The Fall of Obama

All 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 Primary wave [A] up (2009 - 2012) has run its course with a massive wedge collapse in progress.

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.

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 here. The Magazine Cover Indicator 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.

Here is a chart of the DJIA with the Magazine Cover Indicator event labelled:

Notice that the event occurred close to the peak of Minute wave [b] 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.

The primary count still favors the double zigzag structure for the wedge collapse, Intermediate wave (A) of Primary wave [B] down (2012 - 2016), with the double combination (expanded flat - x wave - zigzag) structure being the alternate scenario. The proposed Minute wave [b] within Minor wave W has retraced 90% of the proposed Minute wave [a] in the Wilshire 5000, but still well short of the 90% threshold for the DJIA and the S&P 500.

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 "fiscal cliff crisis" 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 Treasury Department using accounting maneuvers to buy time for Congress to act on raising the debt ceiling. 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 Intermediate wave (A) of Primary wave [B] down on June 2013.

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:

1 -- FDR vs Obama -- "Obama invokes FDR in his convention speech".  The American populace already see Obama as a parallel of FDR.

2 -- Politico -- "Obama Channels Teddy Roosevelt". 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.

3 -- Suite 101 -- "Comparing Barack Obama to Franklin D Roosevelt". Even in early 2009 with the climax of Cycle wave w (2000 - 2009) of Supercycle wave (a) down (2000 - 2042) unfolding, people were still very optimistic that Obama would be the new FDR.

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".

The "Obama brand" is expected to collapse in the coming years as Primary wave [B] (2012 - 2016) of Cycle wave x (2009 - 2021) unfolds with the peak about to be reached before the multi-year decline starts. During the wedge collapse, Intermediate wave (A), Obama's approval rating is expected to fall to the 28% to 32% range by June 2013. During Intermediate wave (B) 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 Intermediate wave (C) 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). Obama's approval rating could easily fall below 20% by the time the 2016 election takes place.

Skyscraper Indicator Signals a Top

For the third time in less than 15 years, the Skyscraper Indicator is issuing a peaking signal. The indicator was pioneered in January 1999 by Andrew Lawrence, research director of Dresdner Klienwort Wasserstein,  showing that the world's tallest buildings have risen on the eve of economic downturns.

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:

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 Asian Financial Crisis, 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".

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".

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 Primary wave [A] of Cycle wave x up (2009 - 2021), China is planning to build the world's tallest skyscraper 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.  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 Primary wave [B] of Cycle wave x.

The second phase of "The Great Deflation" is expected to end in 2021, which would be the end of Primary wave [C] (2016-2021) of Cycle wave x (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", Cycle wave y (2021 - 2042), in which a massive deflationary collapse unfolds in full force.

The Skyscraper Indicator has proven to be a very strong predictor of impending economic downturns, going all the way back to the 1800s. Here is a longer term chart of the DJIA showing the correlation between the building of skyscrapers and stock market peaks:

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.

Journey to the (Primary Degree) Peak

There 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.

The longer term outlook for the 2009 - 2021 period is still intact, with Supercycle wave (a) (2000 - 2042) down unfolding as a complex W - X - Y structure and Cycle wave x (2009 - 2021) up in progress.

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 Intermediate wave (C), 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 Cycle wave x structure in the S&P 500:

The revised wave count still works within the larger Cycle degree structure, with Primary wave [W] up (nearing its end) lasting 3 years, which would then be followed by Primary wave [X] down from 2012 to 2016, lasting 4 years, then Primary wave [Y] 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 Cycle wave x are reasonably comparable to each other in price movement and duration, as well as Cycle wave x (2009 - 2021) being reasonably comparable to Cycle wave w (2000 - 2009) in duration.

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.

Here is a chart of the NYSE Composite from 2005 to 2021:

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 "Apple Bubble" as well as a social media bubble that is now bursting with the decline of Facebook in progress.

There are also a number of social mood indicators that are signalling a significant top in the markets:

1 -- The first "Magazine Cover Indicator" event took place with "Dow 15000" appearing on the February 13, 2012 cover of Barron's magazine. 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.

2 -- In early August 2012, Mitt Romney called for more bull market in the economy and the job market. 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".

3 -- The second "Magazine Cover Indicator" event took place with the bull market portrayed as unstoppable and invincible on the September 3, 2012 cover of Barron's magazine. 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.

4 -- Just three days later, on September 6, 2012, 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". 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.  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.

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.

Inclusionism Breaks New Ground

As 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 Russia joining the World Trade Organization (WTO) after 18 years of negotiations.  The significance of the event won't be recognized by most people, but it is a very significant event from a socionomic perspective. This type of event, along with Mitt Romney calling for more bull market in the economy and job market (see this post), could easily be a peaking signal with a large degree reversal just around the corner.

When inclusionism breaks ground in previously unreachable areas, it is a very strong peaking signal. The last event of this type was Bulgaria and Romania joining the European Union in 2007 just before Primary wave [B] of Cycle wave w down (2000 - 2009) ended in October 2007. 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.

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 Cycle wave x (2009 - 2021) up, with the break up (due to nations leaving the EU) to take place during Cycle wave y (2021 - 2042) of Supercycle wave (a) (2000 - 2042) down. The last part of Cycle wave x up (likely to be Primary wave [Y] up (2016 - 2021)) could feature a last frenzied expansion of the European Union before "The Great Deflation" unfolds in full force in 2021. 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.

The addition of Russia into the WTO is occurring as Primary wave [W] 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 Primary wave [X] down to shortly follow the peak.

The European Union is expected to come under a lot of stress during Primary wave [X] (~2012 to 2016) down of Cycle wave x (2009 - 2021) up with perhaps a lot of speculation that Greece, Spain, Italy, or Portugal leaving the European Union during that time. When Primary wave [Y] (2016 - 2021) up of Cycle wave x (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. 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.

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.

Trend Extrapolation in Politics

On 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.

One day after the jobs report was released for July 2012, Mitt Romney made a bullish comment on the job market, 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. Politicians are always the last people to act on a trend, and for that matter, the last people to extrapolate a trend. 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.

Here is a long term chart of the S&P 500, with the event labelled on the chart:

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 Minute wave [ii] up is about to wrap up to a close within the next few trading days, with Minute wave [iii] down of Minor wave C down (April / May 2012 - June 2013) to follow shortly afterwards. The event will indeed turn out to be a significant peaking signal from a socionomic perspective.

The rally also appears to be corrective with a lot of overlapping waves and appears to be forming a bear flag.

Here is a close up of Minute wave [ii] of Minor wave C down in the DJIA:

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.

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 US ISM Manufacturing (officially) in decline for the second month in a row, and US Factory orders and car sales unexpectedly declining last month, 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".

Increasing Turmoil in Europe

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

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

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

Here is a long term chart of the IBEX 35:

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

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

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

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

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

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

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

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

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

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

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

Final Thrust In Progress

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

Here is an updated intermediate term chart of the DJIA:

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

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

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

Here is an updated longer term chart of the DJIA:

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

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

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

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

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

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

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

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

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

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

The Fall of Facebook

Facebook 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 social media bubble 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.

Facebook's mountain top experience was evident back in early February 2012 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, evidenced by an AP-CNBC poll showing that 59% of Facebook users do not trust Facebook to keep their personal information private. 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 Intermediate wave (Y) (the sharp zigzag down) of Primary wave [X] (2011 - 2016) down is in progress.

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:

As the chart shows, the Nasdaq is already on the way down again, completing Primary wave [B] (2002 - 2012) of the zigzag Cycle wave w (2000 - 2016) with Primary wave [C] (2012 - 2016) now in progress. The Facebook IPO was unveiled during Minuette wave (iv) of Minute wave [iii] of Minor wave 1 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.

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:

1 -- Shareholders are now suing Facebook and its banking partners as a trading firm revealed massive losses on its shares and are seeking remedies. The sudden change in sentiment from hype to anger is a strong indication that social mood is going south on a large scale.

2 -- 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. 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.

3 -- The chairman of the Senate Banking Committee, Sen. Tim Johnson (D-SD), has indicated that his panel is looking into the Facebook IPO. 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.

4 -- 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. 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.

5 -- Citadel Investment Group took massive losses from Facebook trades on the behalf of clients, again underscoring the hype surrounding the IPO which did not materialize into gains for investors.

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. 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.

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.

Update on the Road to Plutocracy

This is an update to the earlier blog entry in which there is a case to be made that there is a full-scale plutocracy in the forecast for the United States. More developments in the last several months strengthen the case for a coming plutocracy. The Unites States has clearly become more plutocratic over time on President Obama's watch, continuing the multi-decade trend that goes all the way back to the Reagan Administration Period. The case for a plutocracy is also compatible with the Elliott Wave Principle, as plutocracies fit the character of a large degree wave B in the economy, within a bear market of at least Supercycle degree.

Here are some of the latest developments that bear evidence of a coming plutocracy:

1 -- The wealth gap between the rich and the working class in the United States continued to widen during the Obama Administration Period, continuing the trend that also played out during the Bush 43 Administration Period. The gap between the rich and the working class in the Unites States is now comparable to places such as Serbia, China, and Rwanda. Even now, people on the low end of the top 1% make over 10 times as much ($250,000 a year) as a typical worker ($25,000 a year).

2 -- The top 1% have captured 93% of nominal GDP growth during the Obama Administration Period, compared to 65% during the Bush 43 Administration Period and 45% during the Clinton Administration Period. Working class wages accounted for 20% of the nominal GDP growth under Clinton, falling to 6% under Bush 43 and then dropping below zero (1% in 2010, dropping below zero in late 2011) under Obama. We are now seeing the effects of President Obama's economic policies, and the result is a larger chasm between the top 1% and the bottom 99%.

3 -- There is more evidence that President Obama has cast his lot with the top 1% -- in February 2012, he put up a proposal to cut the corporate tax rate from 35% to 28%. This is the same type of voodoo economics that was implemented by Reagan and Bush 43. Indeed, the advent of voodoo economics (also known as trickle-down economics) corresponds to the start of Cycle wave V (1974 - 2000).

4 -- The poverty rate continues its relentless rise with extreme poverty hitting record highs. This trend underscores the extreme weakness of economic fundamentals. The actual poverty rate in the United States is likely closer to 30% as the official poverty rate thresholds are not indexed to the actual inflation rate. This also reflects persistent weakness in the job market -- while the economy has created 2.7 million jobs from the low on December 2010, virtually all the jobs created have been part-time jobs that pay minimum wage with no benefits.

5 -- Another effect of the coming plutocracy is food hardship -- over a third of US households have had difficulty putting enough food on the table at some point in the last 12 months due to food prices rising relative to wages. This scenario is not surprising since commodities have been rising faster than stocks (It's all the same market in a deflationary environment and a robust bear market rally is unfolding now) and will continue to do so until the "Extend and Pretend" phase (Cycle wave x) ends. Couple this with persistent wage deflation and its no surprise that food is getting more expensive for the typical household.

6 -- Homelessness is on the rise with people that were previously successful ending up on the streets after losing their jobs and the subsequent long-term unemployment that followed. This trend is a precursor to what will come in the future -- every major city in the United States surrounded by "Obamavilles" in the suburbs as "The Great Deflation" continues to unfold, a parallel of the "Hoovervilles" that appeared during the Great Depression.

7 -- President Obama is also pushing for a "super-NAFTA" in which more free trade agreements are implemented extending all the way to South America. The effect of a super-NAFTA is quite predictable. Back in the 1992 election when Bill Clinton proposed NAFTA, Ross Perot warned about a "giant sucking sound" that would take place is NAFTA were to be implemented. Ross Perot's prediction was since fulfilled in the aftermath of NAFTA going into effect in 1994 -- slowly at first, but now a deafening roar as millions of living wage and family wage jobs continue to be outsourced every year. The effect of a super-NAFTA would therefore be the loss of all remaining living wage and family wage jobs as corporations find new places for cheap manufacturing and labor. The advent of a super-NAFTA would play a strong role in purging the last of the family wage jobs on Main Street by 2015 with the last of the living wage jobs on Main Street purged by 2020.


It is very clear that the United States is on the road to becoming a full-blown plutocracy. The trend has accelerated during the Obama Administration Period. Some people already characterize the United States as a plutocracy, but there is a case to be made that the country is currently in a transitional period where there exists a hybrid of democracy and plutocracy. The transitional period started in 2000, corresponding to the start of Grand Supercycle wave [IV] and the start of "The Great Deflation". The US economy stopped creating family wage jobs in 2000 and stopped creating living wage jobs in 2007. The transitional period will continue for the duration of Supercycle wave (a) until the nadir of "The Great Deflation" is reached in 2042. During Supercycle wave (a), everyone will take a massive hit from the deflationary collapse in the economy. The deflationary collapse will unfold in full force with the start of Cycle wave y in 2021 in which 90% of corporations and businesses implode by the time the bottom is reached. However, the bottom 99% will lose ground faster then the top 1% will, so the wealth gap will continue to widen.

Given the road that the United States is currently on, it does not matter whether Mitt Romney or Barack Obama wins the November 2012 election -- whoever wins, we (the 99%) lose. Both Romney and Obama have cast their lot with the top 1%, ensuring that the inevitable road to plutocracy will continue.

Every plutocracy has an engine, and the one that is coming in the United States is no exception. The driving force of the future plutocracy has already been identified -- Koch Industries and its extension, the American Legislative Exchange Council (ALEC). The structure for the coming plutocracy is already being built and the stage is already being set. ALEC was founded in 1975, just a short time after the start of Cycle wave V (1974 - 2000). Koch Industries was founded in 1940, but its political activism started in 1977 with the founding of Cato Institute, also a short time after Cycle wave V (1974 - 2000) started. The socionomic model explains why ALEC and the political activism of Koch Industries appeared when they did -- that was when the social mood of the United States population became favorable for the organizations to carry out their political agenda.

Big Oil will certainly survive through "The Great Deflation" intact. With the advent of Supercycle wave (b) in 2042, alternative energy will drive the "Green Technology Revolution" in Canada, Western Europe, Japan, South Korea,  Australia, and Brazil. However, alternative energy will never take root in the United States -- the Koch-ALEC cabal will have a strong enough stronghold on the government (both state and federal level with many lawmakers being members of ALEC) and the country to shut down all forms of alternative energy in the country through unprecedented lobbying power. At the beginning of Supercycle wave (b) in 2042, all the oil companies will be folded into Koch Industries and all the corporations and large businesses that managed to make it through the deflationary collapse of the economy will be folded into ALEC. With the merging of corporate power into the Koch-ALEC cabal in 2042, a full-blown plutocracy is born. The top 1% will pull away from the working class at a greatly accelerated clip with living and economic conditions on Main Street comparable to the 1930s.

The appearance of a plutocracy from 2042 to 2076 fits the character of Supercycle wave (b) as B waves are technically weak with weak breadth (only a small cross section of stocks take part in the advance in the stock market, only a small cross section of the populace will take part in the return to prosperity in the United States). Just as fifth waves are weaker than third waves, B waves are weaker than fifth waves by every measure. The nominal GDP of the United States is likely to hit new highs by 2076, but virtually all of the increase will go to the top 1%.

The Koch-ALEC cabal will be unstoppable until the plutocracy peaks in 2076, corresponding to the beginning of Supercycle wave (c). It is very likely that the Koch-ALEC cabal will start overplaying their hand in 2074, thereby sowing the seeds of their own destruction, as we approach the peak of Supercycle wave (b). Once Supercycle wave (c) -- "The Great Tribulation" --- starts, the Koch-ALEC cabal will suffer damage from their own seeds of destruction, exposing more and more cracks in the formerly impenetrable armor. A combination of the plutocracy taking damage from their own seeds of destruction and bearish social mood associated with Supercycle wave (c) motivating the 99% to take their country back will eventually bring about the downfall of the plutocracy in 2118 as the Grand Supercycle degree bear market reaches its epic climax.

Super Tuesday Aftermath and the Road Ahead

Super Tuesday has come and gone in the GOP Primary. Mitt Romney didn't collapse outright on the Super Tuesday elections, but he didn't close the deal on getting on a runaway path to the nomination. Just before the big elections started, there was a lot of talk from the mainstream media that it was going to be a big night for Mitt Romney. When the results came in for the Super Tuesday elections, it became crystal clear that the GOP Primary is going to be a long choppy affair all the way to the end as Mitt Romney and Rick Santorum splitting the states with Newt Gingrich winning Georgia.

The original forecast in December 2011 for the collapse of Mitt Romney was based on the simple expanded flat scenario with Primary wave [3] down currently in force. Mitt Romney has lasted longer than first thought because positive social mood persisted longer than first thought as a bullish social mood would tend to favor Mitt Romney while an increasingly bearish social mood would tend to favor Rick Santorum and Newt Gingrich due to the voter tendency to elect radical candidates.

The GOP Primary now heads to the deep South, which under normal conditions would favor Newt Gingrich and Rick Santorum. With social mood poised to go south in the coming weeks, Mitt Romney will lose his momentum.

As for social mood, here is a chart of the DJIA from the October 2011 low. The stock market (as per the main count) is tracing out a triangle (Intermediate wave (Y)) as part of a complex structure for Primary wave [A] up.

Since the A, B, and C legs of the triangle are simple zigzags, then we should expect wave D to be the complex leg. Minor wave D could unfold as a combination (expanded flat - zigzag - zigzag) or a double zigzag. However  Minor wave D of the triangle unfolds, the downside target is 11250 on the DJIA and 1160 on the S&P 500, both to be reached in late April 2012. The decline should be followed by the E leg of the triangle which should unfold as a sharp three wave rally to 13750 on the DJIA and 1440 on the S&P 500 by late June 2012. There is a 1 in 4 chance that the E lag of the triangle will truncate, which would put the orthodox high of the triangle around 12500 on the DJIA and 1300 on the S&P 500.

Here is an updated longer term chart of the rally from the March 2009 low.

While the D leg of the triangle is unfolding, increasing bearish social mood will make success increasingly difficult for Mitt Romney. The trend already started with Rick Santorum cruising to an easy win in Kansas. During the D leg of the triangle, Rick Santorum and Newt Gingrich will steadily cut into Mitt Romney's delegate lead. The Texas group of states (which traditionally favors conservatives) will be up for election during the D leg of the triangle.

When the E leg of the triangle commences in late April 2012, increasingly bullish social mood will allow Mitt Romney to regain momentum as the last part of the GOP Primary draws to its choppy conclusion.  The California group (which normally favors moderates) will be up for election during the final part of the triangle.

The GOP Primary is going to be a long, drawn out affair with a very high probability that no candidate reaches the required number of delegates to win the nomination. By the time the GOP Convention starts, the advance from the March 2009 low will already be finished with the first part of Primary wave [B] down in progress. Increasingly bearish social mood in the second half of 2012 should favor a scenario where Rick Santorum wins the GOP nomination in a brokered convention.

Update on State Level Authoritarianism

The social trend of increasing authoritarianism at the state level started unfolding in earnest in 2011, starting with Wisconsin passing a union-busting bill into law and Michigan implementing its emergency manager law, and continuing through the rest of the year as more and more red (and even purple) states pass laws aimed at union busting, voter suppression, curbs on abortion and curbs to immigration. The forecast for 2012 called for more of the same with increasing state level authoritarianism (or government over-reach if you prefer to call it that).

Here is an excerpt from an earlier entry (Social Trends for 2012) underscoring the forecast regarding state level authoritarianism:

The trend of increasing authoritarianism is expected to accelerate in 2012. Many governments throughout the world increased their control over their own people in 2011. Even in the United States, there was a rapid rise in state level authoritarianism with people such as Wisconsin Gov. Scott Walker, Michigan Gov. Rick Snyder, Ohio Gov. John Kasich, Florida Gov. Rick Scott, and New Jersey Gov. Chris Christie leading the charge with laws aimed at union busting, voter suppression, curbs to immigration, and curbs to abortion. Look for this trend to continue in 2012 with even more state and national governments increasing their control over people.

In spite of the Primary wave [3] down wave count being invalidated several weeks ago, the forecast is still being fulfilled. What seems to matter in regards to increasing authoritarianism is that a Grand Supercycle degree bear market is unfolding, and a bear market of that magnitude will inevitably result in increasing authoritarianism regardless of the wave path of the stock market that unfolds while the bear market is in force.

Since the start of 2012, state level authoritarianism has been accelerating:

1 -- Indiana passes a tougher version of Michigan's Emergency Manager law. The bill, Senate Bill 355,  gives emergency managers a number of new powers, including the power to review existing labor contracts, the power to renegotiate existing labor contracts and act as an agent of the political sub-division (municipality or a school district) in collective bargaining, the power to reduce or suspend the salaries of a political division's employees, and the power to enter in agreements with other political subdivisions for the provision of services.

2 -- The state of Texas passed new laws aimed at curbing abortion and reproductive freedom, including the requirement for invasive sonograms. The new laws are already taking a toll on people in the state of Texas, both for women seeking abortions and for providers, as well as the complications that arise from 90% of the counties have no clinics or hospitals that provide abortion services. Some complications of the anti-abortion laws have resulted in criminal charges that carry a five year prison term.

3 -- In the middle of February 2012, the state of Virginia was in the process of passing a law requiring invasive ultrasounds for those seeking an abortion. This caused a massive backlash from women's rights groups. The backlash resulted in Gov. Bob McDonnell settling for a watered down version of the law that was passed by the state Senate towards the end of the month.

4 -- Alabama's legislature is in the process of passing a law (Senate Bill 12) requiring invasive ultrasounds for those seeking an abortion.

5 -- In response to the Occupy Wall Street protests that unfolded in the last quarter of 2011, the Tennessee state legislature passed a law that was specifically made to stop the OWS protests from taking place in the state in the future. The bill, SB 2638, and its companion bill, SB 2508, already reached the governor's desk. The new anti-OWS law makes both "camping" and "homelessness" a class A misdemeanor that is punishable by up to a year in jail, a $2500 fine, and a permanent criminal record, including a permanent entry into the Tennessee Criminal Records online database.

6 -- In Georgia, the state of legislature is in process of passing a bill criminalizing union picketing in spite of widespread opposition to the bill. The bill amounts to another instance of union busting as the law is specifically aimed at unions and labor organizations. The bill, SB 469, was being considered by the state legislature near the end of the month apparently in response to a specific action by Occupy Atlanta and unions to protest layoffs at AT&T.

7 -- Increasing authoritarianism is accelerating in Wisconsin as Gov. Scott Walker is poised to sign into law a bill that repeals the Wisconsin Equal Pay Enforcement Act. Even as the state governor faces a recall within the next few months with state residents still angry over the union-busting legislation that was passed into law last year, the state government stays the course with laws aimed at union busting and voter suppression.

8 -- The Michigan state legislature recently passed a law, SB 0971, that was specifically aimed at stopping the 2200 member Graduate Student Research Assistants (GRSA) at the University of Michigan from forming a union. Michigan continues to lead the charge in terms of increasing state level authoritarianism in spite of being a purple state as a wave of voter anger allowed the GOP to take control of all three branches of the state government in the 2010 mid-term elections. SB 0971 is yet another instance of union busting legislation.

Only two months of the new year have passed and there is already very strong evidence of increasing authoritarianism at the state level, especially in the red states but also unfolding in a number of purple states as well. Even as we pass through the long "Extend and Pretend" phase of "The Great Deflation" (Cycle wave x of Supercycle wave (a) down), bearish social mood continues to simmer all the way to the surface as state and national governments continue to increase their control over people. The social trend of increasing state level authoritarianism is expected to continue through the rest of the year and in the years to come. We are currently in the late stages of Primary wave [A] of Cycle wave x (as per the main wave count), with Primary wave [B] down to unfold from June 2012 to 2016. Once Primary wave [B] of Cycle wave x starts, state level authoritarianism is poised to accelerate in both the red and purple states as social mood deteriorates.

Climax of Exuberant Bullishness

It's all led up to the main event -- a climaxing of exuberant bullishness as the peak of Minor wave 2 is established. With markets continuing to rally throughout January 2012 on decreasing momentum and volume, exuberant bullishness continued to build to levels that few even thought possible. The reprieve period was originally expected to last 3 months with the markets doing a relatively standard 61.8% retrace of Minor wave 1 down, bringing the DJIA back up to 11930 and the S&P 500 back up to 1260 by early January 2012.

By late October 2011, bullishness started to make a return as we completed the first part of Minor wave 2 up. The peak of Minute wave [w] of Minor wave 2 up occurred on good news -- namely the European debt crisis going into remission when a deal was made in which banks took a 50% haircut on Greek debt. The rally off the early October 2011 low was so powerful that it triggered a Zweig Breadth Thrust signal.

Short term bearish sentiment started to return during Minute wave [x] of Minor wave 2 up, which unfolded during most of November 2011. Bear market rallies can be riddled full of pitfalls, and this one was no exception as many pitfalls showed up in November 2011 with rising interest rates in Italian, Spanish, and French bonds, mass crackdowns on Occupy Wall Street protesters by police, and the SOPA bill (now dead) moving through Congress at that time.

The last part of Minor wave 2 up was kicked off by a mass intervention of multiple central banks with the aim of shoring up liquidity. The DJIA shot up almost 500 points shortly before the intervention started and kicked off a massive wave of exuberant bullishness. In early December 2011, bullishness became dominant again with economists, analysts, and the mainstream media getting bullish on the economy and the job market.

By late December 2011, expectations for a three month long reprieve period were fulfilled.  Throughout the course of Minute wave [y] of Minor wave 2 up, there was increasing bullishness with increasing calls for more bull market, more economic recovery, and more job creation. Calls for the stock market to take out the 2007 highs were routinely unfolding as analysts became more optimistic under the influence of rising social mood. A waterfall decline was originally expected to start in January 2012, yet even as the reprieve period continued to go into overtime in January 2012, momentum and volume continued to weaken over time as the markets continued to float higher, continuing to signal that a sharp decline is ahead.

By late January 2012, extreme bullish sentiment was taken to the next level as capitulation started to set in. People that have been bearish were throwing in the towel as the markets continued to slowly float higher. The fortitude of even the most staunch of bears was being tested all the way to the core as the markets closed in on 12876 on the DJIA, 1370 on the S&P 500 and 14562 on the Wilshire 5000. Virtually everyone was convinced that the markets could only go up.

The last part of January 2012 marked the beginning of the climax as the mainstream media devoted an insane amount of time to the Facebook IPO as anticipation shot up into the stratosphere. From a socionomic perspective, there was a great deal of significance to the developments associated with the Facebook IPO as Minor wave 2 neared completion. This was Facebook's mountain top experience unfolding, much like Apple with its blowout earnings earlier in the month.

The climax of extreme bullish sentiment came with the jobs report that came out yesterday. It wasn't the rate of job creation or the official unemployment rate (U-3) that resulted in the reaction from the mainstream media and economists, for the economy was also creating jobs at the same rate in the first few months of last year. The mainstream media devoted around the clock coverage on the jobs report and the job market (a type of event that almost never occurs). Virtually everyone is convinced that the job market recovery will continue to unfold. As a testimony of the extensive news coverage devoted to the jobs report, there was coverage on Hardball with Chris Matthews, Nightly News with Brian Williams, the Rachel Maddow show, and CNBC. The markets shot up in an exhaustion gap in the morning hours before the jobs report was released and continued higher through the morning hours. The DJIA came within 6 points of hitting the May 2011 high before going lower and sideways for the rest of the trading session. Bullish sentiment climaxed as > 99% of analysts are strongly convinced of the inevitability of new highs in the stock market, as well as > 99% of economists and analysts convinced that the economy and job market can only go up. Exuberant bullishness has indeed reached an epic climax. From a socionomic perspective, such an event is a signal of a large degree peak with a reversal in the stock market, economy, and job market just around the corner.

The last time that exuberant bullishness climaxed was in May 2011 with the news of the assassination of Osama bin Laden. The event marked the peak of Primary wave [2] up and President Obama's approval rating briefly reached 61% in the aftermath of the event.  After the event took place, markets declined, unfolding as Minor wave 1 down within a much larger Primary degree downward impulse.

Increasing hard times are in the forecast for 2012 as we enter Minor wave 3 down in a matter of a few days at the most if we are not there already. The Minor degree bear market rally for the Wilshire 5000, the S&P 500, and the DJIA all appear to be complete.

Facebook's Mountaintop Experience

There has been a tremendous amount of buzz surrounding the much anticipated Facebook IPO over the last several weeks. Today, Facebook has filed for a $5 billion IPO under the symbol FB. It is very significant that Facebook is filing for an IPO while the peak of Minor wave 2 up is unfolding in the S&P 500 and the Wilshire 5000.

From a socionomic perspective, the timing of Facebook's IPO could be signalling a large degree peak in the stock market with another wave of bearish social mood to follow in the near future. It could also be signalling a peak for Facebook as well, given the insane amount of news coverage in the mainstream media that the IPO has been getting, and the insane amount of anticipation for the IPO as well.

Facebook formed in 2004 and its rise from start-up to a large corporation was very rapid, reaching 500 million users by 2010 and over 700 million today. Facebook was featured in the movie The Social Network in 2010, with the movie opening in theaters in October 2010.

There was an insane amount of anticipation for the Facebook IPO:

1 -- Facebook IPO: What to Expect --- ABC News.

2 --  Facebook plans IPO filing as early as next week -- Jan 27, 2012, Bloomberg

3 -- What to expect from Facebook's IPO filing -- Washington Post

4 -- Facebook may file for IPO this week -- USA Today

There has also been a lot of exuberant bullishness on the potential impact of Facebook's IPO on Wall Street as well:

1 -- Silicon Valley braces for Facebook millionaires -- Yahoo news

2 -- Why Facebook IPO is a bonanza for Wall Street -- CNBC

3 -- Facebook IPO will create a money machine  -- Forbes

Given the insane amount of news coverage that Facebook is getting on its IPO, coupled with the exuberant bullishness on the stock market that is still present, Facebook could be approaching a large degree peak.

"Mountain-top experiences" can unravel very quickly, and Facebook could be in for quite a large fall when social mood starts becoming increasingly bearish in earnest as indicated in the DJIA, S&P 500 and the Wilshire 5000.

The Fall of Mitt Romney

In the last few days, potential voters have been souring on Mitt Romney as evidenced by new polls that are showing that Newt Gingrich is surging in Florida in the aftermath of a strong performance in South Carolina. As usual, journalists in the mainstream media attempt to explain Mitt Romney's fall from grace and attribute the fall to his status as a wealthy elite. Even Jon Stewart has gotten in the act, mocking Mitt Romney for trying to justify making more money in a day than most people make in a year.

Less than a week ago, journalists in the mainstream media were talking about the inevitability of Mitt Romney as the GOP nominee as the large number of articles exemplify:

1 -- KKTV.com -- Sense of inevitability grows around Romney candidacy.

2 -- Daily Kos (Nov 2011) -- Why it is going to be Mitt Romney.

3 -- Intrade -- Mitt Romney's chances of winning the nomination rose as high as 91% on the Intrade site several days ago before a sharp fall started to unfold.

4 -- New York Times -- The Inevitable nominee

Since the fall from grace, many people in the mainstream media attribute Mitt Romney's fall from grace to his status as a wealthy elite. There is just one problem with the supposed connection between the fall from grace and his wealth -- Mitt Romney's status as a wealthy elite has been well known to the American people at least as far back as 2007. The key to the reason for the fall is why now.

Mitt Romney's fall from grace was completely foreseeable using the socionomic model. Consider the forecast of the GOP Primary that I made back in early December 2011, which included the forecast for Mitt Romney's fall from grace. There are a couple of important points to the forecast:

While Minor wave 2 up is unfolding, Mitt Romney will have the wind at his back.

Once Minor wave 3 down starts unfolding, success becomes increasingly difficult for Mitt Romney as the bearish social mood brings out the voter tendency to pick increasingly radical candidates.

Social Mood is the reason why Mitt Romney is on the decline. Even after Newt Gingrich won big in South Carolina, the mainstream media was still convinced that Mitt Romney would ultimately win the nomination. Social mood is getting increasingly bearish again. Even though Minor wave 2 up is still unfolding in the nominal DJIA, the peak of Minor wave 2 up is already in for the DJIA / gold ratio (see this chart). The DJIA / gold ratio has proven to be a very strong indicator of where the approval rating of politicians is going in the future. Minor wave 3 down is already in progress for the DJIA / gold ratio.

Mitt Romney has peaked and has nowhere to go but down. With social mood becoming increasingly bearish as seen in the DJIA / gold ratio, voters will have a stronger tendency to pick increasingly radical candidates. Once Minor wave 3 down in the nominal DJIA starts unfolding in earnest, Mitt Romney's candidacy will collapse, which will make either Newt Gingrich or Ron Paul the GOP nominee.

A Tale of Two Movements

As the peaking process of Minor wave 2 up continues (Minor wave 3 down is either under way now or it will be very shortly), it has become obvious that Occupy Wall Street has indeed followed the same pattern as the Tea Party. The Tea Party - Occupy Wall Street parallel is only obvious when it is looked at from the perspective of the socionomic model.

Both the Tea Party and Occupy Wall Street were motivated by anger. The Tea Party was motivated by anger over taxes, Occupy Wall Street was motivated by anger over excessive corporate control over politics and the large gap between the top 1% and the 99%. It is important to realize that anger is one of the signature characteristics of bear markets, which is why mass protests only unfold in bear markets of Cycle degree and above.

Here are charts of the DJIA with significant events for both the Tea Party and Occupy Wall Street:

DJIA with significant Tea Party events labelled:

DJIA with significant Occupy Wall Street events labelled:

Detailed information on Wikipedia can be found for both the Tea Party and Occupy Wall Street. Notice that both movements exhibited identical patterns with social mood being the primary driver of both movements from start to end.

The Tea Party :

1 -- The Tea Party formed during Intermediate wave (5) of Primary wave [1] down.
2 -- Upon inception, Glenn Beck of FOX News was the only journalist providing news coverage of the Tea Party protests.
3 -- After forming, the Tea Party rapidly expanded with protests spreading to more and more areas of the United States.
4 -- The Tea Party protests peak just after Primary wave [1] down ended. Virtually everyone in the mainstream media was providing extensive news coverage on the Tea Party with all the journalists convinced that the Tea Party will continue expanding and impact the course of the nation.
5 -- As Intermediate waves (A) and (B) of Primary wave [2] up unfolded, Tea Party protests continued to take place across the nation. The Tea Party was losing steam over time with protests getting smaller as social mood became increasingly bullish.
6 -- Half way through Intermediate wave (C) of Primary wave [2] up, Tea Party protests and rallies stopped, but still had enough juice to win a number of seats in Congress. Christine O'Donnell, Sharron Angle, Joe Miller, Rand Paul and many others won Republican primaries, with some going on to win in November 2010.
7 -- During the last part of Intermediate wave (C), Tea Party protests stopped altogether. By the peak of Primary wave [2] up, the mainstream media became convinced that the Tea Party is a "spent force".

Occupy Wall Street:

1 -- Occupy Wall Street formed during Minute wave [v] of Minor wave 1 down.
2 -- Upon inception, Keith Olbermann of Current was the only journalist providing news coverage of the Occupy Wall Street protests.
3 -- After forming, Occupy Wall Street rapidly expended with protests expanding to more and more areas of the United States (and eventually went global).
4 -- Occupy Wall Street protests peak just after Minor wave 1 down ended. Virtually everyone in the mainstream media was providing news coverage on Occupy Wall Street with people in the mainstream media and even the academic world convinced that the protests will continue to expand and change the course of the nation.
5 -- As Minute waves [w] and [x] of Minor wave 2 up unfolded, Occupy Wall street protests continued to take place across the nation. Occupy Wall Street was losing steam with protests getting smaller and taking place in fewer cities as social mood became increasingly bullish.
6 -- Half way through Minute wave [y] of Minor wave 2 up, Occupy Wall Street protests mostly stopped, but still had enough juice left to block a number of ports on the US west coast on December 12, 2011.
7 -- During the last part of Minute wave [y], Occupy Wall Street protests stopped altogether. By the peak of Minor wave 2 up, New York City authorities became convinced that Occupy Wall street is a "spent force" as the barricades blocking Zircotti Park were removed.


Here are the Google Trends charts for both the Tea Party and Occupy Wall Street:

Tea Party :

Occupy Wall Street:

Notice that the Tea Party and Occupy Wall Street exhibit nearly identical patterns, which tell of waning interest as social mood became increasingly bullish over time.

As Minor wave 3 down is either in progress now or will be very shortly, both of the movements should be re-ignited shortly after the "Panic of 2012" takes place as the center of Minor wave 3 down is reached.