span> are completed as per the preferred count, and the second zigzag, <span style="color: lime;">Minute wave [y]</span>, is still unfolding. A relationship of <span style="color: lime;">Minute wave [y]</span> = 2.618 * <span style="color: lime;">Minute wave [w]</span> would give a downside target of <b>452</b> for the end of <span style="color: #3d85c6;">Minor wave A</span>. The ideal time for the end of the wedge collapse is <b>December 4, 2012</b>, which would make the time needed to complete the wedge collapse half of the time needed to construct the ending diagonal.<br />
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The larger picture is that <span style="color: red;">Intermediate wave (4)</span> down is in progress, unfolding as an expanded flat, which would then be followed by a five wave advance, <span style="color: red;">Intermediate wave (5)</span> up, which would also end the advance at Primary and Cycle degree as well. Here is a chart of Apple updating the larger picture:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0-7jFYtfLmmI7BZ4PjvKXO_WzsZvfWwaysXOXRUIBAblf7kYtxWobwfND-IJS084AMLHfQYOk2yYi3nr-DZ-EaeM05HXE7uYw6bXCaRKTY9hWnvOvLULFXAO301rP81VDXMh1ApBplLpx/s1600/AppleChart11102012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0-7jFYtfLmmI7BZ4PjvKXO_WzsZvfWwaysXOXRUIBAblf7kYtxWobwfND-IJS084AMLHfQYOk2yYi3nr-DZ-EaeM05HXE7uYw6bXCaRKTY9hWnvOvLULFXAO301rP81VDXMh1ApBplLpx/s400/AppleChart11102012A.jpg" width="400" /></a></div>
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The final stage of the "Apple Bubble" should start around June 2013 and last for 1 year, ending around June 2014. A final upside target of $875 to $1000 a share at the peak of the bubble is still in play. Once the final stage of the bubble is completed, the bubble will burst. The ripple effect from the bursting of the "Apple Bubble" will be global -- Just as the South Sea Company was a global bellwether in 1720, Apple is a global bellwether now, so the bursting of the bubble will result in financial fallout on a global scale, including the implosion of the job market throughout the Western World. The unraveling of the bubble should be quite swift, with the company's stock losing perhaps 90% of its value by June 2016.<br />
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The final stage of the "Apple Bubble" will play a central role in fueling a powerful rally in the stock market from June 2013 to June 2014, propelling the S&P 500 from 925 to 1550 and the DJIA from 9300 to 14400, as well as a robust wave 2 bounce in the Nasdaq and Nasdaq 100. Once the "Apple Bubble" bursts, the rally will unravel very fast, dropping the DJIA down to 5500 and the S&P 500 to around 525 by June 2016.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com1tag:blogger.com,1999:blog-7063331580968428178.post-57115872080899475032012-10-31T20:36:00.000-07:002012-10-31T20:42:55.155-07:00Frankenstorm, the Next Harbinger of Climate ChangeAll eyes have been focused on this year's 100 year storm known as Hurricane Sandy, which peaked at Category 2 strength before making landfall in New Jersey with 80 mph winds. The hurricane has been labelled as "<b>Frankenstorm</b>" by a number of people, seeing the storm as a product of warmer than usual water off the Atlantic coast and man-made global warming that is just now starting to take effect.<br />
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The hurricane has already moved inland and the damage from the storm is only just now starting to become apparent. In many areas, the damage is one for the record books:<br />
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1 -- <a href="http://www.bloomberg.com/news/2012-10-30/hurricane-blackouts-cut-power-to-about-8-million-customers.html">The storm left 8.6 million people without power</a>, mostly in New Jersey and New York.<br />
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2 -- <a href="http://www.huffingtonpost.com/2012/10/30/manhattan-power-outage-pictures-photos-nyc-skyline_n_2045748.html?utm_hp_ref=hurricane-sandy-2012">New York City went dark with the lights out in Manhattan</a> as <a href="http://www.bloomberg.com/news/2012-10-30/hurricane-sandy-blacks-out-skyscrapers-neighborhoods.html">storm surges reach a record 13.88 feet with many downtown streets flooded</a> before receding.<br />
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3 -- <a href="http://www.huffingtonpost.com/2012/10/31/hurricane-sandy-new-jersey-gas_n_2051486.html?utm_hp_ref=hurricane-sandy-2012">Gasoline shortages have come up in New Jersey</a> in the aftermath of the storm.<br />
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4 -- Property damage is already estimated to be $20 billion or more with more surveying of the aftermath still taking place. The numbers could be much higher, in the order of $50 billion, once the dust settles. This would make Hurricane Sandy one of the most expensive natural disasters in US history.<br />
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5 -- The NYSE and Nasdaq exchanges were closed for 2 days, the first 2 day closure due to weather since 1888. Trading resumed today with markets mostly trading in a narrow range. <br />
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The storm was over 1000 miles in diameter at its peak with hurricane force winds as far as 175 miles from the center and tropical force winds as far as 500 miles from the center. <a href="http://www.blogger.com/">Some areas in West Virginia received up to 3 feet of snow, Maryland was hit by a massive blizzard</a> and <a href="http://www.detroitnews.com/article/20121029/METRO/210290351/Warnings-Monster-storm-may-take-Great-Lakes-wave-heights-33-feet?odyssey=tab|topnews|text|FRONTPAGE">even the Great Lakes area was affected with winds as high as 60 mph in Chicago with waves over 30 feet high</a>. This is the second year in a row that the northern Atlantic coast was hit with hurricane force winds (<a href="http://thegreatbearmarket-avbursch.blogspot.com/2011/08/hurricanes-and-great-deflation.html">see this post about Hurricane Irene and its aftermath last year</a>). Before Hurricane Irene, one would have to go all the way back to <b>1954</b> to find a comparable event, when <a href="http://en.wikipedia.org/wiki/Hurricane_Hazel">Hurricane Hazel</a> struck the same region of the Atlantic coast. Going even farther back, no comparable event is found until <b>1888</b>, when the <a href="http://en.wikipedia.org/wiki/Great_Blizzard_of_1888">Great Blizzard of 1888</a> struck.<br />
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Having the same area hit by a 100 year storm 2 years in a row can only be due to the effects of man made climate change that is now starting to kick in as a result of the abuse of fossil fuels that has been taking place for many decades. Even with the evidence mounting that man made global warming is for real, there is still evidence that people in the political, business, and corporate world are still in denial (and will be for many more decades):<br />
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1 -- The Obama Administration continues pushing forward with the construction of the Keystone XL pipeline, with many protesters arrested. The arrest of people protesting the Keystone XL project <a href="http://thinkprogress.org/climate/2012/10/31/1118311/green-party-candidate-jill-stein-arrested-protesting-keystone-xl-pipeline-im-here-to-connect-the-dots/">was taken to the next level with the arrest of Green Party presidential candidate Jill Stein</a>, who has been critical of both Obama and Romney on energy policy.<br />
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2 --<a href="http://thinkprogress.org/climate/2012/10/31/1098531/exclusive-coal-export-lobby-spends-big-on-ads-promoting-shipping-taxpayer-owned-coal-abroad/"> Lobbyists for the coal industry go on a massive ad buying spree advertising the benefits of coal exports</a> with much of the coal slated to enter Chinese markets. The result is greenhouse gases pumped into the atmosphere at an accelerated clip.<br />
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3 -- The mainstream media continues to be in denial over the reality of man made climate change, <a href="http://thinkprogress.org/climate/2012/10/30/1110721/television-news-coverage-ignores-climate-change-during-sandy-coverage-should-we-really-be-surprised/">as climate change is not even brought up at all even as news coverage on the storm and its aftermath continue around the clock</a>. The same is true with newspaper coverage <a href="http://thinkprogress.org/climate/2012/10/26/1097761/frankenstorm-sandy-climate/">in which there is a lot of coverage on the storm, but no mention of climate change</a>.<br />
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4 -- Oil companies are in full denial over the reality of climate change as evidenced by an oil capacity construction boom in which <a href="http://thinkprogress.org/climate/2012/10/26/1092241/one-chart-says-it-all-why-oils-new-supply-boom-is-a-bust-for-the-climate/">efforts are under way to increase oil production capacity to 110 million barrels a day by 2020</a>. The increased oil production capacity is projected to raise the planet's average temperature by as much as 8 degrees Celsius.<br />
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During bull markets (when social mood is trending positive), governments have no problem coming up with the money to rebuild in the aftermath of disaster and helping affected communities get back on their feet. It is another matter when a long term bear market is unfolding. During long term bear markets, governments are constrained by budget cuts, tax revenue drying up, and the general mindset that comes with negative social mood, namely, limits and conservation. It is especially the case when a deflationary collapse is unfolding in full force. We are already getting a taste of the implications of trying to rebuild communities affected by natural disaster during a long term bear market.<br />
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Last year, in the aftermath of Hurricane Irene, Rep. Ron Paul was quoted as saying "there is no magic with FEMA" and House Rep. Eric Cantor wanted the cost of disaster relief to be offset with cuts elsewhere. At that point, I had made a forecast concerning FEMA:<br />
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<i>It would not at all be farfetched if FEMA were abolished altogether in 2017 during the Bachmann Administration Period under the pretense of balancing the budget</i>.<br />
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There is already evidence that this forecast is on track to being fulfilled in 2017. <a href="http://www.slate.com/blogs/moneybox/2012/10/29/romney_s_fema_cuts.html">Mitt Romney is now on record for wanting to cut FEMA out of federal spending, sending the responsibility of disaster relief to the states, under the pretense of balancing the budget</a>, having made the plan known during a GOP Primary debate. Mitt Romney labelled spending on disaster relief as "immoral" during the debate, saying that deficit reduction and debt reduction have higher priority. <a href="http://thinkprogress.org/climate/2012/10/30/1109401/october-30-news-fema-would-lose-nearly-900-million-in-funding-if-automatic-budget-cuts-are-triggered/">Austerity measures that are set to kick in due to the "fiscal cliff" will also compromise FEMA's ability to respond to natural disasters with a loss of $878 million in annual funding in the pipeline</a>.<br />
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<b>The ability of government to respond to natural disasters is an issue that people should be thinking about</b>, considering that one of the implications of "The Great Deflation" is budget cuts at all levels of government. In particular, if a major hurricane were to strike a populated area during the third phase of "The Great Deflation" (<span style="color: magenta;">Cycle wave y</span> down (2021 - 2042) of <span style="color: #38761d;">Supercycle wave (a)</span> down (2000 - 2042)), the affected areas will very likely be on their own with power remaining shut down for a number of years and rebuilding efforts in the affected areas delayed for years (if not a decade or more) due to austerity measures in play during that time.<br />
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On the longer term, Hurricane Sandy is a harbinger of the effects of climate change that will play out during "The Great Tribulation" (<span style="color: #38761d;">Supercycle wave (c)</span> down (2076 - 2118)). The worst of man made global warming is very likely to unfold during that time, possibly with the Atlantic coast hit with hurricanes of Category 5+ on an annual basis. There is already recognition among scientists that man made global warming is for real. It will be a very long time before people in the political, business, and corporate world, along with the mainstream media, finally come to a recognition that man made global warming is for real -- that point should occur when the center of <span style="color: magenta;">Cycle wave I</span> down (2076 - 2082) of <span style="color: #38761d;">Supercycle wave (c)</span> down (2076 - 2118) is reached and result in the "<b>Global Warming Panic</b>". By then, the full force of the effects of climate change will already be playing out throughout the world.<br />
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<br />AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com1tag:blogger.com,1999:blog-7063331580968428178.post-81017071985338619082012-10-28T17:07:00.000-07:002012-10-28T17:07:01.193-07:00Four More Years of ObamaWith all three of the presidential debates completed, the election is looking to be a close contest. The closest parallel to the 2012 presidential election is the 2004 presidential election, in which the incumbent of that time, Bush 43, won a second term by a narrow margin.<br />
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From the perspective of social mood, bear markets normally result in incumbents getting thrown out of office by a landslide, as was the case with Herbert Hoover in the 1932 presidential election at the low of <span style="color: #38761d;">Supercycle wave (IV)</span> down and Martin Van Buren in 1840 during <span style="color: #38761d;">Supercycle wave (II)</span> down (1835 - 1859).<br />
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The 2012 presidential election, however, is taking place in a <b>mixed mood environment</b>, resulting from a very large bear market rally off the March 2009 low. It was the same way in the 2004 presidential election as well, with a 5 year bear market rally, <span style="color: #f1c232;">Primary wave [B]</span> up (2002 - 2007) of <span style="color: magenta;">Cycle wave w</span> down (2000 - 2009) with a mixed mood environment in play. <br />
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In a mixed mood environment, the candidate with the best ground game and the highest level of organizational strength will be the one that wins. George W. Bush (Bush 43) won a second term by a narrow margin in 2004. Bush 43 had a stronger ground game than John Kerry did due in part to the Koch-ALEC cabal and the organization of the religious right. In the current presidential election, President Obama is on course to win a second term by a narrow margin. Unlike the 2008 election in which Obama rode a massive wave of voter anger (from the "Panic of 2008") all the way to the White House, the 2012 election will prove to be much harder and will take a great amount of effort to win. President Obama's superior organizational strength is what will allow him to win a second term in the midst of a mixed mood environment.<br />
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The bear market rally off the March 2009 low appears to be incomplete and needs one more five wave rally to complete the structure. The rally should unfold through election day and peak about a third of the way into November 2012, as the chart below illustrates:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPJjBMfiz-eXCge_jMiT-bVTBQwwiW7rhRqD5NSp_qiSL5yD07IrDeV2-Y3GNE7dxnTn3LKxEPcs5v2mpUKtotfQVpD4UHo8jwySfKy2UN52zxfukke3U43G5Fl6oFvN-te8tH15-MHImG/s1600/SP500Chart10272012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="238" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPJjBMfiz-eXCge_jMiT-bVTBQwwiW7rhRqD5NSp_qiSL5yD07IrDeV2-Y3GNE7dxnTn3LKxEPcs5v2mpUKtotfQVpD4UHo8jwySfKy2UN52zxfukke3U43G5Fl6oFvN-te8tH15-MHImG/s400/SP500Chart10272012A.jpg" width="400" /></a></div>
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The chart above shows <span style="color: #3d85c6;">Minor wave 5</span> of the 2 year bearish rising wedge, <span style="color: red;">Intermediate wave (C)</span>, that started in June 2010. <span style="color: #3d85c6;">Minor wave 5</span> is unfolding as a triple zigzag with the last part of the third zigzag still to come. The upside target is <b>1484</b> for the S&P 500 and <b>13750</b> for the DJIA.<br />
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In the midst of the mixed mood environment are undercurrents of bearish social mood, which is most clearly seen in the DJIA / gold ratio. As the chart below shows, the DJIA in terms of real money is in a very clear down-trend with a series of lower lows and lower highs throughout the Obama Administration Period so far:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhW0pWxEoEJDc4buhSqY9X8_YctKA2oVoFafL-80ojy81lrMUEdI-sE0nx6_70PlqF8bBDeOVUqjjptP6pB1JUW4NsuHqsk3JQTchsEvORNDvxUXpcVj79Qv7AIzrj6bS2BsttUzhTz60is/s1600/DowGoldRatioChart10282012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="302" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhW0pWxEoEJDc4buhSqY9X8_YctKA2oVoFafL-80ojy81lrMUEdI-sE0nx6_70PlqF8bBDeOVUqjjptP6pB1JUW4NsuHqsk3JQTchsEvORNDvxUXpcVj79Qv7AIzrj6bS2BsttUzhTz60is/s400/DowGoldRatioChart10282012A.jpg" width="400" /></a></div>
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The decline in the DJIA / gold ratio also explains why Obama's approval rating displayed a long term down-trend. In addition, <a href="http://www.huffingtonpost.com/2012/10/27/2012-polls-lead_n_2031046.html?ir=Politics">the most recent polls are painting a mixed picture</a>, with some polls putting Obama ahead and some putting Romney ahead. <br />
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Intrade is <a href="http://www.intrade.com/v4/markets/contract/?contractId=743474">currently projecting a 62% chance that Obama will win a second term</a>, although some such as <a href="http://fivethirtyeight.blogs.nytimes.com/">Nate Silver is currently projecting a 73% chance that Obama will win</a>. It will be a close election, with Mitt Romney reaching 250+ electoral votes (it could possibly go as high as 260), but California, Oregon, and Washington will put Obama over the 270 electoral votes needed to win once voting is completed in those three states.<br />
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The last two cases of a president winning a second term during a bear market rally was Bush 43 in the 2004 election and Richard Nixon winning a second term in 1972 with the mixed mood environment in play as a result of <span style="color: #f1c232;">Primary wave [D]</span> up of a Cycle degree triangle, <span style="color: magenta;">Cycle wave IV </span>(1966 - 1974). Obama is on course to win a second term on November 6, 2012.<br />
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It is perhaps instructive to look back and realize that both Bush 43 and Nixon declined in popularity during their second term. Bush 43 saw his approval rating plunge to 25% in the wake of the "Panic of 2008" and Richard Nixon was pressured out of office less than 2 years later due to scandal. If the forecast for a Primary degree decline from 2012 to 2016 is correct, than Obama will face the same fate as Bush 43 with social mood becoming increasingly bearish, culminating in a wave of voter anger that makes conditions ripe for someone like Michele Bachmann or Paul Ryan to rise to power as the next president of the United States in the 2016 election.<br />
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President Obama's approval rating will likely plunge soon after the elections taking place. In the midst of all the talk about a "fiscal cliff" in economic policy that has been dubbed "Taxmageddon" and is set to be reached in January 2013, there is another cliff that we are approaching, and that is the end of a 2 year rising bearish wedge in the DJIA, S&P 500, and the Wilshire 5000. The resolution of the wedge pattern is expected to be relatively swift with the full retracement of the wedge expected to be completed in <b>June 2013</b>.<br />
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Here is a chart of the wedge and the drop-off that follows:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhipHuEdRG_sjVF4dehAK6SP0mKEaRWAU_ei8R5YVv3mwruQCquuajuNePZbBUDUNe-UFsnN-viBJL5poHysWQMRJaXHYwikvCy11dEQs5-WrlCj6iAfGoLT26fwUzQ3IDQOVfZ_58z58CT/s1600/SP500Chart10282012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhipHuEdRG_sjVF4dehAK6SP0mKEaRWAU_ei8R5YVv3mwruQCquuajuNePZbBUDUNe-UFsnN-viBJL5poHysWQMRJaXHYwikvCy11dEQs5-WrlCj6iAfGoLT26fwUzQ3IDQOVfZ_58z58CT/s400/SP500Chart10282012A.jpg" width="400" /></a></div>
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Labelled on the chart is President Obama's approval rating at important junctures. At the May 2011 high, when the DJIA reached 12876, President Obama's approval rating briefly reached 61% in the aftermath of the assassination of Osama bin Laden. Just 5 months later, at the low of <span style="color: #3d85c6;">Minor wave 2</span> down within the larger wedge, the United States was downgraded by Standard and Poors from AAA to AA+, and Obama's approval rating reached a low of 38%. As the peak of the bear market rally approaches, Obama's approval rating has only partially rebounded from the October 2011 low and is currently at 48%.<br />
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The expectation is for Obama's approval rating to take a massive plunge downward as the retracement of the rising bearish wedge unfolds. The forecast is for Obama's approval rating to fall to a low of 28% to 32% by June 2013. The sudden decline in social mood starting in mid November 2012 points to a scenario where there is no resolution on the "fiscal cliff" at all due to strife and discord between Obama, John Boehner, Harry Reid, and Mitch McConnell, which could result in another downgrade on the credit rating of the United States.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-29807246392180720132012-09-09T17:26:00.000-07:002012-09-09T17:26:39.785-07:00Journey to the (Primary Degree) PeakThere are now a number of compelling signs that a Primary degree top has already put in or will be registered in the very near future. Both the internal market indicators and the social mood indicators are suggesting that a peak has already happened or will shortly. The S&P 500 and the Wilshire 5000 reached new 2012 highs, exceeding the April / May 2012 highs. The DJIA has yet to confirm the S&P 500 and the Wilshire 5000 higher, but given the tendency for the three indexes to have "similar wave paths", it is quite likely that the DJIA will confirm the other two indexes higher.<br />
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The longer term outlook for the 2009 - 2021 period is still intact, with <span style="color: #38761d;">Supercycle wave (a)</span> (2000 - 2042) down unfolding as a complex W - X - Y structure and <span style="color: magenta;">Cycle wave x</span> (2009 - 2021) up in progress.<br />
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The most likely wave count for the S&P 500, Wilshire 5000, and most likely the DJIA as well, is a 3 year zigzag with an ending diagonal for <span style="color: red;">Intermediate wave (C)</span>, as the previous main count was invalidated with a new 2012 high in the S&P 500 and the Wilshire 5000. Here is a chart showing the revised wave count in the context of the larger <span style="color: magenta;">Cycle wave x</span> structure in the S&P 500:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDNgdErdGarSd9tCnxlT9MG6jt9wdebOVWzKJ-D2iDWxb9Kr4_3JByOIndzccpamnda9lCHkSdU048AeHXBdyRhFSq1S1-Zdm0NG3l7ZklKEHDNaRxrbv5DaH1wZP_ExV1GOMWBQzdmDSu/s1600/SP500Chart08272012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="236" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDNgdErdGarSd9tCnxlT9MG6jt9wdebOVWzKJ-D2iDWxb9Kr4_3JByOIndzccpamnda9lCHkSdU048AeHXBdyRhFSq1S1-Zdm0NG3l7ZklKEHDNaRxrbv5DaH1wZP_ExV1GOMWBQzdmDSu/s400/SP500Chart08272012A.jpg" width="400" /></a></div>
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The revised wave count still works within the larger Cycle degree structure, with <span style="color: #f1c232;">Primary wave [W]</span> up (nearing its end) lasting 3 years, which would then be followed by <span style="color: #f1c232;">Primary wave [X]</span> down from 2012 to 2016, lasting 4 years, then <span style="color: #f1c232;">Primary wave [Y]</span> up from 2016 to 2021, lasting 5 years. Cycle wave x would then be a complex (zigzag - double zigzag - expanded flat) structure. 4 years is enough time for the DJIA to fall from 13300 to 5500 and for the S&P 500 to fall from 1430+ to 550, and each of the Primary degree sub-waves that compose <span style="color: magenta;">Cycle wave x</span> are reasonably comparable to each other in price movement and duration, as well as <span style="color: magenta;">Cycle wave x</span> (2009 - 2021) being reasonably comparable to <span style="color: magenta;">Cycle wave w</span> (2000 - 2009) in duration. <br />
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However, the previous main count is still working very well for the NYSE Composite as well as the DAX and the FTSE 100. Along side the Wilshire 5000, the NYSE Composite is a market index composed of a large cross-section of corporations and businesses and thus is a broad measure of social mood. The NYSE Composite is in a bearish intra-market divergence with the Wilshire 5000 and the S&P 500, indicating a fractured market.<br />
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Here is a chart of the NYSE Composite from 2005 to 2021:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1ajCfCenyem8CwG2OAIO9P4ALQNrhd5cDllFO0uDjJmJxJ1uhCjYSBJ2a6F-vK5Q2Pf_M3dThlI4AxT2zi2W8R_dJxal2fwExQVA-cEHk258Kss7m5YmlfNf_RcVWSpKcdt6NmhEWJ4Xr/s1600/NYSECompChart08282012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="265" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1ajCfCenyem8CwG2OAIO9P4ALQNrhd5cDllFO0uDjJmJxJ1uhCjYSBJ2a6F-vK5Q2Pf_M3dThlI4AxT2zi2W8R_dJxal2fwExQVA-cEHk258Kss7m5YmlfNf_RcVWSpKcdt6NmhEWJ4Xr/s400/NYSECompChart08282012A.jpg" width="400" /></a></div>
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Upside momentum is clearly on the decline, not only with bearish intra-market divergences taking place (the 2012 high in the S&P 500 and the Wilshire 5000 is not confirmed by the NYSE Composite, the Transports, the DAX, the CAC-40, or the FTSE 100), but the rally is being carried by fewer stocks. A substantial part of the recent rally in the S&P 500, the Nasdaq, and the Nasdaq 100 can be attributed to the "<b>Apple Bubble</b>" as well as a social media bubble that is now bursting with the decline of Facebook in progress.<br />
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There are also a number of social mood indicators that are signalling a significant top in the markets:<br />
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1 -- The first "<b>Magazine Cover Indicator</b>" event took place with "Dow 15000" appearing on the <a href="http://brazilianbubble.com/sell-everything-barrons-cover-screams-dow-15000/">February 13, 2012 cover of Barron's magazine</a>. With the rally from the March 2009 lows losing much of its momentum and with bullish sentiment already in the stratosphere, this event is a significant sell signal for the markets.<br />
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2 -- In early August 2012, <a href="http://thegreatbearmarket-avbursch.blogspot.com/2012/08/trend-extrapolation-in-politics.html">Mitt Romney called for more bull market in the economy and the job market</a>. This is another very strong peaking signal as politicians are always the last people to act on a trend, and for that matter, the last people to extrapolate a trend. This event is in the same league as the Federal Reserve Chairman saying that "rates will remain low through 2014".<br />
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3 -- The second "<b>Magazine Cover Indicator</b>" event took place with the bull market portrayed as unstoppable and invincible on the <a href="http://i385.photobucket.com/albums/oo297/Fast996/Barrons20cover.jpg">September 3, 2012 cover of Barron's magazine</a>. Now that everyone is convinced that the "bull market" is unstoppable, the uptrend in the markets from the March 2009 lows is fully played out and ripe for a reversal.<br />
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4 -- Just three days later, on September 6, 2012, <a href="http://news.yahoo.com/blogs/ticket/biden-declares-america-turned-corner-023312040--election.html">Vice President Joe Biden declared that "America has turned the corner" on the job market and the economy, saying that "America's best days are ahead of us"</a>. This is yet another instance of politicians extrapolating a trend and "predicting the present". Unlike Mitt Romney, Joe Biden has virtually no business experience, so this event is even more significant. The job creation trend has played out for a long enough time that it has become intuitive even for politicians to extrapolate the trend. <b>America's best days are indeed ahead of us, but those days won't come until the Grand Supercycle degree bear market that started unfolding in 2000, and the associated major depression in the economy, is completed</b>.<br />
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The journey to the top of the (Primary degree) peak in the markets have been marked by extreme bullishness, as well as magazine cover indicator events and politicians calling for more bull market in the economy and job market, thereby extrapolating a trend by "predicting the present". These events, along with bearish intra-market divergences and declining momentum, all point to a major reversal ahead.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com1tag:blogger.com,1999:blog-7063331580968428178.post-69250747216128381642012-08-31T22:51:00.002-07:002012-08-31T22:51:49.235-07:00The Rise of Paul RyanThis is an update to an earlier post, "<a href="http://thegreatbearmarket-avbursch.blogspot.com/2012/04/update-on-road-to-plutocracy.html">Update on the Road to Plutocracy</a>", in which the forecast for a full blown plutocracy in the United States is slowly being fulfilled as the stage continues to be set behind the scenes. In August 11, 2012, <a href="http://www.washingtonpost.com/politics/paul-ryan-is-romneys-pick-for-vice-presidential-nominee/2012/08/11/dc2f5070-e0f1-11e1-8fc5-a7dcf1fc161d_story.html">Mitt Romney selected Paul Ryan as his running mate</a>. The significance of the event, as with so many cases, is not fully recognized by most people. The key to the larger picture is that Paul Ryan is a member of the American Legislative Exchange Council (ALEC) and <a href="http://www.dailykos.com/story/2012/08/14/1119752/-Paul-Ryan-Using-Koch-Brothers-1980-s-Privatization-Plot">is closely connected with the Koch Brothers</a> (and Koch Industries).<br />
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Paul Ryan's connection with Koch Industries and ALEC is very significant, as the Koch-ALEC cabal is identified as the engine that will drive the future plutocracy in the United States starting in 2042. This also does not conflict with the idea of a Bachmann Administration Period, which is forecast to span from 2017 to 2024. While Michele Bachmann has not been confirmed to be a member of ALEC, her platform is virtually identical to Paul Ryan's as far as economic policy is concerned. This brings about the possibility of Ryan / Bachmann or Bachmann / Ryan for the 2016 presidential election in which bearish social mood is guaranteed to result in the Democratic Party taking massive losses during the 2016 elections to a comparable (if not even larger) degree to the losses that the GOP sustained in the 2008 election and either Michele Bachmann or Paul Ryan as the next president of the United States. <br />
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The forecast for a plutocracy is based on the characteristic of a B wave within a larger bear market of Supercycle degree and above, in which B waves are technically weak with weak fundamentals. Just as fifth waves are weaker than third waves by every measure, B waves are weaker than fifth waves by every measure. A full blown plutocracy is consistent with the expected character of <span style="color: #38761d;">Supercycle wave (b)</span> up (2042 - 2076) of <span style="color: #45818e;">Grand Supercycle wave [IV]</span> (2000 - 2118), including the fact that only a small cross section of the populace will take part in the return to prosperity in the United States after "The Great Deflation" ends in 2042.<br />
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We continue to see evidence of a coming plutocracy in the United States, as new developments illustrate:<br />
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1 -- <a href="http://lifeinc.today.com/_news/2012/08/22/13380877-many-in-middle-class-say-they-are-doing-worse-financially?lite">The middle class continues to decline</a> with most people in that group substantially worse off than they were a decade ago.<br />
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2 - <a href="http://finance.yahoo.com/blogs/the-exchange/where-good-jobs-gone-195409412.html">The destruction of living wage jobs and family wage jobs continues unabated</a>, with the last of the family wage jobs projected to be gone by 2015 and the last of the living wage jobs projected to be gone by 2020.<br />
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3 -- In spite of the phony "recovery" in the job market, <a href="http://www.dailykos.com/story/2012/07/17/1110801/-Your-applications-go-unanswered-because-job-creators-aren-t-really-trying-to-fill-job-openings">corporations and businesses are not really putting in much effort in hiring more workers</a>. This is consistent with the expectation of increasing conservatism due to a bearish social mood that is unfolding.<br />
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4 -- Poverty continues to proliferate, <a href="http://news.yahoo.com/us-poverty-track-rise-highest-since-1960s-112946547--finance.html">with the official poverty rate reaching the highest point since the 1960s</a>. The actual poverty rate in the United States is likely around 35% to 40%. Expect the poverty rate to reach much higher levels by the time the plutocracy arrives in 2042.<br />
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5 -- As of 2011, <a href="http://www.huffingtonpost.com/2012/07/25/living-paycheck-to-paycheck-2012_n_1702347.html">40% of households in the United States were living paycheck to paycheck</a>. At the start of the Grand Supercycle degree bear market, the figure was 31%. There is no doubt that the bear market continues to have an effect on the economy, akin to a house that is prettied up with new paint on the outside even as the foundation of the house continues to rot. <br />
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The rise of Paul Ryan in the political arena is another indication of the coming plutocracy, In 2016, bearish social mood associated with Primary wave [X] down 2011/2012 - 2016) within Cycle wave x up (2009 - 2021) will make conditions ripe for Paul Ryan to ascend to the White House in 2017 either as VP or President.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-28644395447438062762012-08-22T21:32:00.000-07:002012-08-22T21:32:37.089-07:00Inclusionism Breaks New GroundAs a testimony of social mood remaining at historically bullish levels in spite of 12 years of bear market (so far), we witnessed inclusionism (characteristic of bullish social mood) break new ground with <a href="http://news.yahoo.com/russia-joins-wto-18-years-talks-145949731--finance.html">Russia joining the World Trade Organization (WTO)</a> after 18 years of negotiations. The significance of the event won't be recognized by most people,<b> but it is a very significant event from a socionomic perspective</b>. This type of event, along with Mitt Romney calling for more bull market in the economy and job market (<a href="http://thegreatbearmarket-avbursch.blogspot.com/2012/08/trend-extrapolation-in-politics.html">see this post</a>), <b>could easily be a peaking signal with a large degree reversal just around the corner</b>.<br />
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When inclusionism breaks ground in previously unreachable areas, it is a very strong peaking signal. The last event of this type was <a href="http://en.wikipedia.org/wiki/2007_enlargement_of_the_European_Union">Bulgaria and Romania joining the European Union in 2007</a> just before <span style="color: #f1c232;">Primary wave [B]</span> of <span style="color: magenta;">Cycle wave w</span> down (2000 - 2009) ended in October 2007. <a href="http://en.wikipedia.org/wiki/2004_enlargement_of_the_European_Union">It is also notable that there was a frenzied eastward expansion of the European Union from 2004 to 2007 with 10 nations added to the union during the period</a>.<br />
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Even though there has been a lot of speculation amongst the (euro) bears that the European Union will break up in the future, there is a strong case to be made that the expansion of the EU could continue all the way into 2021, the peak of <span style="color: magenta;">Cycle wave x</span> (2009 - 2021) up, with the break up (due to nations leaving the EU) to take place during <span style="color: magenta;">Cycle wave y</span> (2021 - 2042) of <span style="color: #38761d;">Supercycle wave (a)</span> (2000 - 2042) down. The last part of <span style="color: magenta;">Cycle wave x</span> up (likely to be <span style="color: #f1c232;">Primary wave [Y] </span>up (2016 - 2021)) could feature a last frenzied expansion of the European Union before "The Great Deflation" unfolds in full force in 2021. <a href="http://en.wikipedia.org/wiki/Future_enlargement_of_the_European_Union">Indeed, the stage is already being set for a last period of frenzied expansion starting with Croatia set to join the European Union in July 2013 and several other nations recognized as potential candidates to join the EU in the future</a>.<br />
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The addition of Russia into the WTO is occurring as <span style="color: #f1c232;">Primary wave [W]</span> up is nearing a peak (current wave count was invalidated in the S&P 500, but still valid for the DJIA and Wilshire 5000. New charts coming in the very near future), with <span style="color: #f1c232;">Primary wave [X]</span> down to shortly follow the peak.<br />
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The European Union is expected to come under a lot of stress during <span style="color: #f1c232;">Primary wave [X]</span> (~2012 to 2016) down of <span style="color: magenta;">Cycle wave x</span> (2009 - 2021) up with perhaps a lot of speculation that Greece, Spain, Italy, or Portugal leaving the European Union during that time. When <span style="color: #f1c232;">Primary wave [Y]</span> (2016 - 2021) up of <span style="color: magenta;">Cycle wave x</span> (2009 - 2021) up starts, the European Union is expected to go on a frenzied expansion with inclusionism reaching levels regarded as unreachable today. There are five nations that are even now recognized as candidates for inclusion into the European Union -- Iceland, Macedonia, Montenegro, Serbia, and Turkey. In addition, Albania is in the process of applying for membership into the EU. <b>From the socionomic perspecive, the most likely scenario is for Iceland, Macedonia, Montenegro, Serbia, Turkey, and Albania to gain membership in the European Union during the 2019 - 2021 time frame as the last part of the Cycle degree advance in social mood unfolds</b>.<br />
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The Euro, the currency of the European Union, is expected to be a fully functioning currency during the rest of the "extend and pretend" phase (the second phase of "The Great Deflation"), with the fate of the currency expected to face very tough challenges during the third phase of "The Great Deflation" during the 2021 - 2042 time frame.<br />
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<br />AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com3tag:blogger.com,1999:blog-7063331580968428178.post-67369921574482282152012-08-14T22:43:00.000-07:002012-08-14T22:43:19.691-07:00Update on the Apple BubbleThis is an update on the <a href="http://thegreatbearmarket-avbursch.blogspot.com/2012/02/apple-bubble.html">February 2012 blog entry on the Apple bubble</a>, in which a case was made for Apple being a parallel of the South Sea Company. The Apple bubble is still in progress in spite of a decline that unfolded earlier this year. Investors are still very bullish on Apple as illustrated by a number of articles <a href="http://www.cnbc.com/id/47506512">such as this one</a> that is calling for more upside in Apple's stock price.<br />
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There was a very strong reason to not call a long term top on Apple even though the rally appeared to have played out. Here is an intermediate term chart of Apple to illustrate the point:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwCqPKsl0szVK62tyUpVjA4XkinjictH2pnV6_SkcSQpXtJDRied475mTgXlcxgr3rRqOwTHtzrkeCwXeQS5JS9yYodpJZrPSXVclZfByWhUM_LUeqhr-pNMLM8lMuRrScr9m9O8jZRm7A/s1600/AppleChart08142012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="238" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwCqPKsl0szVK62tyUpVjA4XkinjictH2pnV6_SkcSQpXtJDRied475mTgXlcxgr3rRqOwTHtzrkeCwXeQS5JS9yYodpJZrPSXVclZfByWhUM_LUeqhr-pNMLM8lMuRrScr9m9O8jZRm7A/s400/AppleChart08142012A.jpg" width="400" /></a></div>
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Apple's high for the year occurred in April 2012 before the decline started to unfold. The decline, now identified as <span style="color: lime;">Minute wave [iv]</span>, unfolded as a zigzag and reaching its low point in late May 2012 before resuming higher. There is already some recognition that Apple is a bubble, yet many people have attempted to call a long term top in Apple's stock, saying that the bubble has popped (the top calling has been unfolding since 2008!):<br />
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1 -- Yahoo news -- <a href="http://voices.yahoo.com/why-apples-bubble-already-starting-burst-1798855.html?cat=15">Apple bubble already starting to burst (August 18, 2008)</a>.<br />
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2 -- Seeking Alpha -- <a href="http://seekingalpha.com/article/310800-the-apple-bubble-is-ready-to-burst">The Apple Bubble is ready to burst (November 29, 2011)</a>.<br />
<br />
3 -- Forbes -- <a href="http://www.forbes.com/sites/investor/2012/04/23/five-signs-that-apple-is-a-bubble/">Five signs that Apple is a bubble (April 23, 2012)</a>.<br />
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Bubbles always end in a bust, but they also seem to last longer than many people think possible. After the decline earlier this year, the stock is on the rise again. However, it is quite obvious that the rally lacks the impulsiveness of earlier rallies that propelled the company's stock to $600 a share earlier this year. The rally from the late May 2012 low appears to be unfolding as an <b>expanding ending diagonal</b> with the last part of the rally in progress. The target for the rally is <b>$664 a share</b> to be hit within the next few weeks before a sharp sell-off commences with the advent of <span style="color: red;">Intermediate wave (4)</span> down.<br />
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Here is a longer term chart of Apple, showing how the rest of the Apple bubble may play out:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiz0G6RXSsRo4IYNm-_XYEFd-mZGxM7AEuMNbtpPk0DfbMKV8EY1g71b0W_ChwCrsqyPGRZYW6SrtFCbyP2L8KhkaVPCvxyG0tvaNLYguKaM4F3G_NHeFylaw_p5kEeVuF_zHKbmbh63ik/s1600/AppleChart08142012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiz0G6RXSsRo4IYNm-_XYEFd-mZGxM7AEuMNbtpPk0DfbMKV8EY1g71b0W_ChwCrsqyPGRZYW6SrtFCbyP2L8KhkaVPCvxyG0tvaNLYguKaM4F3G_NHeFylaw_p5kEeVuF_zHKbmbh63ik/s400/AppleChart08142012B.jpg" width="400" /></a></div>
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The blue box shown on the chart is the price territory of the fourth wave of one lesser degree, which would be around $300 to $375 a share. This follows a guideline that fourth waves go into the price territory of the fourth wave of one lesser degree. A sideways pattern for the coming <span style="color: red;">Intermediate wave (4)</span> down is in the forecast, most likely a flat, which should take around a year to play out.<br />
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As <span style="color: red;">Intermediate wave (4)</span> down climaxes in around June 2013, Apple could either come out with (or announce the unveiling of) an entirely new innovative product or make a move to acquire a large social media company. Either one could be seen as a massive game changer and give investors a reason to go on a bullish frenzy with the mainstream media along for the final ride up. The final stage of the Apple bubble will unfold during <span style="color: red;">Intermediate wave (5)</span> up, unfolding as an epic blow-off top that takes the company's stock as high as $875 to $1000 a share by June 2014. As a precursor to the coming blow-off top, <a href="http://www.zerohedge.com/news/record-216-hedge-funds-own-apple-worlds-biggest-hedge-fund-hotel-gets-even-bigger">there are already at least 216 hedge funds that have Apple in their portfolios</a>, which is indicating a very high level of bullishness on Apple stock.<br />
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This chart shows the final Primary degree advance in Apple stock:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPGiMd3LCD2kd0pC7W4mtEft-CI0aHov9NMCUqXeDmgciKtgeD3sriM7wPcny-Au-FudcwAHT_q79pb0tQdXWbkYghdQ-ZImIVJRIE2twUKKqm1ZdYn4J4I09iw37mQvj4gRB5ajeN89Oq/s1600/AppleChart08142012C.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="238" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPGiMd3LCD2kd0pC7W4mtEft-CI0aHov9NMCUqXeDmgciKtgeD3sriM7wPcny-Au-FudcwAHT_q79pb0tQdXWbkYghdQ-ZImIVJRIE2twUKKqm1ZdYn4J4I09iw37mQvj4gRB5ajeN89Oq/s400/AppleChart08142012C.jpg" width="400" /></a></div>
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The final Primary degree advance will have lasted 5 years, from 2009 to 2014. Notice that <span style="color: red;">Intermediate wave (2)</span> down in April 2010 was very brief and very sharp, while <span style="color: red;">Intermediate wave (4)</span> down, as a guideline of alternation, is likely to have a much longer duration and unfold as a flat (a sideways pattern).<br />
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The bursting of the Apple bubble will have widespread implications as the stock is a component of both the S&P 500 and the Nasdaq. The aftermath of the bursting of the Apple bubble is expected to result in a massive decline in the stock market in general from 2014 to 2016 with the longer term aftermath persisting for years if not decades. The effects of the Apple bubble bursting will first be felt in the technological sector with many tech jobs being purged off the map in the 2014 - 2016 time frame, which will then have a ripple effect on other areas of the economy and job market.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-49980468806153296462012-08-06T04:19:00.000-07:002012-08-06T04:19:17.093-07:00Trend Extrapolation in PoliticsOn Saturday, August 4, 2012, an event that is considered very significant from a socionomic perspective has taken place. Most people will not recognize the significance of the event as it will be seen as just one more day of speeches by politicians made in an effort to influence the November 2012 election.<br />
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One day after the jobs report was released for July 2012, <a href="http://news.yahoo.com/romney-attacks-obama-indiana-203644317.html">Mitt Romney made a bullish comment on the job market</a>, saying that "America is poised to take off economically". This event is in the same league as the Federal Reserve Chairman saying that "rates will remain low until 2014.". What we saw is politicians extrapolating a trend that has been unfolding for over 2 years. <b>Politicians are always the last people to act on a trend, and for that matter, the last people to extrapolate a trend</b>. When a trend becomes so obvious that it becomes intuitive even for politicians to extrapolate the trend, the trend has run its course -- in other words, it is a peaking signal at tops.<br />
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Here is a long term chart of the S&P 500, with the event labelled on the chart:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi933yb_PtDtwGGNv05-n0hxE0WWkwXZjpTOrcp_mB0kt2cedfXLotzv3oDccqCzyDLPdLPexdl82Qb03aVyHpdzCcNSO7fzvsESAP8UpjSX3jW2kczw2wxvUp3vlP08LCY72TDzsSX_Yny/s1600/SP500Chart08062012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="266" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi933yb_PtDtwGGNv05-n0hxE0WWkwXZjpTOrcp_mB0kt2cedfXLotzv3oDccqCzyDLPdLPexdl82Qb03aVyHpdzCcNSO7fzvsESAP8UpjSX3jW2kczw2wxvUp3vlP08LCY72TDzsSX_Yny/s400/SP500Chart08062012A.jpg" width="400" /></a></div>
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Notice when Mitt Romney made the statement about "America being poised to take off economically" -- it is very significant that the statement was made just as <span style="color: lime;">Minute wave [ii]</span> up is about to wrap up to a close within the next few trading days, with <span style="color: lime;">Minute wave [iii]</span> down of <span style="color: #3d85c6;">Minor wave C</span> down (April / May 2012 - June 2013) to follow shortly afterwards. <b>The event will indeed turn out to be a significant peaking signal from a socionomic perspective</b>.<br />
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The rally also appears to be corrective with a lot of overlapping waves and appears to be forming a bear flag. <br />
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Here is a close up of <span style="color: lime;">Minute wave [ii]</span> of <span style="color: #3d85c6;">Minor wave C</span> down in the DJIA:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpSNum3BV_76tenvcCugu2qrQQVE0Viv1BKWCSFyvmc_Ug0HABi6bj85bD_7n1IFSJQQ2XrQSg6xiQwZ32QHhLDyfyO8d1HeJGvSGU9OScXUCWwYiVUHVFOlowI_2hFsSuxs_iyPQCBVIQ/s1600/DJIAChart08062012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="266" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpSNum3BV_76tenvcCugu2qrQQVE0Viv1BKWCSFyvmc_Ug0HABi6bj85bD_7n1IFSJQQ2XrQSg6xiQwZ32QHhLDyfyO8d1HeJGvSGU9OScXUCWwYiVUHVFOlowI_2hFsSuxs_iyPQCBVIQ/s400/DJIAChart08062012A.jpg" width="400" /></a></div>
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The chart illustrates how close we are to the end of the rally that started in June 4, 2012. The structure, of course, is a complex (zigzag - double zigzag - flat) structure. The last part of the structure is just about completed with a few more small sub-waves yet to unfold. The waterfall decline to follow should start some time this week.<br />
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There is much to be said about Mitt Romney extrapolating a trend that has been in play for over 2 years -- namely extrapolating the trend in the job market. There is a very strong tendency for people to "predict the present" and extrapolate the present into the future when the trend has played out for a sufficiently long time. This event is a peaking signal for the job creation trend as well, with the larger trend of job destruction soon to regain dominance in the job market within the next few months (definitely by the end of the year). With <a href="http://globaleconomicanalysis.blogspot.com/2012/08/dismal-manufacturing-numbers-worldwide.html">US ISM Manufacturing (officially) in decline for the second month in a row</a>, and <a href="http://globaleconomicanalysis.blogspot.com/2012/08/us-factory-orders-unexpectedly-decline.html">US Factory orders and car sales unexpectedly declining last month</a>, there is strong evidence that the declining portion of the business cycle is starting to have an effect on the economy, bringing about the next leg down in "The Great Deflation".AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com6tag:blogger.com,1999:blog-7063331580968428178.post-6477502279962898232012-07-31T14:05:00.000-07:002012-07-31T14:05:55.903-07:00On The EdgeThis is an update to the previous post regarding the latest developments involving the rally off the June 4, 2012 low point. The rally is very close to completion with likely a few more trading days to go before <span style="color: lime;">Minute wave [iii]</span> of <span style="color: #3d85c6;">Minor wave C</span> down (May 2012 - June 2013) commences. The DJIA is back above 13,000 and the S&P 500 is nearing 1400. Exuberant optimism is one again evident with virtually everyone calling for new highs especially after the <a href="http://globaleconomicanalysis.blogspot.com/2012/07/market-soars-on-whatever-it-takes-mush.html">ECB President Mario Draghi vowed to do "whatever it takes" to support the euro currency last Thursday</a>. In addition, <a href="http://www.cnbc.com/id/48409582">virtually everyone in Wall Street is looking for the Federal Reserve to launch QE3 and the ECB to launch yet another round of quantitative easing in the very near future</a>. The exuberant optimism and bullishness will not translate into new recovery highs <b>as the bullish sentiment is very consistent with the character of a bearish wave 2 in a larger decline</b>.<br />
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Here is an updated chart of <span style="color: lime;">Minute wave [ii]</span> of <span style="color: #3d85c6;">Minor wave C</span> down. The complex structure is very close to completion as the chart indicates:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEpZhG7Wo-_Gp9bcaD83x5d6J08H5znsk4W7CbCuafPzf00JVE2K8UzLM8zkhHs6SsnUnHf0UeI3QBo7m1BuShFdVBgXRsOuCF8lK3ecdnX7aradw_uvRnIKaAcrX_vSuoA165P8nh4Ij0/s1600/DJIAChart07312012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEpZhG7Wo-_Gp9bcaD83x5d6J08H5znsk4W7CbCuafPzf00JVE2K8UzLM8zkhHs6SsnUnHf0UeI3QBo7m1BuShFdVBgXRsOuCF8lK3ecdnX7aradw_uvRnIKaAcrX_vSuoA165P8nh4Ij0/s400/DJIAChart07312012A.jpg" width="400" /></a></div>
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The structure unfolded as a complex structure (zigzag - double zigzag - flat) with the last part of the flat (<span style="color: #7f6000;">Subminuette wave c</span> of <span style="color: #e69138;">Minuette wave (y)</span>) in progress. Notice that the market is struggling to hold the upper light green channel line shown in the chart as support after reaching the trend line. On the longer term, the market continues its struggle to stay above the lower blue trend channel lines associated with <span style="color: #3d85c6;">Minor wave B</span> up (Oct 2011 - May 2012) -- the trend lines continue to be important and a decisive failure to hold the lower blue trend lines shown in the chart as support would be very bearish as well.<br />
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The markets are on the edge of a massive waterfall decline that should start unfolding in early August 2012 with the center of <span style="color: #3d85c6;">Minor wave C</span> down to be reached around September 19, 2012 and the end of <span style="color: lime;">Minute wave [iii]</span> of <span style="color: #3d85c6;">Minor wave C</span> down to be reached sometime in early October 2012.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-62278022095049917542012-07-22T16:34:00.000-07:002012-07-22T16:34:20.062-07:00Roadmap for 2012 and 2013Markets are on the verge of a waterfall decline larger than the one that unfolded in August 2011 as <span style="color: #3d85c6;">Minor wave C</span> down (May 2012 - June 2013) of <span style="color: red;">Intermediate wave (W)</span> down (Feb 2011 - June 2013) continues to unfold, completing an intermediate degree expanded flat.<br />
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All of the major indexes are clearly in the midst of a counter-trend bounce as evidenced by the choppy overlapping waves off the June 4, 2012 low. Here is a chart of the DJIA showing the advance from the June 4, 2012 low: <br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijTChVxR2QHlNrVcq9TCu2y0OisWVD4PQnGAHUXP_fAhXHNycXdfaB4jSifa8eCpqFqdSLfyVjrQuVtXfig5wfetYI3-ztgjT15VLob-G_fNRh5wxCZhE6tXOurxPVdYZDWfvxEYE8xnFH/s1600/DJIAChart07212012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijTChVxR2QHlNrVcq9TCu2y0OisWVD4PQnGAHUXP_fAhXHNycXdfaB4jSifa8eCpqFqdSLfyVjrQuVtXfig5wfetYI3-ztgjT15VLob-G_fNRh5wxCZhE6tXOurxPVdYZDWfvxEYE8xnFH/s320/DJIAChart07212012A.jpg" width="320" /></a></div>
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The rally off the June 4, 2012 low, identified as <span style="color: lime;">Minute wave [ii]</span> of <span style="color: #3d85c6;">Minor wave C</span> down, is nearing completion. The rally appears to be unfolding as a double zigzag with minuette degree sub-waves <span style="color: #e69138;">(w)</span> and <span style="color: #e69138;">(x)</span> complete and the second zigzag in the process of unfolding. With <span style="color: #e69138;">Minuette wave (y)</span> = 0.618 times the length of <span style="color: #e69138;">Minuette wave (w)</span> in the DJIA, an upside target of 13085 is projected based on the fibonacci relationship between the first and second zigzags within <span style="color: lime;">Minute wave [ii]</span>. The rally is also losing momentum as the RSI and MACD are no longer confirming the move higher.<br />
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<span style="color: lime;">Minute wave [ii]</span> of <span style="color: #3d85c6;">Minor wave C</span> down is projected to reach completion in early August 2012. A massive waterfall decline, <span style="color: lime;">Minute wave [iii]</span> down, will follow and last roughly 3 months. Here is a longer term chart of the DJIA, showing an updated road map for <span style="color: red;">Intermediate wave (W)</span> down (Feb 2011 - June 2013) of <span style="color: #f1c232;">Primary wave [X]</span> down (Feb 2011 - June 2016) within <span style="color: magenta;">Cycle wave x</span> up (2009 - 2021):<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyv-oyQj97MyUz044Sx3dx4Kj6TeLPXM6HNUQ0LxUk8p5ufTbojQHvWTGWX6Mn_mt3HTs8zadFesUHZsTToxHNjtpC1zifZSBuiXZyPOzNhR1KkH0JnCVEROTIVeJ8st7kToWbNz9gEtls/s1600/DJIAChart07212012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="266" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgyv-oyQj97MyUz044Sx3dx4Kj6TeLPXM6HNUQ0LxUk8p5ufTbojQHvWTGWX6Mn_mt3HTs8zadFesUHZsTToxHNjtpC1zifZSBuiXZyPOzNhR1KkH0JnCVEROTIVeJ8st7kToWbNz9gEtls/s400/DJIAChart07212012B.jpg" width="400" /></a></div>
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First the longer term perspective. Since <span style="color: #3d85c6;">Minor wave B</span> up (Oct 2011 - May 2012) is almost 1.618 times the length of <span style="color: #3d85c6;">Minor wave A</span> down (Feb 2011 - Oct 2011), then it is <b>very likely</b> that <span style="color: #3d85c6;">Minor wave C</span> down (May 2012 - June 2013) will have 2.618 times the length of <span style="color: #3d85c6;">Minor wave A</span>. This projects a downside target near <b>8500</b> for the end of <span style="color: red;">Intermediate wave (W)</span> down in the DJIA. Now we consider <span style="color: #3d85c6;">Minor wave C</span> down in terms of its smaller sub-waves. <span style="color: lime;">Minute wave [i]</span> down has 27% of the projected length of <span style="color: #3d85c6;">Minor wave C</span> down with most of it retraced by <span style="color: lime;">Minute wave [ii]</span> up. With 93% of the distance to the projected downside target of <span style="color: #3d85c6;">Minor wave C</span> at the end of the second wave yet to be traversed, there is a strong case for <span style="color: lime;">Minute wave [iii]</span> down to have 2.618 times the length of <span style="color: lime;">Minute wave [i]</span> down, which projects a downside target of <b>9750</b> by October 2012.<br />
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<span style="color: lime;">Minute wave [iii]</span> down should unfold during August, September, and October with the center of the downward impulse occurring around <b>September 19, 2012</b>. The "point of recognition" is important as evidence of the declining part of the business cycle should be abundantly clear by then, <b>resulting in the Federal Reserve making a move to launch QE3 in an effort to prop up the economy and the stock market</b>. After a multi-month sideways period, <span style="color: lime;">Minute wave [v]</span> down should last 3 months with the center of the downward impulse occurring around <b>May 20, 2013</b>. The center of <span style="color: lime;">Minute wave [v]</span> should be significant as well. Recall that Occupy Wall Street appeared in September 2011 as the fifth wave of the expanded flat (<span style="color: #3d85c6;">Minor wave A</span> down)) unfolded. The center of <span style="color: lime;">Minute wave [v]</span> down is expected to be associated with the advent of "<b>Occupy Wall Street Phase 2</b>" in which a much larger number of people take to the streets than before.<br />
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The same type of scenario also applies to broader markets as well, as the chart of the S&P 500 shows with the Intermediate degree expanded flat unfolding in the index:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUF7j4RCIvmz16cmNeZndbZHamOjjIWkP1zUxDBWffdwaaoPw_3A4-QNurqEulfrBW2Yszb40MKFiv7AV6DX0Lgmh06BxCWnKqG1rreKL2Gtx4mZm22mi2H8omkd5MvNjvXFOlg0O7m9KP/s1600/SP500Chart07212012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="265" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUF7j4RCIvmz16cmNeZndbZHamOjjIWkP1zUxDBWffdwaaoPw_3A4-QNurqEulfrBW2Yszb40MKFiv7AV6DX0Lgmh06BxCWnKqG1rreKL2Gtx4mZm22mi2H8omkd5MvNjvXFOlg0O7m9KP/s400/SP500Chart07212012A.jpg" width="400" /></a></div>
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The target for <span style="color: lime;">Minute wave [ii]</span> of <span style="color: #3d85c6;">Minor wave C</span> down in the S&P 500 is <b>1405</b>. <span style="color: lime;">Minute wave [iii]</span> down is expected to take the S&P 500 down to <b>1000</b> with the relationship <span style="color: lime;">Minute wave [iii]</span> = 2.618 * <span style="color: lime;">Minute wave [i]</span> expected to unfold. The downside target for <span style="color: red;">Intermediate wave (W)</span> down in the S&P 500 is <b>814</b>, to be reached in June 2013. <br />
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The second half of 2012 and the first half of 2013 will go to the bears as the rest of <span style="color: red;">Intermediate wave (W)</span> down unfolds, after which the markets are projected to rally from June 2013 to June 2014. By the end of <span style="color: red;">Intermediate wave (X)</span> up, there should be a consensus that QE3 was successful in propping up the stock market. The upside targets for the end of <span style="color: red;">Intermediate wave (X)</span> is <b>1100</b> in the S&P 500 and <b>11700</b> in the DJIA. <span style="color: red;">Intermediate wave (Y)</span> will then follow, unfolding as a zigzag, completing <span style="color: #f1c232;">Primary wave [X]</span> down in June 2016 with a downside target of <b>5500</b> in the DJIA and around <b>550</b> in the S&P 500.<br />
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<br /></div>AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com3tag:blogger.com,1999:blog-7063331580968428178.post-69010430618695561432012-07-13T16:09:00.001-07:002012-07-13T16:09:48.761-07:00Update on the 2008 ParallelThis is an update to the earlier blog entry "<a href="http://thegreatbearmarket-avbursch.blogspot.com/2011/11/prelude-to-2012.html">Prelude to 2012</a>" in which a forecast was made that the collapse of MF Global was the prelude to more seismic shocks that will come in 2012. History is indeed repeating itself even though the wave paths have turned out to be different.<br />
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Here is a chart of the S&P 500 from 2007 - 2009 with the events labeled:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjEhcCqz8nREjDnnaavH4XOfUQoLRjdm57Iv7WL5nHBMxldyJ34_wFHNo0YR416W65_uYiV-zIsxupwUqD0wuHzst6TlG6_qaH50WTdbFJpNiJn_AfCA_4iU9-7gL2_1JARRvGIg6fI8Pok/s1600/SP500Chart07122012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjEhcCqz8nREjDnnaavH4XOfUQoLRjdm57Iv7WL5nHBMxldyJ34_wFHNo0YR416W65_uYiV-zIsxupwUqD0wuHzst6TlG6_qaH50WTdbFJpNiJn_AfCA_4iU9-7gL2_1JARRvGIg6fI8Pok/s400/SP500Chart07122012A.jpg" width="400" /></a></div>
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Notice that the collapse of Bear Stearns took place early in what is now labeled <span style="color: #f1c232;">Primary wave [C]</span> down (Oct 2007 - Mar 2009) of <span style="color: magenta;">Cycle wave w</span> down (2000 - 2009). Six months later, the dam burst open in September and October 2008 with the collapse of Lehman Brothers and Washington Mutual, along with AIG, Freddie Mac and Freddie Mae, and the largest banks all getting a bailout, all as the "Panic of 2008" unfolded.<br />
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History is repeating itself again. In November 8, 2011, <a href="http://www.businessweek.com/news/2011-11-08/mf-global-files-for-bankruptcy-as-broker-dealer-unit-liquidates.html">MF Global collapsed </a>as the bear market rally off the October 4, 2011 low unfolded. The collapse of MF Global was seen as a parallel of the collapse of Bear Stearns. There are a number of recent events that strengthen the case that 2011 - 2016 is a parallel of 2007 - 2009:<br />
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1 -- <a href="http://www.cnbc.com/id/47973033">Stockton, CA files for bankruptcy</a> -- Stockton, CA became the largest US city to file for bankruptcy as soaring pensions and contractual obligations became too heavy of a financial burden for the city to carry. The city was unable to reach a deal with creditors to address a $26 million budget shortfall.<br />
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2 -- <a href="http://news.yahoo.com/blogs/lookout/scranton-minimum-wage-city-police-firemen-140229063.html">Scranton, PA is bankrupt for all practical purposes</a> -- The city mayor reduced the wage for all city workers, including police and firefighters, to minimum wage as the city's cash reserves rapidly depleted. This move has sparked furor from a number of unions that are now vowing to sue in federal court including a motion to hold the mayor in contempt of court for violating a judge's orders to pay full wages.<br />
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3 -- <a href="http://news.yahoo.com/third-calif-city-votes-declare-bankruptcy-050210981.html">San Bernardino, CA became the third large city in California to file for bankruptcy</a> -- The city is facing a budget shortfall of $45.8 million, has already stopped paying some of its vendors, and is close to being unable to make payroll. The city benefited from the housing boom of the early 2000s, but since suffered as the housing bubble continues to deflate.<br />
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4 -- <a href="http://www.cnbc.com/id/48107987">The LIBOR rate fixing scandal has rocked the financial world in the last several days</a> -- At the center of the scandal is the British banking giant Barclays manipulating interest rates on trillions of dollars of credit derivatives. In the aftermath of the scandal, <a href="http://www.huffingtonpost.com/2012/07/05/barclays-criminal-probe-libor-manipulation_n_1652697.html">U.K. regulators have launched a criminal investigation</a> into the rate manipulation behavior. <a href="http://www.reuters.com/article/2012/07/11/us-banking-libor-panel-idUSBRE86A0P020120711">A few days later, the scandal expanded in scope with a number of the largest banks including Bank of America, JP Morgan Chase, and Citigroup also involved</a>. <a href="http://www.huffingtonpost.com/2012/07/11/libor-scandal-lawsuits_n_1665708.html">A number of cities and states in the US are now in the process of suing the banks over the economic impact of LIBOR manipulation</a>. This is already being described as one of the biggest bank frauds in the history of modern civilization.<br />
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Here is an updated chart of the S&P 500 from 2011 - 2016 with all the important events labaled:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi27ulXtoLyfXpjq4pvU0xnN5AxAVeK2meUaEbHId02I9mgRTD8TQaqS_r4QnmrtQWdQatUCyv9mnDOr72tirt00IsQdSsZGQeHy3pznziCDmOHb5TgGsZt43SWp7g3DWxSdNANSjP4aDRn/s1600/SP500Chart07122012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="237" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi27ulXtoLyfXpjq4pvU0xnN5AxAVeK2meUaEbHId02I9mgRTD8TQaqS_r4QnmrtQWdQatUCyv9mnDOr72tirt00IsQdSsZGQeHy3pznziCDmOHb5TgGsZt43SWp7g3DWxSdNANSjP4aDRn/s400/SP500Chart07122012B.jpg" width="400" /></a></div>
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We are still in the early part of <span style="color: #f1c232;">Primary wave [X]</span> down (2011 - 2016) of <span style="color: magenta;">Cycle wave x</span> up (2009 - 2021), meaning that the "dam bursting open" event is yet to unfold in the future and it will be associated with a Primary-degree "point of recognition". The next set of shocks should come from Europe with the "Panic of 2012" unfolding later this year as the stock markets in Spain, Greece, and Italy reach the center of <span style="color: red;">Intermediate wave (1)</span> of <span style="color: #f1c232;">Primary wave [3]</span> down, which would correspond to the center of <span style="color: #3d85c6;">Minor wave C</span> down of <span style="color: red;">Intermediate wave (W)</span> down (February 2011 - June 2013) in the DJIA, S&P 500 and the Wilshire 5000. <br />
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The dam should burst open in late 2014 after the popping of the education bubble in June 2014. <b>Look for the Obama Administration to launch TARP 2 to bail out the banks in late 2014</b> -- especially plausible even now as the "too big to fail" banks were never downgraded in 2008 but have been hit with a series of downgrades since late last year, <b>indicating that the banks are in worse shape now than they were in 2008</b>. With the job market also collapsing during that time (10 million workers in the US lose their jobs between now and June 2016), college graduates won't be able to find employment after graduating from college. <a href="http://finance.yahoo.com/news/1-2-graduates-jobless-underemployed-140300522.html">The issue is in crisis mode even now as over half of recent college graduates are unemployed</a>. Student loan debt is already past the $1 trillion mark and continues to grow as the college bubble continues to inflate at an exponential clip. In 2014, with the next leg of the job market collapse well underway, <b>look for the Obama Administration to do a student loan bailout to the tune of $1.7 trillion in late 2014</b>. There are already a few people that recognize the possibility of a student loan bailout,<a href="http://www.businessweek.com/finance/occupy-wall-street/archives/2011/11/when_will_the_student_loan.html"> such as the article on Bloomberg Businessweek</a>.<br />
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The most powerful seismic shocks are yet to rock the financial world as the Primary degree decline (Primary wave [X] down) is still in the early stages. The largest shocks that will hit during the Primary degree decline in social mood should take place in late 2014.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-43830690297575584132012-07-08T21:03:00.000-07:002012-07-08T21:03:48.585-07:00Economic Slope of HopeWe are now seeing evidence of the declining portion of the business cycle unfolding even in the United States with weakening manufacturing and the job market continuing to display signs of exhaustion. Even as the economic indicators (even the official ones published by the BLS) show signs of deterioration, <b>economists and analysts remain stubbornly bullish</b> -- in both 2010 and 2011, when the economic indicators showed signs of declining momentum, the fear of a double dip came up, but there is no fear of a double dip this time around -- just more bullishness. <b>The economy is sliding down the slope of hope, both in the United States, and the rest of the western world</b>.<br />
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A number of developments have come into play, solidifying the case for an economic slope of hope:<br />
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1 -- <a href="http://www.cnbc.com/id/48043017/">In June 2012, manufacturing in the United States as indicated by the ISM index entered into contraction territory with a reading of 49.7</a>. The index stayed above 50 during all of 2010 and 2011. This is a very strong indication that the declining phase of the business cycle is in force. <a href="http://globaleconomicanalysis.blogspot.com/2012/07/eurozone-composite-pmi-signals-steep.html">Considering that the ISM in the rest of the Western World has stayed below 50 for an extended amount of time</a>, it is very likely that manufacturing will continue to contract in the months and years ahead. Economists reacted to the numbers by taking a bullish position with the belief that the Federal Reserve will step in with QE3 to keep the economy propped up.<br />
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2 -- The job market continues to show signs of exhaustion <a href="http://globaleconomicanalysis.blogspot.com/2012/07/third-consecutive-weak-payroll-report.html">with just 80,000 jobs created in June 2012</a> after creating 69,000 jobs in May 2012. Even with a weak jobs picture, economists are still making very large extrapolation leaps <a href="http://education.yahoo.net/articles/high_growth_careers.htm?kid=1LFY3">such as the prediction by the Department of Labor for careers such as health care to expand by 18% to 30% from 2010 to 2020</a>. Also making a large trend extrapolation leap is Georgetown University's Center on Eduction and Workforce, <a href="http://www.latimes.com/business/money/la-fi-mo-health-care-jobs-20120621,0,1325697.story">which is predicting that the health care industry will create 5.6 million jobs by 2020</a>. <b>The fact that people are making large extrapolation leaps in the job market with predictions for more job market growth is very indicative that a reversal is just around the corner</b>. In spite of extreme bullishness on the outlook of the job market by economists and analysts, there is a lot of weakness underneath the surface:<br />
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2a -- <a href="http://lifeinc.today.msnbc.msn.com/_news/2012/06/04/12049830-full-time-jobs-are-getting-harder-to-find?lite">Full time jobs have been getting harder to find</a>. This strongly supports the supposition that the job creation trend in the United States has been primarily due to the destruction of family wage and living wage jobs with part time minimum wage jobs created in their place.<br />
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2b -- <a href="http://www.cnbc.com/id/47874666">Job openings are on the decline</a> as businesses and corporations once again focus more on limits and preservation (bear market trait), rather than progress and production (bull market trait). <br />
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2c -- Large scale job layoffs are making a comeback with <a href="http://www.msnbc.msn.com/id/48099270/ns/business-retail/#.T_pNbJHYoeI">Best Buy laying off 2400 workers</a> and <a href="http://www.huffingtonpost.com/2012/06/14/nokia-layoffs_n_1595599.html">Nokia laying off 10,000 workers</a>. This is just the start of what should be a very persistent trend of large scale layoffs that will continue until June 2016 and result in 10 million (or more) people losing their jobs as <span style="color: #f1c232;">Primary wave [X]</span> down (Feb 2011 - June 2016) of <span style="color: magenta;">Cycle wave x</span> up (2009 - 2021) unfolds.<br />
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3 -- <a href="http://www.cnbc.com/id/48052458">Economists are already fishing for a bottom</a> in the United States economy with many analysts extremely bullish on the housing market and optimistic that the Federal Reserve will step in with QE3 on any hints of further weakness.<br />
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The stock markets are also indicating that the declining phase of the business cycle has arrived. The orthodox high points are already in for all of the major market indexes, including the DJIA. The "final thrust" that started to unfold from the June 4, 2012 low has morphed into a double zigzag, which means that <span style="color: #3d85c6;">Minor wave C</span> down of <span style="color: red;">Intermediate wave (W)</span> down of <span style="color: #f1c232;">Primary wave [X]</span> down (2011 - 2016) has arrived.<br />
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Here is an updated intermediate term chart of the DJIA:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyU6oGp_dHgXMKCtqAL1NVd3lAj4W0z44frTI3Qo7aOTkXk4L3U_xUEWMyn__mfIZurCikUW1uU5BTgiiGKZTzfYPmBtdvjfWrBoc-dr43CWdLEm2_-Dvwfoip7sqA132eH6dwzaRpFq4G/s1600/DJIAChart07082012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyU6oGp_dHgXMKCtqAL1NVd3lAj4W0z44frTI3Qo7aOTkXk4L3U_xUEWMyn__mfIZurCikUW1uU5BTgiiGKZTzfYPmBtdvjfWrBoc-dr43CWdLEm2_-Dvwfoip7sqA132eH6dwzaRpFq4G/s400/DJIAChart07082012A.jpg" width="400" /></a></div>
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<span style="color: #3d85c6;">Minor wave B</span> up in the DJIA unfolded as a triple zigzag and as a bearish rising wedge. The downside target for <span style="color: #3d85c6;">Minor wave C</span> down is roughly <b>8500</b> to be reached in <b>June 2013</b>.<br />
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Here is an updated intermediate term chart of the S&P 500:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxItx1rauoimual0k7w6phfLPPrmGUx8FyvLn8nsScm_Ee4ak-0wDc9aAZ4hKNn0dJ93_JYP_LNc97kqnAhSl3hf-CYSONr_qLnKv3qU1m9XX8-bGdtpHOlB-69YaN5rLQq802vkEqINu_/s1600/SP500Chart07082012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxItx1rauoimual0k7w6phfLPPrmGUx8FyvLn8nsScm_Ee4ak-0wDc9aAZ4hKNn0dJ93_JYP_LNc97kqnAhSl3hf-CYSONr_qLnKv3qU1m9XX8-bGdtpHOlB-69YaN5rLQq802vkEqINu_/s400/SP500Chart07082012A.jpg" width="400" /></a></div>
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<span style="color: #3d85c6;">Minor wave B</span> up in the S&P 500 (and the Wilshire 5000) unfolded as a double zigzag and peaked sooner than the DJIA. The downside target for <span style="color: #3d85c6;">Minor wave C</span> down in the S&P 500 is roughly 850 to be reached in June 2013.<br />
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<span style="color: #3d85c6;">Minor wave C</span> down has begun in all of the major indexes with <span style="color: lime;">Minute wave [i]</span> down completed in early June 2012 and <span style="color: lime;">Minute wave [ii]</span> up in progress. The stock market is expected to remain elevated in a trading range (12200 - 13200 for the DJIA, 1200 - 1380 for the S&P 500) before heading lower in earnest later this year with <span style="color: lime;">Minute wave [iii]</span> down unfolding as a massive waterfall decline.<br />
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The declining phase of the business cycle is unfolding, but economists and analysts are expected to remain stubbornly bullish even as the economy, the stock market, and the job market resume their larger downtrend. The business cycle low point will be reached around June 2016 with a downside target of 5500 for the DJIA and around 550 for the S&P 500.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-10229402938310980912012-06-30T16:24:00.000-07:002012-06-30T16:24:02.292-07:00More Precursors of Climate ChangeAs 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 "<b>The Great Tribulation</b>" when the effects of man-made climate change start unfolding in full force.<br />
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As I demonstrated <a href="http://thegreatbearmarket-avbursch.blogspot.com/2011/05/global-warming-during-great-tribulation.html">here</a> and <a href="http://thegreatbearmarket-avbursch.blogspot.com/2011/08/hurricanes-and-great-deflation.html">here</a>, man-made global warming unfolding in full force will be one of the defining characteristics of <span style="color: #38761d;">Supercycle wave (c)</span> down (2076 - 2118) within <span style="color: #45818e;">Grand Supercycle wave [IV]</span>, which is one of the big reasons why the term "The Great Tribulation" is warranted.<br />
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Recent events in the Unites States sets the scene for the effects of man-made global warming:<br />
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1 -- <a href="http://en.wikipedia.org/wiki/Colorado_wildfire">A number of massive wildfires are burning out of control in Colorado</a>, 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 href="http://news.yahoo.com/blogs/ticket/obama-colorado-wildfires-212538465.html">A few days ago, President Obama toured the state</a> and sent in federal resources to battle the fires.<br />
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2 -- After one of the warmest springs on record, <a href="http://www.msnbc.msn.com/id/47985936/ns/weather/t/extreme-heat-roasts-central-plains-heads-east-next/?ns=weather">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</a>. 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 <a href="http://thinkprogress.org/climate/2012/06/30/509246/nbc-meteorologist-on-record-heat-wave-if-we-didnt-have-global-warming-we-wouldnt-see-this/">"if we did not have global warming, we would not be seeing this"</a>.<br />
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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 <a href="http://en.wikipedia.org/wiki/Tropical_Storm_Debby_%282012%29">Tropical Storm Debby (2012)</a> <a href="http://news.yahoo.com/tropical-storm-debby-soaks-floridas-gulf-coast-212518388.html">drenching the Florida coast with over 2 feet of rain</a> and causing <a href="http://www.msnbc.msn.com/id/47978615/ns/weather/#.T-9zyZHYoeJ">massive flooding and opening up numerous sinkholes</a>.<br />
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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. <a href="http://www.csmonitor.com/Science/2012/0531/Climate-change-Arctic-passes-400-parts-per-million-milestone">The concentration of carbon dioxide in the Arctic recently exceeded 400 parts per million</a>. The concentration of carbon dioxide in the atmosphere was at 275 parts per million at the start of the late Industrial Revolution (<span style="color: #38761d;">Supercycle wave (III)</span> up (1859 - 1929)). <b>It is very likely that the abuse of resources will continue unabated until the oil supply crash takes place in 2017</b>.<br />
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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 <span style="color: #38761d;">Supercycle wave (b)</span> 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 <span style="color: #38761d;">Supercycle wave (b)</span> up (2042 - 2076) and even a portion of <span style="color: #38761d;">Supercycle wave (c)</span> down (2076 - 2118) as well.<br />
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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:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgguGD5qKMz2k8MX6U2aXTIvSBB5hLljJu0j6rhU64z2Heaztnt87Mm42eNQKXvGl_wff2Jw_386g59EtIegNOPZejaFfm4jzi95rdsdZn4pQLiZhj-Ry8veawOC9aG_BT5g2YhNHPfswzi/s1600/DJIAChart06302012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="265" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgguGD5qKMz2k8MX6U2aXTIvSBB5hLljJu0j6rhU64z2Heaztnt87Mm42eNQKXvGl_wff2Jw_386g59EtIegNOPZejaFfm4jzi95rdsdZn4pQLiZhj-Ry8veawOC9aG_BT5g2YhNHPfswzi/s400/DJIAChart06302012A.jpg" width="400" /></a></div>
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It is very likely that the "point of recognition" associated with man made global warming will take place at the center of <span style="color: magenta;">Cycle wave I</span> down (2076 - 2082) within the larger <span style="color: #38761d;">Supercycle wave (c)</span> down. The "point of recognition" will result in the "<b>Global Warming Panic</b>" in 2078 as people finally realize that global warming is for real.<br />
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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:<br />
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1 -- <a href="http://thinkprogress.org/climate/2012/06/25/504984/perspectives-from-rio20-we-cannot-conflate-the-negotiations-with-what-is-actually-happening-on-the-ground/">The Rio + 20 summit, which was supposed to hammer out solutions to the coming climate crisis, ended in a complete failure with nothing accomplished</a>.<br />
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2 -- There is denial even at the White House, as demonstrated by President Obama's <a href="http://thinkprogress.org/climate/2012/06/27/506953/obama-grants-construction-permits-to-southern-leg-of-keystone-xl/">recent approval for building the southern portion of the Keystone XL pipeline</a> and the <a href="http://thinkprogress.org/climate/2012/06/27/506965/obama-administrations-plan-for-arctic-offshore-drilling-safety-i-believe-theres-not-going-to-be-an-oil-spill/">approval of offshore oil drilling in the Arctic</a> with the belief that an oil spill could never happen.<br />
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3 -- <a href="http://thinkprogress.org/climate/2012/06/26/506298/chamber-of-commerce-and-utility-groups-wage-campaign-against-renewable-energy-increase-in-michigan/">The Chamber of Commerce and utility companies are actively waging a campaign against increasing renewable energy standards in Michigan</a>. 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.<br />
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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<span style="color: #38761d;"> Supercycle wave (c)</span> down, <b>it is very likely that nations will go to war to secure control over arable land and habitable land</b>. The possibility of war as a consequence of climate change has been discussed in an article titled "<a href="http://thinkprogress.org/climate/2011/05/27/208187/memorial-day-2030/#more-50317">Memorial Day 2030</a>". This would not be the first time that civilization would be dramatically affected by climate change -- <a href="http://www.sciencedaily.com/releases/2012/05/120528154943.htm">Recent archeological evidence points to climate change as the primary cause of the fall of the ancient Indus civilization</a> between 3900 and 3000 years ago.<br />
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The effects of man made climate change will almost certainly continue well into <span style="color: #45818e;">Grand Supercycle wave [V]</span> up (2118 - 2296) <a href="http://www.sciencedaily.com/releases/2012/06/120624134955.htm">with sea levels continuing to rise during that time</a>. However, it is very likely that positive social mood during that time will allow human civilization to adapt to the changing climate.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-43682780320651658052012-06-23T14:51:00.000-07:002012-06-23T14:51:26.777-07:00Life After ObamacareAll 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, <b>yet the ruling could, in theory, come any time between now and November 2012</b>. <br />
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According to <a href="http://www.intrade.com/v4/markets/contract/?contractId=745353">Intrade</a>, 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:<br />
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Scenario 1 -- Health Care ruling handed down in June 2012 (Optimistic scenario)<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwlHh2RQEswpVO3RIHlSsbILl2luwYPsE2uGFoKK3NlI95gXFNoZUyM5YTU6a6H_LF9uV5ZNpgckwXaAAhybu8qa6iNS0WapAMun8houuupwhrTKX4vf88Z5i22Q2YQISCMd8wMvtaw2RM/s1600/SP500Chart06232012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgwlHh2RQEswpVO3RIHlSsbILl2luwYPsE2uGFoKK3NlI95gXFNoZUyM5YTU6a6H_LF9uV5ZNpgckwXaAAhybu8qa6iNS0WapAMun8houuupwhrTKX4vf88Z5i22Q2YQISCMd8wMvtaw2RM/s400/SP500Chart06232012A.jpg" width="400" /></a></div>
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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 <span style="color: #3d85c6;">Minor wave B</span> up (Oct 2011 - June 2012) of <span style="color: red;">Intermediate wave (W)</span> down, so a Minor degree bear market rally is about to wrap up if nor already completed.<br />
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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 <span style="color: #3d85c6;">Minor wave B</span> up reaches completion would work very well for a Minor degree bear market rally ending on great news.<br />
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Scenario 2 -- Health care ruling handed down in October / November 2012 (Pessimistic Scenario)<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1nVpyeGgTk5SyfiJH41pTNAjhdB6HUMfvrHSnDYfbaY_cqswDHmQrh5dXdEGlkLk2ytuOhqxVHNgRnCTUsFDJ9_sfAQeWubN0QIe5aBES2SEXdcApqDlDxYByc_Af8-_ofMR_ZLXf8n6I/s1600/SP500Chart06232012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1nVpyeGgTk5SyfiJH41pTNAjhdB6HUMfvrHSnDYfbaY_cqswDHmQrh5dXdEGlkLk2ytuOhqxVHNgRnCTUsFDJ9_sfAQeWubN0QIe5aBES2SEXdcApqDlDxYByc_Af8-_ofMR_ZLXf8n6I/s400/SP500Chart06232012B.jpg" width="400" /></a></div>
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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 <a href="http://www.cnbc.com/id/47904279">CNBC</a>, <a href="http://finance.yahoo.com/news/stern-advice-supreme-court-healthcare-213318517.html">Yahoo news</a>, and <a href="http://www.huffingtonpost.com/2012/06/18/supreme-court-health-care-law_n_1606524.html">Huffington Post</a>, 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. <a href="http://www.kevinmd.com/blog/2012/04/chaos-doctors-affordable-care-act-struck.html">There are already predictions of a full blown panic if the entire law is struck down as outlined in the KevinMD.com article</a>, making the case that the panic could hit doctors and providers as well.<br />
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<a href="http://www.cnbc.com/id/47925419">There are already a number of economists and analysts that see striking down the entire law as bullish for the stock market</a>. 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 <span style="color: #3d85c6;">Minor wave C</span> down is in play with a bearish Intermediate degree "point of recognition" reached shortly afterwards. The result, of course, would be the "<b>Panic of 2012</b>" as a massive backlash unfolds in the aftermath of the ruling.<br />
<br />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 <a href="http://thegreatbearmarket-avbursch.blogspot.com/2011/09/death-spiral-in-health-care.html">here</a> and <a href="http://thegreatbearmarket-avbursch.blogspot.com/2012/03/future-of-us-healthcare.html">here</a>, 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".AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com2tag:blogger.com,1999:blog-7063331580968428178.post-11087548735218197112012-06-16T16:57:00.000-07:002012-06-16T17:03:45.444-07:00Increasing Turmoil in EuropeSocial 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.<br />
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As suggested in the previous blog entry, <a href="http://worldnews.msnbc.msn.com/_news/2012/06/09/12141409-spain-to-seek-bailout-up-to-125-billion-on-table?lite">Spain's banks got a $125 billion (100 billion euros) bailout on Sunday afternoon (June 10, 2012)</a>. The bailout news resulted in a short lived euphoria that fizzled out by the end of the next day. <a href="http://globaleconomicanalysis.blogspot.com/2012/06/gap-and-crap-comparison-spain-ibex-vs-s.html">The IBEX 35 gapped up by more than 5% only to close the entire gap within a few hours</a>. 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.<br />
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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.<br />
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Here is a long term chart of the IBEX 35:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8b18roorryPcNPoQIO7WfOWOPtyG6WFPTNgqfLmbtrg8v9XB5MnnZtNeITY3aUmK44xrVjsJuFlHYLcSoh6XTUr3d8aKfifxCXDSgr9XxQ_DbG5mhwvk43NDbKqbvQawHAhqaVHeVqV3C/s1600/IBEXChart06162012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="261" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8b18roorryPcNPoQIO7WfOWOPtyG6WFPTNgqfLmbtrg8v9XB5MnnZtNeITY3aUmK44xrVjsJuFlHYLcSoh6XTUr3d8aKfifxCXDSgr9XxQ_DbG5mhwvk43NDbKqbvQawHAhqaVHeVqV3C/s400/IBEXChart06162012A.jpg" width="400" /></a></div>
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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.<br />
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Here is a closer look at the IBEX 35 from 2009 to today:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjs-VaFMQqQfsixjcIE_YiysZdmmR_hfzXTv2TSI_sRiR1DjzHlF1SZ6NIf8Kt_TsaJOLGP3rjTlR-bCl-sJXg-Igxkcm71WX0L_jCknkrG0Z_Snp95PeNA6O78ARN0fiKn5Kty2XlYY0_k/s1600/IBEXChart06162012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="261" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjs-VaFMQqQfsixjcIE_YiysZdmmR_hfzXTv2TSI_sRiR1DjzHlF1SZ6NIf8Kt_TsaJOLGP3rjTlR-bCl-sJXg-Igxkcm71WX0L_jCknkrG0Z_Snp95PeNA6O78ARN0fiKn5Kty2XlYY0_k/s400/IBEXChart06162012B.jpg" width="400" /></a></div>
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Like all the other markets, the IBEX 35 reached a Primary degree low point in March 2009, which would be the end of <span style="color: #f1c232;">Primary wave [1]</span> down. The low point was followed by a bear market rally, <span style="color: #f1c232;">Primary wave [2]</span> 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 <span style="color: red;">Intermediate wave (1)</span> of <span style="color: #f1c232;">Primary wave [3]</span> down will soon be reached.<br />
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The center of <span style="color: red;">Intermediate wave (1)</span> of <span style="color: #f1c232;">Primary wave [3]</span> down in Spain, Greece, and Italy is very likely a key event, as it will result in the "<b>Panic of 2012</b>". The coming point of recognition will likely result in Spain and Italy both needing a bailout, yet <b>Spain and Italy are both too big to bail out</b>. 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 "<b>Crisis of the Western World</b>".<br />
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There are already a lot of precursor events unfolding that are indicating that the "<b>Panic of 2012</b>" will take place in Europe in the near future:<br />
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1 -- Nations in Europe have been hit with a barrage of credit downgrades in the last few days. On June 13, 2012, <a href="http://www.cnbc.com/id/47802891">Spain's credit rating was downgraded by Moody's from A-3 to Baa-3</a>. Just one day later, <a href="http://www.cnbc.com/id/47809418">Spanish 10 year bonds hit the key 7% level</a>. On Friday, June 15, 2012, <a href="http://www.cnbc.com/id/47823574">Moody's cut the credit rating of 11 European banks and said that more downgrades will take place of Greece ditches the euro</a>.<br />
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2 -- <a href="http://news.yahoo.com/global-shares-ease-weak-u-data-wary-italy-003755925--finance.html">Italy's 10 year bond yield is also on the rise, hitting 6.25%</a> 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.<br />
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3 -- The June 17, 2012 elections in Greece have been hanging like a dark cloud <a href="http://www.cnbc.com/id/47833711">with many central banks gearing up for another round of intervention</a> with the European Central Bank possibly cutting interest rates and Britain's central bank possibly infusing the markets with more money. <b>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</b>.<br />
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4 -- <a href="http://globaleconomicanalysis.blogspot.com/2012/06/imf-pressures-spain-to-lower-salaries.html">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</a>.<br />
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5 -- <a href="http://globaleconomicanalysis.blogspot.com/2012/06/greeks-rail-against-crude-german.html">The Greek election has also resulted in substantial involvement of the EU</a> 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.<br />
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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. <a href="http://www.cnbc.com/id/47814459">Greece's power grid is already starting to come under pressure and stress</a>, in addition to the barter markets that started to come up last year. <a href="http://www.cnbc.com/id/47826051">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</a> 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.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-49055080632330493312012-06-09T02:10:00.000-07:002012-06-09T02:10:36.416-07:00Final Thrust In ProgressThe wait was longer than expected but the <a href="http://thegreatbearmarket-avbursch.blogspot.com/2012/05/final-thrust.html">final thrust that has been in the forecast</a> is finally materializing. The last leg of a Minor degree triple zigzag, <span style="color: #3d85c6;">Minor wave B</span> 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 <b>June 24, 2012</b>.<br />
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Here is an updated intermediate term chart of the DJIA:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgj3zTrNRPdnnuf8k-fslGuEiQSWQ0avhZs7poj-v0ut9hj9YYGW487IF71TuItNNglzmHda0_d7o_YOVynYfH-zNikOv0RHaJM_brWBkuSMJHV2jtLFmTIhOgQFL8veDjfEpiNUWnWUXQp/s1600/DJIAChart06072012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="270" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgj3zTrNRPdnnuf8k-fslGuEiQSWQ0avhZs7poj-v0ut9hj9YYGW487IF71TuItNNglzmHda0_d7o_YOVynYfH-zNikOv0RHaJM_brWBkuSMJHV2jtLFmTIhOgQFL8veDjfEpiNUWnWUXQp/s400/DJIAChart06072012A.jpg" width="400" /></a></div>
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The triangle count for <span style="color: lime;">Minute wave [x]</span> (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 <b>March 18, 2012</b> and ended on <b>June 5, 2012</b>. 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.<br />
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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.<br />
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The upside target for the final thrust is <b>13340</b> - <b>13625</b> for the DJIA and <b>1415</b> - <b>1452</b> 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 <b>13350</b> as the upside target for the final thrust in the DJIA and <b>1375</b> for the S&P 500. The final thrust should be completed on around <b>June 24, 2012</b> with <span style="color: #3d85c6;">Minor wave C</span> down (June 2012 - June 2013) to commence afterwards.<br />
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Here is an updated longer term chart of the DJIA:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiqpsG3gxdMAWiW9sJ9p8grRxg2nsEHt9XI0SiYzE5l4gDtuJnCYOTqA0t7o5aqQefeUWucm-G2W4RB9DhK-EmIZ8v9iyBW3XCbmxzLmWUbqL06F1CFcoyOR-xw9SFIGlzzPXYn-Ecnjgv2/s1600/DJIAChart06072012C.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiqpsG3gxdMAWiW9sJ9p8grRxg2nsEHt9XI0SiYzE5l4gDtuJnCYOTqA0t7o5aqQefeUWucm-G2W4RB9DhK-EmIZ8v9iyBW3XCbmxzLmWUbqL06F1CFcoyOR-xw9SFIGlzzPXYn-Ecnjgv2/s400/DJIAChart06072012C.jpg" width="400" /></a></div>
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Notice that the triple zigzag, <span style="color: #3d85c6;">Minor wave B</span> 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.<br />
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The small complex structure that unfolded as <span style="color: lime;">Minute wave [x]</span> (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, <span style="color: #f1c232;">Primary wave [X]</span> (2011 - 2016) of <span style="color: magenta;">Cycle wave x</span> (2009 - 2021) of <span style="color: #38761d;">Supercycle wave (a)</span> (2000 - 2042), appears to be taking a similar wave path, as shown on the chart:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEig1A4XahCCN2lIUgkHy3_xycNHqdHKMeJEtAe_9A0Xx4wxqFWlF93SpSYvdZeJflOZDIoHZ922g-byChFs9tMEzm88_fzJM5SChuCD71SZZQUKS4aI3RRibOF2QepmKbfmN_cqSsbWIfKZ/s1600/DJIAChart06072012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="243" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEig1A4XahCCN2lIUgkHy3_xycNHqdHKMeJEtAe_9A0Xx4wxqFWlF93SpSYvdZeJflOZDIoHZ922g-byChFs9tMEzm88_fzJM5SChuCD71SZZQUKS4aI3RRibOF2QepmKbfmN_cqSsbWIfKZ/s400/DJIAChart06072012B.jpg" width="400" /></a></div>
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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.<br />
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As the final thrust unfolds, exuberant optimism is expected to take center stage (see the previous blog entry). <a href="http://news.yahoo.com/blogs/ticket/scott-walker-fights-retain-governorship-wisconsin-recall-010044710.html">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</a> in spite of a <a href="http://www.dailykos.com/story/2012/06/01/1096476/-Wisconsin-John-Doe-investigation-launched-after-Scott-Walker-s-office-stonewalled-initial-inquiry">criminal investigation involving one of his closest aides that is now in progress</a>. 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".<br />
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Even as exuberant optimism takes center stage, undercurrents of bearish social mood associated with the decline of the stock market during <span style="color: #f1c232;">Primary wave [X]</span> (2011 - 2016) down is brimming under the surface:<br />
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1 -- <a href="http://www.cnbc.com/id/47700847">Greece is on the verge of running out of cash</a>. 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.<br />
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2 -- <a href="http://money.cnn.com/2012/06/07/news/economy/spain-downgrade/index.htm?hpt=ibu_c2">The Spanish debt crisis takes another turn for the worse when its credit rating was downgraded by three notches, from "A" to "BBB"</a>. A number of Spanish banks are also in serious financial trouble and a <a href="http://www.cnbc.com/id/47744785">bailout of the banks appears to be on the horizon</a>. <br />
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3 -- <a href="http://www.cnbc.com/id/47263088/?What_s_This_Fiscal_Cliff_Anyway_Do_I_Need_to_Worry">There is also speculation about a "Fiscal Cliff"</a> (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), <b>strife and discord is the most likely outcome</b> as both the GOP and the Democrats stubbornly hold their ground and refuse to come to a compromise on the issue.<br />
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4 -- <a href="http://www.huffingtonpost.com/2012/06/07/bernanke-testimony-congress_n_1577631.html">The Federal Reserve is prodding Congress to spend more money to prop up the economy</a>. 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.<br />
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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.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-47968009740504242532012-05-31T14:28:00.000-07:002012-05-31T14:28:04.242-07:00Exuberant Optimism Takes Center StageEven as the markets struggle to muster a rally off the short term lows of May 23, 2012, optimism continues to rise to new heights. The DJIA narrowly held above the May 23, 2012 low point today at the session lows before moving off the lows.<br />
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Here is an updated chart of the DJIA. In the short term, the short term decline lasted longer than expected, but the larger picture has not changed -- the rally off the October 2011 low is a triple zigzag in the making with the final z wave in play, part of a larger expanded flat, <span style="color: red;">Intermediate wave (W)</span> of <span style="color: #f1c232;">Primary wave [X]</span> (2011 - 2016) down.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPN-JdJ6Z_7CNJWmdFH7CoNzOOMZjmIYesK1SP1wdKW-_U0dI8CIrvECEhyphenhyphen0rqx5t139yc0Ns6ds0-Km6cMkYtOo1au8cDM8Ctr7SWkQE8U9-MdJCqJrs-eok44VL29PzZWiWvGGmfkgvg/s1600/DJIAChart05312012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPN-JdJ6Z_7CNJWmdFH7CoNzOOMZjmIYesK1SP1wdKW-_U0dI8CIrvECEhyphenhyphen0rqx5t139yc0Ns6ds0-Km6cMkYtOo1au8cDM8Ctr7SWkQE8U9-MdJCqJrs-eok44VL29PzZWiWvGGmfkgvg/s400/DJIAChart05312012A.jpg" width="400" /></a></div>
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The markets are at a crucial juncture. All the major markets -- the DJIA, the S&P 500, the FTSE, and the DAX, are all testing the lower trend channel line. The DJIA and the S&P 500 have already touched that line three times since May 23, 2012, so the trend line is considered important. Any decisive break below the lower trend line (shown as the lowest blue line on the chart) is bearish and a very strong indication of a trend change -- that is, <span style="color: #3d85c6;">Minor wave C</span> down of the larger expanded flat, <span style="color: red;">Intermediate wave (W)</span> is in progress. <br />
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Even as the markets struggle to hold the lower trend channel line as support, optimism continues to rise into the stratosphere in the mainstream media.<br />
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1 -- <a href="http://finance.yahoo.com/news/u-home-sales-prices-rise-140458037.html">We continue to see calls for more recovery in the housing market</a> as people in the mainstream media continue fishing for a bottom. <a href="http://www.cnbc.com/id/47599371">A number of people went on CNBC in the last few days, including Robert Schiller, S&P's David Blitzer, and Carl Case, all calling a bottom and a recovery</a>. All three cite the local housing markets in Las Vegas (construction) and Phoenix (home prices) as evidence that the housing market is at a bottom with a recovery on the horizon. <b>There is no recovery in the housing market, only a dead cat bounce that will soon give way to new post-bubble lows</b>. The housing market is sliding down the "slope of hope" and the bottom is very far down.<br />
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2 -- As testimony to the exuberant optimism that is pervasive in society, <a href="http://www.cnbc.com/id/46222415">there is now talk of a "second industrial revolution" from advanced manufacturing</a>. It is way too soon to talk about a coming "industrial revolution". <b>No "industrial revolution" will start until "The Great Deflation" is completed.</b> The next "revolution" will be the "Green Technology Revolution", which will unfold during <span style="color: #38761d;">Supercycle wave (b)</span> up, and span from 2042 to 2076. Calls for a "second industrial revolution" by people in the mainstream media are based on linear extrapolation of a trend that started in 1932, and it has become intuitive for people to take the long term trend and extend it into the future -- in other words, predicting the present.<br />
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3 -- <a href="http://www.cnbc.com/id/46902840">Another instance of exuberant optimism is projections of a high tech worker shortage</a> -- a very strong indication that exuberant optimism has taken hold in the job market. It's one thing to call for more job creation, it's another matter altogether to call for job creation to unfold at a fast enough clip that businesses can't find workers to fill all the job positions. The job creation trend has unfolded long enough (since January 2011) that it has become intuitive for people to take the trend and extrapolate the trend into the future, and we are now at a point where people are making large extrapolation leaps, which is a sign that a large degree trend reversal is imminent. <b>Considering that we are very close to a business cycle high point, job creation will come to an end and the economy is very likely to wipe out 10 million (or more) jobs in the United States between now and June 2016, the next business cycle low point</b>. The job market, like the housing market, is sliding down the slope of hope. There is no high tech worker shortage -- the technological revolution started in 1932 with the advent of <span style="color: #38761d;">Supercycle wave (V)</span> of <span style="color: #45818e;">Grand Supercycle wave [III]</span> -- and ended in 2000 with the bursting of the tech bubble in 2000. There was no talk of a tech worker shortage until the late 1990s, when the tech bubble was in its late stages and ready to pop. <b>The high tech worker shortage hoax has been circulated by colleges since the late 1990s as the higher education bubble started to pick up momentum and has taken center stage now as the higher education bubble appears ready to burst if it has not already done so.</b><br />
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As we approach the business cycle high point next month, exuberant optimism has taken center stage as the mainstream media, analysts, and economists have all become bullish. There is every reason to believe that a large degree reversal is imminent with a five wave decline set to start in June 2012 and last for around a year.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-7194246642160239322012-05-24T15:12:00.001-07:002012-05-24T15:12:47.319-07:00The Fall of FacebookFacebook has reached the top of the mountain and is now on the other side of the mountain. The IPO was hyped into the stratosphere before debuting on May 20, 2012. The company's stock opened at $38 a share, whipsawed throughout the day before ending the first day up just 0.6%. In the days following the unveiling of the IPO, Facebook has seen its stock plunge in a waterfall decline and is now at $33 a share. It's too early to come up with a wave count for Facebook's stock, but being part of the Nasdaq and being part of the <b>social media bubble</b> that has either popped or will do so soon, the Nasdaq can be used as a reasonably good proxy for where Facebook will be heading down the road in the months and years ahead.<br />
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<a href="http://thegreatbearmarket-avbursch.blogspot.com/2012/02/facebooks-mountaintop-experience.html#comment-form">Facebook's mountain top experience was evident back in early February 2012</a> as rumors about an IPO began to circulate throughout the financial world. Facebook's population had reached 700 million at that time and has allegedly reached 900 million today. There was an insane amount of anticipation for the IPO back then as exuberant optimism went into overdrive. Several days ago, as the IPO was about to debut, it had become evident that Facebook was at the top of the mountain, yet the other side of the mountain was clearly visible. With Facebook changing its policies and terms of use on a frequent basis, the seeds of destruction have already been sown, <a href="http://www.technolog.msnbc.msn.com/technology/technolog/we-may-not-trust-facebook-we-dont-quit-it-either-775670">evidenced by an AP-CNBC poll showing that 59% of Facebook users do not trust Facebook to keep their personal information private</a>. With social mood poised to go south for several years, mistrust can easily turn into a scenario where people rush for the exits by the tens of millions as they pull the plug on their Facebook accounts out of anger and self preservation of their privacy, especially as we approach the year 2015, when <span style="color: red;">Intermediate wave (Y)</span> (the sharp zigzag down) of <span style="color: #f1c232;">Primary wave [X]</span> (2011 - 2016) down is in progress.<br />
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The Nasdaq is a reasonably good proxy for where Facebook is heading in the future as all the social media companies are part of the index. Here is an intermediate term chart of the Nasdaq with the Facebook IPO arrowed on the chart:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDBjyMjgDqJCb5Cy1DmyZgc9Och1w533TCAY05BklABrtaSpFMTB5hS2nko2JqMflWlvfgWbLYqs8QRAsfK5ww6RBYCHUPQnF1G5NG1eMFbB2LXpT1l5kyUV9CNgPBsxOpETYdjiB3UFwE/s1600/NasdaqChart05232012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDBjyMjgDqJCb5Cy1DmyZgc9Och1w533TCAY05BklABrtaSpFMTB5hS2nko2JqMflWlvfgWbLYqs8QRAsfK5ww6RBYCHUPQnF1G5NG1eMFbB2LXpT1l5kyUV9CNgPBsxOpETYdjiB3UFwE/s400/NasdaqChart05232012A.jpg" width="400" /></a></div>
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As the chart shows, the Nasdaq is already on the way down again, completing <span style="color: #f1c232;">Primary wave [B]</span> (2002 - 2012) of the zigzag <span style="color: magenta;">Cycle wave w</span> (2000 - 2016) with <span style="color: #f1c232;">Primary wave [C]</span> (2012 - 2016) now in progress. The Facebook IPO was unveiled during <span style="color: orange;">Minuette wave (iv)</span> of <span style="color: lime;">Minute wave [iii]</span> of <span style="color: #3d85c6;">Minor wave 1</span> down from the March 2012 peak in the Nasdaq. The future wave path of the Nasdaq also supports the idea of Facebook having peaked a few days ago with a long term decline on the horizon.<br />
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We are indeed seeing the beginning of the end of Facebook. In the immediate aftermath of the IPO, Facebook has run into hard times on many fronts:<br />
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1 -- <a href="http://finance.yahoo.com/news/shareholders-sue-facebook-nyse-comes-015429732.html">Shareholders are now suing Facebook and its banking partners as a trading firm revealed massive losses on its shares and are seeking remedies</a>. The sudden change in sentiment from hype to anger is a strong indication that social mood is going south on a large scale.<br />
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2 -- <a href="http://business.time.com/2012/05/23/facebook-ipo-furor-feds-probing-deal-over-insider-bank-warnings/">The Feds are probing a deal over Wall Street investment banks warning its top clients about Facebook's future financial prospects in the days leading up to the IPO as well as revelations involving Facebook's underwriters gave favored clients an unfair advantage over other investors</a>. This is the first time that the Feds have gotten involved in an IPO debacle. Other social media companies, such as Pandora, had unveiled their IPOs and seen their stocks decline without drawing attention from the government. The involvement of the Feds also signals a major trend change in social mood.<br />
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3 -- <a href="http://www.huffingtonpost.com/2012/05/23/senate-facebook-ipo_n_1539842.html?">The chairman of the Senate Banking Committee, Sen. Tim Johnson (D-SD), has indicated that his panel is looking into the Facebook IPO</a>. The banking committee seeks briefings with Facebook's representatives, regulatory agencies, and possibly the banking underwriters, with the possibility of a hearing taking place in the short term future.<br />
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4 -- <a href="http://thinkprogress.org/economy/2012/05/15/484452/facebook-zuckerberg-avoid-taxes/">Facebook's top executives are exploiting loopholes to avoid paying taxes to the US government, as well as Facebook issuing stock options to avoid corporate taxes</a>. This move was immediately denounced by Sen. Carl Levin (D-MI), highlighting the destructive effects of the exploits on the taxpayers and on US tax revenue.<br />
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5 -- <a href="http://www.cnbc.com/id/47554054">Citadel Investment Group took massive losses from Facebook trades on the behalf of clients</a>, again underscoring the hype surrounding the IPO which did not materialize into gains for investors. <br />
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In spite of the massive decline in Facebook's stock following the IPO debut, as well as the hard times that have now started to come to the company, analysts and economists are still stubbornly optimistic on the prospects of Facebook's stock going higher in the future. <a href="http://www.cnbc.com/id/47540146">Setting the scene is analyst Laura Martin of Needham & Co, who went on CNBC comparing the idea of shorting Facebook stock to "getting in front of a freight train" and issued a "buy" rating for Facebook stock</a>.<br />
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Facebook's hard times are just beginning. We are seeing the initial series of shocks now. As social mood goes south in the months and years to come, Facebook's decline will continue unabated, eventually resulting in tens of millions of people rushing for the exits as mistrust morphs into anger and self preservation in the area of protecting their privacy and personal information. Facebook is expected to be much smaller in 2016 than it is now with a population decline of 50% of more from today's levels.<br />
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<br />AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com0tag:blogger.com,1999:blog-7063331580968428178.post-20247037379908052052012-05-17T17:08:00.001-07:002012-05-17T17:08:24.434-07:00The Final ThrustWe are on the verge of embarking on the final thrust and put in the final high for 2012 before the markets head lower in earnest in the second half of the year and beyond. Many markets in the Western World (with the exception of France) have been tracing out a complex structure from the October 2011 low. We are approaching the business cycle high point, on course to be reached on <b>June 24, 2012</b>.<br />
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Here is an updated intermediate term chart of the DJIA:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPttj995XGakzuHNwHU_C54SDckuM1HNEpOAIdQLc-ZBxWcOQhqPBsEYX_ujYT1ztEbOOXYkoJtmvCjivGpBz8ggZYxHJC6gHItdp1J6z2r_BL_cb-04kWclQtrWMtzbvhb2n6B8xu6Vuy/s1600/DJIAChart05172012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="243" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPttj995XGakzuHNwHU_C54SDckuM1HNEpOAIdQLc-ZBxWcOQhqPBsEYX_ujYT1ztEbOOXYkoJtmvCjivGpBz8ggZYxHJC6gHItdp1J6z2r_BL_cb-04kWclQtrWMtzbvhb2n6B8xu6Vuy/s400/DJIAChart05172012A.jpg" width="400" /></a></div>
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The 3 month triangle, <span style="color: lime;">Minute wave [x]</span> of <span style="color: #3d85c6;">Minor wave B</span>, is complete with <span style="color: lime;">Minute wave [z]</span> poised to start. Notice that the DJIA found support on the middle blue trend line, which is the inner trend channel line associated with <span style="color: #3d85c6;">Minor wave B</span>. The triple zigzag should be completed on <b>June 24, 2012</b> with an upside target of <b>13625</b>.<br />
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Here is a chart showing the 3 month triangle in the context of the larger term picture in the DJIA:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgScrXPMlowxQ9wfiBRtrB_WpZEgC5wAgw0EvH8PvROLc1AKHN9AG8xC4yc89Fn3RDDq-cKlJ_hx6w5OAHP4qDxJPQdzg-OBRLNuQeg_sZFoC4ArB8caLL7OjeAXSNGGbvgJXliqum-KbVq/s1600/DJIAChart05172012B.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="246" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgScrXPMlowxQ9wfiBRtrB_WpZEgC5wAgw0EvH8PvROLc1AKHN9AG8xC4yc89Fn3RDDq-cKlJ_hx6w5OAHP4qDxJPQdzg-OBRLNuQeg_sZFoC4ArB8caLL7OjeAXSNGGbvgJXliqum-KbVq/s400/DJIAChart05172012B.jpg" width="400" /></a></div>
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The advance from the October 2011 low is <span style="color: #3d85c6;">Minor wave B</span> of a larger expanded flat, <span style="color: red;">Intermediate wave (W)</span>. At the upside target of 13625, <span style="color: #3d85c6;">Minor wave B</span> will be 1.618 times the length of <span style="color: #3d85c6;">Minor wave A</span>. After the final thrust is completed, then <span style="color: #3d85c6;">Minor wave C</span> of <span style="color: red;">Intermediate wave (W)</span> will unfold and last for around a year with a downside target of <b>8500</b> on <b>June 2013</b>.<br />
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Many other markets in the Western World are also tracing the same pattern in which <span style="color: #f1c232;">Primary wave [W]</span> of <span style="color: magenta;">Cycle wave x</span> ended in February 2011 with <span style="color: #f1c232;">Primary wave [X]</span> now in progress and on course to continue until June 2016.<br />
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Here is an updated chart of the DAX:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjg_kcN_PmW2twICugiBU67c7wuk3TT1CwMXKZn9hawiJVbgFcmwLNw7C3ZBh7wrHUkTa377sFJmdmWnQnJFzAK85-vfeQKVoFg3RGjBq-8HW7tYamVlC1oFkUjM718ypLdNKKi2bR5WT_p/s1600/DAXChart05172012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjg_kcN_PmW2twICugiBU67c7wuk3TT1CwMXKZn9hawiJVbgFcmwLNw7C3ZBh7wrHUkTa377sFJmdmWnQnJFzAK85-vfeQKVoFg3RGjBq-8HW7tYamVlC1oFkUjM718ypLdNKKi2bR5WT_p/s400/DAXChart05172012A.jpg" width="400" /></a></div>
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Unlike other markets, <span style="color: #3d85c6;">Minor wave B</span> in the DAX traced a simple zigzag and retraced just enough of <span style="color: #3d85c6;">Minor wave A</span> for <span style="color: red;">Intermediate wave (W)</span> to be a regular flat. <span style="color: #3d85c6;">Minor wave C</span> of the larger flat is in progress now. The DAX should put in a <span style="color: lime;">Minute wave [ii]</span> bounce while the final thrust unfolds in the DJIA before heading lower in a larger third wave sell-off. The downside target for the DAX at the end of <span style="color: red;">Intermediate wave (W)</span> is <b>3625</b> to be reached in June 2013.<br />
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Here is an updated chart of the FTSE, which is following the wave path of the DJIA quite closely:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-n8DfZJadK_nTWkaJYpTVWJMNkTj7Rhlpq18_SY2Tg9O5xqgnzpkVQx2pMEQj9suX7BwaIG4UgL2niVMdxx6JzQfAlZe3OZO0Qz9n7EVuoL-dlyoIO0fIogOiiojAf96ap1KbAxDb01Zf/s1600/FTSEChart05172012A.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-n8DfZJadK_nTWkaJYpTVWJMNkTj7Rhlpq18_SY2Tg9O5xqgnzpkVQx2pMEQj9suX7BwaIG4UgL2niVMdxx6JzQfAlZe3OZO0Qz9n7EVuoL-dlyoIO0fIogOiiojAf96ap1KbAxDb01Zf/s400/FTSEChart05172012A.jpg" width="400" /></a></div>
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As with the DJIA, the FTSE is also tracing a triple zigzag from the October 2011 low. The FTSE is yet to fulfill the requirements for a flat. The minimum upside target for <span style="color: #3d85c6;">Minor wave B</span> is <b>5966</b>, the level in which Minor wave B retraces 90% of <span style="color: #3d85c6;">Minor wave A</span>. Notice that the FTSE found support at the bottom blue trend line, which is part of the outer trend channel associated with <span style="color: #3d85c6;">Minor wave B</span>. A final thrust should propel the FTSE to at least 5966 to complete the triple zigzag. A five wave decline, <span style="color: #3d85c6;">Minor wave C</span>, is in the forecast once the final thrust is completed. The downside target for <span style="color: #3d85c6;">Minor wave C</span> is around 4100, the price level that would make <span style="color: #3d85c6;">Minor wave C</span> 1.618 times the length of <span style="color: #3d85c6;">Minor wave A</span>.<br />
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There is already a lot of extreme optimism and bullishness. As I suggested in the previous blog entry, economists and analysts will be making large extrapolation leaps for both the stock market and the economy:<br />
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1 -- <a href="http://www.cnbc.com/id/47409660">An analyst from BNP Paribas Fortis is forecasting that the DJIA will hit 100,000 (!) within the next 10 years</a>. The analyst is basing the forecast on central banks pumping enormous amounts of money into the markets.<br />
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2 -- Federal Reserve worship has reached unprecedented levels <a href="http://www.fool.com/investing/general/2012/05/16/can-the-fed-save-the-dow-.aspx">with most analysts believing that the Federal Reserve can keep the markets propped up indefinitely</a>.<br />
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3 -- Some analysts are even seeing the economic cataclysm in Greece as bullish for the United States economy <a href="http://www.cnbc.com/id/47456361">under the rationale that the economic cataclysm will lead to investors seeking a safe haven in US treasury securities</a>.<br />
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4 -- All eyes are on the Facebook IPO, soon to be unveiled. <a href="http://www.cnbc.com/id/47450452">There is almost universal optimism that the IPO will be bullish for the economy and the job market</a>. Facebook's mountain top experience is nearing an end, <a href="http://thegreatbearmarket-avbursch.blogspot.com/2012/02/facebooks-mountaintop-experience.html#comment-form">as suggested in an earlier blog entry</a>. The other side of the mountain is already visible with a long term decline in the future. <a href="http://www.technolog.msnbc.msn.com/technology/technolog/we-may-not-trust-facebook-we-dont-quit-it-either-775670">The seeds of the decline have already been sown as 59% of Facebook users do not trust Facebook to keep their information private</a>. A big social mood decline associated with <span style="color: #f1c232;">Primary wave [X]</span> (2011 - 2016) down can easily turn public mistrust into a scenario where people pull the plug on their Facebook accounts by the tens of millions.<br />
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In spite of a pervasive atmosphere of exuberant optimism, we are already seeing hints of the next stage of the <b>Crisis of the Western World</b>:<br />
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1 -- There is evidence of a bank run in progress in Greece as <a href="http://worldnews.msnbc.msn.com/_news/2012/05/16/11729795-greeks-withdraw-894-million-in-a-day-is-this-beginning-of-a-run-on-banks?lite">$894 million were withdrawn from banks in the country in one day</a>. This could easily be a precursor to bank runs in Spain, Portugal, Ireland, and Italy within the next 12 to 36 months as the debt crisis in Europe continues to spread.<br />
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2 -- Hollande has been sworn in as the new president of France after an election on May 6, 2012 in which Sarkozy was thrown out of office by angry voters. In spite of talks between <a href="http://news.yahoo.com/merkel-hollande-hold-first-ever-talks-euro-crisis-182931595.html">Hollande and Merkel in the aftermath of the election aimed at keeping the EU together</a>, Hollande ran on a platform of spending to stimulate economic growth. With social mood poised to go south in the coming months and years, there will be strife and discord between Hollande and Merkel, much like the strife and discord that has been unfolding between President Obama and House Speaker Boehner, and the result will be the same -- <b>large scale political gridlock</b> -- effectively shutting down any attempt to fight the economic cataclysm that is unfolding.<br />
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3 -- The United States is dealing with its own version of the PIIGS -- namely Illinios, California, Texas, New Jersey, and Florida. <a href="http://globaleconomicanalysis.blogspot.com/2012/05/california-deficit-soared-to-16-billion.html">California's budget deficit problems have been making the news again with the deficit expanding to $16 billion with even more budget cuts on the horizon</a>. Keep in mind that California is over three times the size of Greece, so the implications of California going under will certainly result in a deflationary vortex that will drag down the rest of the United States within a matter of months, if not weeks.<br />
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<b>The second half of 2012 will go to the bears</b>. Once the final thrust is completed on June 2012, the markets will head lower in earnest for the rest of the year and continuing to decline until the next business cycle low point is reached in June 2016.AVBurschhttp://www.blogger.com/profile/00730422457525456340noreply@blogger.com1