Four More Years of Obama

With 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.

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 Supercycle wave (IV) down and Martin Van Buren in 1840 during Supercycle wave (II) down (1835 - 1859).

The 2012 presidential election, however, is taking place in a mixed mood environment, 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, Primary wave [B] up (2002 - 2007) of Cycle wave w down (2000 - 2009) with a mixed mood environment in play.

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.

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:

The chart above shows Minor wave 5 of the 2 year bearish rising wedge, Intermediate wave (C), that started in June 2010. Minor wave 5 is unfolding as a triple zigzag with the last part of the third zigzag still to come. The upside target is 1484 for the S&P 500 and 13750 for the DJIA.

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:

The decline in the DJIA / gold ratio also explains why Obama's approval rating displayed a long term down-trend. In addition, the most recent polls are painting a mixed picture, with some polls putting Obama ahead and some putting Romney ahead.

Intrade is currently projecting a 62% chance that Obama will win a second term, although some such as Nate Silver is currently projecting a 73% chance that Obama will win. 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.

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 Primary wave [D] up of a Cycle degree triangle, Cycle wave IV (1966 - 1974). Obama is on course to win a second term on November 6, 2012.

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.

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 June 2013.

Here is a chart of the wedge and the drop-off that follows:

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 Minor wave 2 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%.

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.

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".

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.

Collapse of Mitt Romney in Progress

Mitt Romney's candidacy is collapsing, exactly as I suggested in an earlier post. Mitt Romney's performance in the GOP Primaries and caucuses is unfolding exactly as forecast. As the polls in Missouri, Minnesota, and Colorado closed, Rick Santorum was declared the projected winner immediately after the polls closed. This falls in line with an earlier forecast made back in December 2011, indicating that success will become increasingly difficult for Mitt Romney over time during the time that the second wave of states go through the process of voting for the GOP nominee.

In spite of the nominal DJIA taking out last years high, The DJIA continues to decline from the Minor degree peak in late December 2011 in terms of real money -- the DJIA / gold ratio. The DJIA / gold ratio, known as the "real Dow", has proven to be an excellent indicator for forecasting the fortunes of people in the political arena. Here is an updated chart of the DJIA / gold ratio:

While the Primary wave [3] down count in the nominal DJIA was effectively invalidated, the scenario is still playing out strong in the DJIA / gold ratio -- the "real Dow", indicating that social mood has been deteriorating since the start of the new year. New charts with updated wave counts are coming in the future once the "lay of the land" is reasonably re-assessed. The DJIA / gold ratio is down around 85% from the peak in 1999, while the nominal DJIA is still at elevated levels -- this is indicative of governments, corporations, businesses, and even individuals getting leveraged to the hilt with credit and debt as a massive blizzard of cheap credit continues to expand an over-bloated credit bubble that is now 38 years old.

Mitt Romney's candidacy is collapsing, and the collapse has only begun. As the second wave of states in the GOP Primary go through the process of voting for their preferred candidate, Mitt Romney is expected to continue losing steam, leading to a disappointing performance in Super Tuesday. If Rick Santorun continues winning states in the coming weeks and days as the DJIA / gold ratio goes south, he will eventually be able to claim the nomination outright on Super Tuesday.

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.

Increasing Political Gridlock Ahead

There existed the possibility that the Republicans and Democrats would briefly have a reluctant willingness to compromise during the last part of Minor wave 2 up as positive social mood results in compromise and consensus. We are indeed seeing a last willingness by Republicans and Democrats to compromise on government spending before "The Great Deflation" starts unfolding in full force.

It is significant that President Obama only managed to garner an agreement in Congress for a 2 month stopgap extension in extended unemployment benefits and a payroll tax cut in spite of over a month of hardcore campaigning on the payroll tax extension issue. This is in strong contrast to December 2010 where President Obama managed to hammer out an agreement for extended unemployment benefits and a payroll tax cut to be extended for a full year (all of 2011). The reason for the difference in outcome has to do with the social mood trends -- in December 2010, we were still in Primary wave [2] up, so the social mood at that time made it easier for President Obama to hammer out a deal with the GOP. We are now almost 8 months into Primary wave [3] down, and positive social mood at the peak of Minor wave 2 up (within a much larger Primary degree decline) was never going to achieve the lofty levels that were reached at the peak of Primary wave [2] up.

The difference in outcome between now and December 2010 underscores a fundamental aspect of bear markets -- as bearish social mood increases, so does strife and discord in the political arena, making it progressively harder for politicians to compromise and reach an agreement on various issues.

The next extension will go for a vote in Congress in late February 2012. By then, Minor wave 3 down will be well underway. Here is a chart of the DJIA with the events labelled:

When the next vote takes place, we will be in Minute wave [iii] of Minor wave 3 down with the Intermediate degree point of recognition close at hand. Given the bearish social mood that will be present at that time, there will be too much strife and discord to make any type of agreement possible, effectively putting an end to the payroll tax cuts and extended unemployment benefits on March 1, 2012. With Congress also due to hammer out a federal budget around that time as well, the strife and discord in the political arena due to bearish social mood will make a government shutdown with a duration of several months a virtual certainty as Republicans refuse to budge on protecting the tax cuts for the top 1% and Democrats refuse to budge on raising taxes on the top 1%.

With Minor wave 3 down on the horizon, one of the defining characteristics of 2012 will be increasing political gridlock as the Republicans and the Democrats become increasingly stubborn, ultimately resulting in a federal government shutdown lasting several months.

Socionomic Perspective on the 2012 GOP Primary

As we approach the end of 2011, all eyes are on the 2012 GOP primary election. On the Democratic side, it is very obvious that Barack Obama will win the Democratic Primary in a massive landslide, as it is very unlikely within the next few weeks that a progressive candidate will come forward to initiate a primary challenge. The GOP Primary is another matter altogether as it is still in a state of flux although some inferences can be made using the socionomic model to predict how the GOP Primary elections and caucuses will progress.

Back in late 2009, Nate Silver did a write-up on the possibility of Sarah Palin winning the 2012 GOP Primary. The author correctly recognized that voter demographics present in each state has a significant influence on election results. There is, however, a very large caveat to the possible results of the 2012 GOP Primary -- the social mood of the United States population as a function of time. Social mood has a very strong influence on how people vote, as the vast majority of people vote with their limbic systems (the part of people's brains that induce herding behavior). In bull markets, there is an increasing tendency to vote for centrist candidates, while in bear markets, there is an increasing tendency to vote for radical candidates (especially after the early stages of a bear market of Cycle or larger degree). Factoring in the influence of social mood will give a better picture of how the 2012 GOP Primary is likely to progress.

Sarah Palin isn't in the 2012 GOP race. Of the GOP candidates that have a viable chance of getting the nomination, Mitt Romney is clearly a centrist candidate, Newt Gingrich and Ron Paul are semi-radical candidates, thus making them a decent proxy of Sarah Palin, while Michele Bachmann and Rick Perry are radical candidates, making them an excellent proxy of Sarah Palin.

Currently, we are in the early stages of Primary wave [3] down, just over 7 months so far out of a projected duration of 58 months. Even in 2012, as we go deeper into Primary wave [3] down, social mood may be too bullish for either Michele Bachmann or Rick Perry to with the GOP nomination. A more likely scenario as we go through the heart of Intermediate wave (1) of Primary wave [3] down, is that a semi-radical candidate will have a much better shot at the nomination -- which would favor Newt Gingrich and Ron Paul.

Here is a chart of the DJIA in 2012 with the 2012 GOP Primary elections labelled on the chart:

Here is a step by step walkthrough on how the 2012 GOP Primary could unfold:

Initial wave of states : Iowa, New Hampshire, South Carolina, Florida, and Nevada

Nate Silver rated Iowa and South Carolina as winnable for Sarah Palin, but also indicated that New Hampshire and Nevada would likely go to Mitt Romney.

Iowa is the first state to cast its vote in the 2012 GOP Primary. Iowa holds a caucus rather than a primary. The Iowa caucus takes place as we reach the peak of Minor wave 2 up. While Minor wave 2 up is unfolding, Mitt Romney will have the wind at his back. Although Iowa tends to turn out conservative voters in its caucus, Mitt Romney could perform surprisingly well with up to 25% of the vote. Look for Newt Gingrich, Ron Paul, and Mitt Romney to put in competitive numbers in the Iowa caucus with all three winning delegates.

New Hampshire is the second state in the GOP Primary. New Hampshire tends to favor centrist candidates, which will give Mitt Romney a substantial advantage. Minor wave 3 down will already be under way when New Hampshire holds its primary. However, Minor wave 3 down is expected to be in its early stages (about half way through Minute wave [i] of Minor wave 3 down) so Mitt Romney will still be able to win the state by a sizable margin even though he will no longer have the wind at his back.

South Carolina would be next after New Hampshire. South Carolina tends to favor conservative candidates. We will be almost a month into Minor wave 3 down with its first subwave almost completed when South Carolina holds its primary. Look for Mitt Romney to put in a weak performance with Newt Gingrich and Ron Paul each picking up 35% to 40% of the vote.

Florida holds its primary at the end of January 2012. Nate Silver rated Florida as below average for Sarah Palin, and its reasonable that it would be below average for Newt Gingrich and Ron Paul as well. We will have completed Minute wave [i] of Minor wave 3 down at this point, so a bearish social mood will almost certainly counter most of the advantage that Mitt Romney would otherwise have. Although Mitt Romney could win the state, look for Newt Gingrich and Ron Paul to put in competitive numbers.

Nevada is the last of the states in the early phase of the 2012 GOP Primary. Nevada plays very strongly to Mitt Romney's advantage. We will be in Minute wave [ii] of Minor wave 3 down. The rising social mood associated with Minute wave [ii] could (at least temporarily) give Mitt Romney a wind at his back. Look for Mitt Romney to win Nevada by a big margin.

Second wave of states -- Montana, Idaho, Wyoming, Alaska, Maine, Nebraska, North Dakota, South Dakota, New Mexico, Hawaii, Delaware, Rhode Island, Vermont, and West Virginia

Nate Silver's analysis back in 2009 indicated that if Sarah Palin can survive the initial wave of states, the second wave of states would be very strong for her. However, the second wave of states also tends to award organizational strength as well, which would be most advantageous to Mitt Romney. The 2012 GOP Primary should be a three man race at this point with Mitt Romney, Newt Gingrich, and Ron Paul vying for the nomination. We will be in the first half of Minute wave [iii] of Minor wave 3 down during this period. Mitt Romney should find success in the early part of this period, but success will get progressively more difficult as we approach the center of Minor wave 3 down. Look for Mitt Romney to win around a third of the states.

Super Tuesday -- Texas Group of states

The later wave of states unfold in three phases with Super Tuesday being the first phase, the second phase unfolding from late March 2012 to early May 2012, and the third phase from mid May 2012 to mid June 2012. The Texas group was rated as good for Sarah Palin's nomination chances (and thus would be an advantage to Newt Gingrich and Ron Paul as well) while the California group and the Pennsylvania group both confer an advantage to Mitt Romney under normal conditions.

By the time Super Tuesday comes around, we will have passed through the center of Minor wave 3 down, triggering an Intermediate degree point of recognition in a bear market. The result will be the "Panic of 2012" with the Obama Administration launching TARP 2 to bail out the banks. In the aftermath of the Intermediate degree point of recognition, the political winds will shift back in the direction of the Republicans, and even within the GOP, the political winds will shift strongly in favor of increasingly radical candidates. This is where Mitt Romney will reach the end of the road as a combination of bearish social mood and the Texas group being advantageous to conservatives will be too much to overcome. Expect Mitt Romney to drop out of the race in the aftermath of a painfully disappointing performance on Super Tuesday.

Pennsylvania Group of states

This phase of the 2012 GOP Primary will unfold during Minute waves [iv] and [v] of Minor wave 3 down. It will be a two man race at this point with Newt Gingrich and Ron Paul battling it out for the nomination. By the end of this period, it should be clear who the Republican nominee will be, depending on how evenly matched the two candidates are against each other

California Group of states

The last phase of the 2012 GOP Primary unfolds during Minor wave 4 up. If the two candidates are evenly matched against each other, we may get a scenario where nobody gets the required number of delegates needed to win the Republican nomination. Endorsements will be key in the last phase of the race if the contest is close.


We are currently in the final part of Minor wave 2 up. Mitt Romney will have the wind at his back for the rest of the year and for the first few days of January 2012. The mainstream media is already convinced that Mitt Romney will win the Republican nomination. By the end of Minor wave 2 up, Mitt Romney will have moved back into first place in all the polls. Once Minor wave 3 down starts unfolding, success will become increasingly difficult for Mitt Romney as the bearish social mood brings out the voter tendency to pick increasingly radical candidates.

Limits and Conservation

Politicians continue to focus more on limits as the larger bear market continues to unfold. Back in July 2011, the GOP advanced the Cut, Cap, and Balance bill during the debt ceiling crisis, which was approved along party lines in the House, but was scuttled in the Senate. The formation of a "Super Congress" was a result of a debt ceiling deal, which has been tasked with cutting the deficit by over a trillion dollars over a decade.

Just four months later, the "Super Congress" has been unable to reach a deal on a deficit deal as strife and discord continue to cause division in the committee. In spite of the increase in strife and discord, the austerity trend is spreading beyond the red states. Even some blue states are participating in the austerity trend. A case of point is Gov. Chris Gregoire (of the state of Washington) pushing for $2.3 billion in budget cuts that will have a substantial impact on the state's subsidized health care, increase class sizes in schools, and cut the length of supervision for inmates released from prison.

The latest example of limits and conservation is the Balanced Budget Amendment, which is not only endorsed by the GOP and the Tea Party, but also has support of "Blue Dog" democrats as well. The austerity trend has spread beyond the GOP and the Tea Party and even the Democratic Party is beginning to take part in the austerity trend. Economists are already recognizing the implications of such an amendment, stating that the amendment would result in the loss of 15 million jobs, and that is before considering the effect of businesses and corporations imploding due to a cascade of debt defaults. This scenario fits with the forecast of the destruction of 36 million jobs during the course of Primary wave [3] down (2011 - 2016), pushing the unemployment rate (U6) up to 40% by 2016.

The austerity trend, which is now becoming more and more bi-partisan over time, is indicative of a bear market in progress, as people tend to focus on limits and conservation during bear markets. The latest attempt at a balanced budget amendment is expected to be scuttled (most likely in the Senate) as there is not enough bearish social mood for the amendment to pass. The most likely time frame for a balanced budget amendment to pass is 2017 after a massive wave of voter anger (larger than 1932) throws most of the liberal progressive politicians out of office in all levels of government in the 2016 election.

On the shorter term, one of the possible events in the political arena that could signal the peak of Minor wave 2 up is the "Super Congress" successfully reaching a deal in cutting the deficit. Such an event could generate a short-lived euphoria, much like the Greek deal in late October 2011 that resulted in banks taking a 50% haircut on Greek debt. Such a euphoria would be short lived as the bearish social mood associated with Minor wave 3 down would take over in very short order.

Precursors of Martial Law

There is now very clear evidence that "Occupy Wall Street" is on a direct collision course with rising authoritarianism. Even as a rising positive social mood associated with Minor wave 2 up continues to temper the protests over time, the mass arrests and other forms of rising authoritarianism are still playing out. Both the protests and the increasing authoritarianism are a result of social mood associated with the bear market that has been unfolding since 2000.

The "Occupy Wall Street" protests are still in the early stages. The protests peaked for the year in the United States around October 6, 2011 with roughly 40,000 people -- just over 0.01% of the population -- taking to the streets. As the worst part of "The Great Deflation" continues to unfold, the "Occupy Wall Street" protests will escalate over time in terms of the number of people taking to the streets, and there will also be an escalation in terms of how governments and law enforcement responds as the protests continue to get larger over time.

One of the recent developments that will prove to be a precursor of events to come is the arrest of Naomi Wolf on October 18, 2011 as she took part in the protests in New York City. The arbitrary arrest and detention of a political activist is a very big deal -- In the 1930s, such an event was a precursor of martial law in Germany and the Soviet Union. The bear market that resulted in the authoritarian regimes in Nazi Germany and the Soviet Union under Stalin is Supercycle degree. We are now in a Grand Supercycle degree bear market, so the potential for authoritarianism in the form of martial law is even greater.

With the worst part of "The Great Deflation" still in the future and Primary wave [3] down (2011 - 2016) still in its infancy, social mood is still dominantly positive. This could explain why Naomi Wolf was released relatively quickly after the arrest and detention occurred. Even now, Naomi Wolf has already expressed concern over heavy handed tactics by law enforcement on the protesters. Another concern that was the involvement of the Department of Homeland Security in the arrest (video is here).


The initial phase of "Occupy Wall Street" started on September 17, 2011 -- during Minute wave [v] of Minor wave 1 down (May 2011 - Oct 2011). As Minor wave 2 up continues unfolding, the protests should lose steam over time, but not completely disappear.

The next phase of "Occupy Wall Street" should start around February 2012 as increasing bearish social mood associated with Minor wave 3 down will reignite the protests and anger over the concentration of wealth in the top 1% continues to build. The protests should slowly grow over time. The center of Minor wave 3 down should be significant. The Intermediate degree "point of recognition", which is projected to be reached in March / April 2012, should manifest itself in the form of police departments stepping up their efforts at breaking up the protests -- expect police departments to utilize tear gas and water cannons on the protesters, even if the protests are peaceful.

The third phase of "Occupy Wall Street" will definitely correspond with Minor wave 5 of Intermediate wave (1) down (May 2011 - Sept 2012) and could start in August 2012. In this phase, expect a larger demographic of people to take to the streets and expect the protests to be 10 times larger than today, with around 300,000 people, or 0.1% of the US population, taking to the streets. The increased size of the protests will be met with an increasingly robust response from law enforcement with a much larger police presence at the site of the protests than today.

The protests will again lose steam through all of Intermediate wave (2) up (Sept 2012 - May 2013), then get re-ignited with the onset of Intermediate wave (3) down. The protests slowly grow over time. With the center of Intermediate wave (3) down -- which should be reached in October 2013 -- efforts aimed at ending the protests get taken to the next level with the Department of Homeland Security getting involved in arresting people seen as protest leaders in an effort to break the back of the "Occupy Wall Street" protests.

Once the center of Primary wave [3] down is reached, social mood will be dominantly bearish.

The next significant phase of "Occupy Wall Street" would start around the middle of 2015 during Intermediate wave (5) of Primary wave [3] down with another massive surge in the protests. By the middle of 2016, the protests will be very large with around 3 million people, or 1% of the US population, taking to the streets. With the unemployment rate (U6) projected to hit 40% by March 2016, there will be a sufficient amount of anger for such a large number of people to take to the streets.

Historically, when the protests reach 1% of a nation's population (critical level is a conjecture at this point), the nation's government generally responds through an extra-ordinary effort to crush the protests. The Obama Administration is likely to remain on the sidelines.

When push comes to shove, governments will act to keep the top 1% in power by any means necessary. Given the precursor events that have unfolded so far with mass arrests, the use of pepper spray on protesters by police officers, baton beatings on protesters by police officers, and now the arbitrary arrest and detention of a political activist, and the use of tear gas and water cannons in the near future, there is no doubt that the "Occupy Wall Street" protests will eventually lead to martial law.

The Bachmann Administration will impose martial law to crush the "Occupy Wall Street" protests. This starts with New York City going into martial law in 2017, followed by Los Angeles, Chicago, Phoenix, Philadelphia, and San Fransisco going into martial law in 2018. During Primary wave [5] down in social mood, the unemployment rate (U6) will be approaching 60%, which will result in a massive tidal wave of anger directed at the top 1%. The final phase should start in 2020, near the center of Primary wave [5] down, where a epic uprising of the 99% against the top 1% will be met with a epic crackdown in which martial law is imposed in every major city in the US. 

Occupy Wall Street -- Day 26

It is quite clear that Occupy Wall Street is on a collision course with rising authoritarianism throughout the Unites States as mass arrests have taken place in Boston and Seattle, implying that we are seeing evidence of rising authoritarianism even in the blue states. Michigan continues to lead the charge in terms of increasing authoritarianism, as evidenced by the latest developments in which new state laws are in the works that are aimed at overriding local laws.

There is one difference between the Tea Party and Occupy Wall Street -- the difference is that the Tea Party as allowed to do as they wanted without push-back from governments, whereas Occupy Wall Street has been on a constant collision course with rising authoritarianism.

From a socionomic perspective, both the Tea Party and Occupy Wall Street have a common denominator -- they are both motivated by a bearish social mood as angry people take to the streets. In fact, they both exhibit identical patterns, but at different degrees of trend.

The Tea Party formed in February 2009, during Intermediate wave (5) of Primary wave [1] down (2007 - 2009). The Tea Party peaked just after the March 2009 low, then steadily lost steam as Primary wave [2] up (2009 - 2011) continued to unfold. By the time the Primary-degree bear market rally peaked, the Tea Party appeared to be a "spent force". The complete write-up on the socionomic perspective of the Tea Party is here at Socionomics Institute's website (take a look at the chart on the write-up).

So far, Occupy Wall Street has followed the same pattern as the Tea Party. Here is a chart of the DJIA with important events pertaining to Occupy Wall Street added.

The chart shows all of Minute wave [v] of Minor wave 1 down (May 2011 - Oct 2011) as well as the early part of Minor wave 2 up that is starting to unfold. Both the Tea Party and Occupy Wall Street formed during the fifth wave of a larger downward impulse. Afterwards, both the Tea Party and Occupy Wall Street grew in size and picked up steam through the rest of the downward impulse. After the low point of the downward impulse was reached, the protest peaked and started to lose steam. Occupy Wall Street peaked (for the year) on October 6, 2011, 2 days after Minor wave 2 up started to unfold.

Here is a chart of Occupy Wall Street using Google Trends, which shows the search volume of the subject on the Internet over time, as well as the news reference volume. The end of Minor wave 1 down (May 2011 - Oct 2011) and the beginning of Minor wave 2 up is also indicated on the chart.

There is also an element of linear trend extrapolation in play as well. When Occupy Wall Street first appeared, Keith Olbermann of Countdown was the only journalist that covered the events. By the time Occupy Wall Street peaked for the year on October 6, 2011, virtually everyone in the mainstream media was talking about the protests, and people became convinced that the protests would continue to pick up steam in the coming days and weeks ahead.

For the rest of the year, rising positive social mood associated with Minor wave 2 up will chill the Occupy Wall Street protests in the same way that the rising positive social mood associated with Primary wave [2] up (2009 - 2011) resulted in the Tea Party losing steam over time. Occupy Wall Street is predicted to lose steam as Minor wave 2 up continues to unfold. 

If Occupy Wall Street persists through Minor wave 2 up, the next wave of increasing bearish social mood, namely Minor wave 3 down, will re-ignite the Occupy Wall Street protests with people taking to the streets in much larger numbers than today starting in February 2012. Considering that the Occupy Wall Street protests are already in a direct collision course with increasing authoritarianism, it is very likely that police departments will step up their efforts to break the back of the protests -- look for the police to utilize tear gas and water cannons on the protesters in addition to mass arrests even if the protests remain peaceful, and the standoff could get ugly quick after the center of Minor wave 3 down (which would be also the center of Intermediate wave (1) of Primary wave [3] down) is reached around March 2012.

Rising Tide of Bearish Social Mood

As we head towards the low point of Minor wave 1 down within the much larger Primary wave [3] down, we continue to see a rising tide of bearish social mood. The rising tide is manifesting itself in many ways, from continued protests, increased strife and discord in the political arena, increasing recognition that a trend change has taken place in the economy, and yes, more downgrades from Moody's.

Here is an updated chart of the DJIA, with Minute wave [v] of Minor wave 1 down in focus.

We entered the strongest portion of Minute wave [v] down on late Tuesday, with Minuette wave (iii) in progress and on track to continue until around October 4, 2011 with a target of 10100 in the DJIA.

For many months, I had been predicting that Minor wave 1 down would end in early October 2011. It is now possible to make a more precise forecast -- Minor wave 1 down should end around October 10, 2011 with a target of 9950 for the DJIA and 1025 for the S&P 500.

The rising tide of bearish social mood has been manifesting itself in many ways in the last several days:

1 -- A large protest has been unfolding in Wall Street in the streets of New York City. The protest, which has involved  over a thousand people, have been part of a campaign "Occupy Wall Street" with the aim of calling for structural economic reforms and calling out the misdeeds of the wealthy. Even though the protest has been relatively peaceful, police have blocked demonstrators from reaching the New York Stock Exchange, and a number of demonstrators have been arrested.

2 -- We face the threat of another government shutdown as the GOP and the Democratic Party continue their game of chicken over disaster aid to communities affected by Hurricane Irene.

3 -- Attacks in the political arena have become more aggressive in the last several days as President Obama takes his jobs legislation campaign directly on Rep. John Boehner's home turf, and the GOP stepped up attacks against Obama with insistent accusations of "class warfare". Yesterday, Elizabeth Warren blasted the GOP's class warfare charge as well as their tax cuts for the rich.

4 -- As evidence of increasing recognition of a trend change in the economy, George Soros is now saying that "the double-dip recession is in progress in the United States". In the context of the larger picture, however, the trend change won't be recognized by economists and analysts until the center of Intermediate wave (1) (of Primary wave [3] down) is reached, which should occur around May 2012.

5 -- Moody's downgraded three of the "too big to fail banks" on Wednesday, with Bank of America, Wells Fargo, and Citigroup Inc, all having their credit ratings lowered.  The downgrade indicates that the banks are in worse financial shape now than they were before the TARP bailout in 2008. No downgrade occurred in 2008. The downgrade is also an indication that the Obama Administration will end up bailing out the "too big to fail" banks around May 2012. The original TARP was launched just before the center of Primary wave [1] down was reached in October 2008. Look for the Obama Administration to launch TARP 2 around May 2012, near the center of Intermediate wave (1) of Primary wave [3] down.

The DJIA, S&P 500, and the Wilshire 5000 should hit the lows of the year around October 2011, then they rally for the rest of the year, completing Minor wave 2 up around early January 2012.

Shredding the Safety Net

Back in June 2011, upon recognition that Primary wave [3] down is in progress, I had made a number of forecasts concerning social events that are expected to unfold from 2011 - 2016. One of them is the fate of unemployment benefits, which I bring up here.

Extended unemployment benefits will not continue beyond the end of 2011.

Turns out the forecast is going to be fulfilled. The increasing desire for more austerity is not just in the realm of the GOP, even President Obama is participating in the austerity trend as well. The new jobs bill proposes to link unemployment benefits to job training with potential employers. While it appears to be relatively harmless at a first glance, the legislation will have a cataclysmic effect on the unemployed once the effect of "The Great Deflation" is factored in, namely, the fact that major depressions result in the destruction of 90% of corporations and businesses through a cascade of debt defaults.

Another consideration is that in bull markets, people focus on progress and production, while in bear markets, people focus on limits and conservation. This is also true for employers and consumers as well. An increasingly bearish social mood results in consumers cutting back on spending and employers laying off workers. When an increasingly bearish social mood is unfolding, employers won't hire more workers even with tax credit incentives and incentives to hire workers for free. It takes an increasingly bullish (positive) social mood for employers to have the willingness to hire more workers.

President Obama's proposals on unemployment benefits will amount to ending unemployment benefits altogether for all practical purposes. This development is very shocking. Talk about turning the clock all the way back to 1932. I had been predicting that unemployment benefits would be completely purged in 2017, during the Bachmann Administration Period. This move is comparable to Rep. Paul Ryan's "kill Medicare" plan in the sense that in both cases, safety nets end up getting shredded.

The unemployment rate (U6) is expected to hit 60% by the end of "The Great Deflation" in 2021. It's hard to imagine the impact that purging unemployment benefits will have on such a large portion of the United States population. Many of these people will end up being unemployable during the "Green Technology Age" as job creation is expected to be very sluggish (about 80,000 a month for 21 years). We will be reaping the consequences of shredding safety nets in ways that are very hard to imagine.

The austerity trend is relentlessly in force. If the job creation bill does not pass, extended unemployment benefits stop at the end of the year. If the jobs bill passes, say kiss goodbye to unemployment benefits -- even before Michele Bachmann wins the presidency in the 2016 presidential election.

The Job Market and Social Mood

The job market entered a tipping point last month as the economy has stopped creating jobs. The tipping point took place after three months of increasing exhaustion in the job market in which the economy created less than 100,000 jobs per month. The number of jobs created in July 2011 was revised downward to 87,000. There is a large chance that the August 2011 number will be revised downward to reflect that the job market collapse was in fact commencing last month. In spite of the latest developments, people in the mainstream media continue to show a lot of optimism, which is associated with positive social mood that occurs in a big wave 2 in a bear market.

The next leg down in the job market is in progress, and the forecast is for the economy to wipe out 36 million jobs over the next 5 years, pushing the unemployment rate up to 40% (U6) by 2016. The mass destruction of jobs will unfold in tandem with Primary wave [3] down (2011 - 2016) in the DJIA and the S&P 500.

We are still in the early part of Primary wave [3] down (2011 - 2016). Here is an updated chart of the DJIA, reflecting the social mood of the United States population.

We are still on track to complete Minor wave 1 down by early October 2011. There is no question that Minute wave [v] down is in progress. A relatively fast downward impulse is in the forecast for September 2011. The projected downside target for the end of Minor wave 1 down is 10180 for the DJIA and 1040 for the S&P 500.

After the October 2011 low, markets will rally for the rest of the year with the peak of Minor wave 2 up to occur in early January 2012. The target for the peak of Minor wave 2 up is 11850 for the DJIA and 1250 for the S&P 500.

The projected social mood of the United States population during September 2011 is important here as it will determine the outcome of any attempt by the Obama Administration to pass a job creation bill. We already know about the jobs speech that President Obama is about to do on September 8, 2011.

As usual, we are seeing optimism associated with a big wave 2 in a bear market as the mainstream media continues to express optimism on the chances of getting a job creation bill passed through Congress. The optimism, however, is in contrast to the increasing polarization in politics that we have been seeing in the last 2 years as the GOP continues to accelerate farther to the right. The political arena is more polarized now than it was when the debt ceiling crisis was unfolding. As the bearish social mood continues to build throughout September 2011, the result is increasing polarization, increasing discord, and an increase in the "us vs. them" mentality in which people and groups attack opposing groups (the vitriol in the political arena last month testifies to this). With the effects of increasingly bearish social mood on the political arena in mind, there is no chance that a job creation bill will be passed through Congress.

Although many progressive groups have been urging the Obama Administration to directly intervene and put the unemployed back to work, there is no basis for such an event to happen. Let's consider a historical perspective on the matter of direct government intervention in the job market with the intent of putting people back to work.

1 -- The New Deal -- It was launched in 1933 by the FDR Administration after the Great Depression ended earlier that same year.

2 -- Reconstruction -- It was launched in 1865, after the Long Depression ended in 1859.

3 -- Hamiltonian Economic Program  -- It was launched in the 1790s, after the "Modern European Major Depression" ended in 1784.

The pattern is very evident -- direct government intervention aimed at putting the unemployed back to work took place after the bear markets ended. With that in mind, we should not expect the Obama Administration to intervene in terms of putting the unemployed back to work. The "Second New Deal", if it happens, is most likely to be initiated in the year 2060, after the current major depression ends in 2055.

Government intervention aimed at putting the unemployed back to work is not guaranteed anyways. The idea that governments can influence the economy is a product of the Keynesian economic model. Major depressions always result in dramatic changes in the character of nations and the character of a nation's government. A case of point is the Renaissance. Both of the economic depressions that occurred during the Renaissance are easily identified -- the first occurred from 1470 - 1484, and the second occurred from 1637 - 1648 in the aftermath of Tulipmania. In both of the cases, the government did not intervene to put the unemployed back to work after the depressions ended, but there was still a vigorous economic recovery that followed the end of the depressions. It is quite possible that the Keynesian economic model will get scrapped altogether in the late 2050s or early 2060s, being seen as a failed model that is riddled full of flaws.

Job Market Collapse Sparks Protests

The collapse of the job market is in progress, and there is increasing awareness of the issue. Even though we are yet to see a monthly job report that indicates that layoffs have resumed, layoffs continue to accelerate as more and more companies and businesses throw people out of work.

We are now seeing an outbreak of protests over the job market issue. A large number of protests have erupted in the last two weeks as outlined in the Daily Kos article on the many instances of constituents displaying their frustration at GOP town halls.

Here is a partial list of articles showing the large number of job market related protests that have erupted throughout the United States:

1 -- Ordinary Americans Continue to Deliver Progressive Messages at Republican Town Hall Meetings.

2 -- Members of Congress face job protests.

3 -- Invisible Town Hall Revolution Continues to Roll, with real impact on GOP.

4 -- Republicans at home face protests from liberal, labor groups.

5 -- Unemployed protest outside Fitzpatrick's office.

It isn't just Republicans that are getting the blame for the collapsing job market. People are blaming Obama as well, as evidenced by the latest gallop poll that indicates that Obama's approval rating on the economy dropped to a new low of 26%. Obama's overall approval rating is down to 39%, another new low. Even now, Obama is facing a great deal of criticism from unions and labor groups on the jobs issue as well as the debt ceiling deal.

It doesn't help that President Obama's proposals for creating jobs involves a substantial amount of magical thinking, as the proposal mostly revolves around creating more free trade agreements and extending tax credits to businesses and corporations.

The Obama Administration will attempt to pass a "jobs bill" after Labor Day. People in the mainstream media are optimistic that a jobs bill can be passed, but the optimism is mostly a product of optimistic social mood associated with a big wave 2 in a bear market. There is no chance of any type of jobs bill getting passed as polarization in politics will continue to increase with the GOP accelerating farther to the right over time, making compromise impossible.

As Primary wave [3] down (2011 - 2016) continues to unfold, expect protests to increase in size, extent, duration, and assertiveness. The protests at town halls are numbering from dozens to a few hundred now, but as social mood continues to become more and more bearish, the protests will increase in size, reaching 20,000 or more by early 2016 as more and more people take to the streets.

Breaching the Glass Debt Ceiling

As I predicted 2 months ago, cooler heads would ultimately prevail and the debt ceiling will be raised before the deadline is reached. We are, at last, seeing indications that a debt ceiling compromise is in the works.

We are not out of the woods yet. As I predicted, the debt ceiling showdown has played out like a hardcore suspense movie that keeps people at the edge of their seats, and that the suspense will make many people in high places very nervous. In the weeks following the start of the showdown, the US Chamber of Commerce and the banks have been furiously lobbying to get the debt ceiling raised.

We have seen more signs of people in high places getting nervous. First, Timothy Geithner has been warning that we are running out of time on the debt. Second, credit rating agencies have been hinting that they may downgrade the rating on US credit, even in the event of a debt ceiling deal. Third, President Obama warned that there is no guarantee that Social Security checks will be delivered if a debt default occurs.

We are already seeing clear indications that the game of chicken is going to end before the month comes to a close, as Sen. Mitch McConnell has shown signs of willingness to make concessions.

Social mood will likely determine when a debt ceiling compromise will get hammered out. Although the next leg down in social mood has already commenced, the trend is still in its infancy. Although the political arena is polarized, there is still a reluctant willingness to compromise as there is still a lot of optimism.

Here is a short term chart of the DJIA, which is the "mood meter" of the United States population.

Even as hints of a coming debt ceiling deal are now emerging, there is still a lot of tension in the political arena. Expect the political drama to last for another week or so with Rep. John Boehner and Rep. Eric Cantor continuing to treat the debt ceiling as a political football. Afterwards, we will see one last blow-off rally. It is very likely that the debt ceiling will be raised sometime between July 25 and July 29. It's hard to say whether we will get a clean debt ceiling bill signed into law. The most likely scenario is that both the GOP and the Democrats will end up making significant concessions to get the debt ceiling raised, which is consistent with a reluctant willingness to compromise.

The ironic thing is that after the debt ceiling gets raised, the DJIA is expected to take a hard plunge and the next leg up in the US Dollar Index is expected to commence. Here is the intermediate term chart of the DJIA.

On the longer term, the United States will not default on its debt this year. There is no doubt that nervousness over the debt ceiling will continue to build on the short term as we get closer to the deadline. A debt default will eventually occur, but it will be due to rising interest rates making the existing debt burden too heavy to bear. We are looking at 2013 or 2014 as when the United States will default on its debt.

Rising Tide of Xenophobia

A social trend that has been unfolding since April 2010 has been a rising tide of xenophobia at the state level in the United States. Xenophobia is generally characteristic of bear markets of Cycle degree or larger as a bearish social mood results in smaller social units and increased friction between social units. Bear markets also result in increased protectionism in which groups of people based on common characteristics such as race, religion, gender, economic status shut other groups out.

The trend started with Arizona passing an immigration bill, SB 1070, in April 2010. The immigration law drew criticism nationwide due to the possibility of "racial profiling". Massive protests erupted for a number of weeks leading up to the signing of the bill into law, and for a number of weeks afterward. The Obama Administration expressed its disapproval with the law and the US Justice Department sued to block the new law.

The trend accelerated in February 2011 and it continues today. In February 2011, Indiana became the second state to pass tougher immigration laws. This was followed by Utah in March 2011, and then Georgia and Alabama a few months later. In all of the cases, the passing of the immigration laws resulted in massive protests in which people took to the streets.

So far, the rising tide of xenophobia has been kept in check to a large degree as federal judges have blocked all or part of the immigration laws in Utah, Indiana, Georgia, and Arizona. At the federal level, there is still a limited level of openness towards immigrants as evidenced by repeated efforts by the Obama Administration to get the DREAM act passed into law. Considering that we are still near the peak of a Primary degree bear market rally, a limited level of openness would still be evident.

As the next leg down, Primary wave [3] down, commences, expect the tide of xenophobia to accelerate over time, and the rising tide will eventually become too much for the groups such as the ACLU to overcome. Expect the DREAM act to get scrapped in the near future, especially if Michele Bachmann wins the presidency in the 2012 presidential election (more on that later). All pretense of openness towards immigration will disappear in the near future as social mood takes its next leg down. The federal government will eventually close the borders in the future, most likely in 2014, and this would happen regardless of who is president at the time (If its Obama, borders get closed to stop the outsourcing of jobs out of the country, if its Bachmann, borders get closed to stop all further immigration into the country).

Government Shutdown in Minnesota

Yesterday, a government shutdown has begun in the state of Minnesota. From a socionomic perspective, a government shutdown is the result of division, discord, and polarization in the political arena. This would indicate that a government shutdown is far more likely to happen during a bear market than during a bull market. Not too long ago, the United States government went on the brink, averting a government shutdown by just 90 minutes.

I would even theorize that the duration of a government shutdown is correlated by the degree of the bear market and where we are in the bear market. Larger bear markets have the potential of producing government shutdowns with a longer duration. For example, Minnesota had a government shutdown in July 2005 that lasted 8 days. There have been a number of government shutdowns at the state level in the last 10 years, such as the New Jersey shutdown in 2006. All of them lasted from a few hours to a few days.

The reason for the short duration of the government shutdowns within the last 10 years is because social mood was trending positive with Cycle wave b up (2003 - 2007) unfolding. Increasing willingness to compromise and increasing ability to reach a consensus in the political arena meant that any government shutdown that unfolded would be brief.

Politics is much more polarized now than it was in 2007. Social mood is going south with increasing momentum as Cycle wave c (2007 - 2021) starts its next leg (Primary wave [3]) down.

Given where we are in the bear market, I am predicting that the government shutdown that is currently in progress in Minnesota will last at least 21 days, with a substantial possibility of lasting a month or more. Another aspect of the development is that both Tim Pawlenty and Rep. Michele Bachmann endorsed the government shutdown, calling it an act of fortitude for the state GOP to stand firm. The shutdown could have a substantial impact on the state's economy, and indeed, 23000 state employees have already been laid off.

In the longer term perspective, the trend of increasing polarization in politics will continue until 2021. The result of increased polarization, of course, will be government shutdowns lasting several months and occurring with greater frequency at both the state level and federal level. A shutdown of the United States government is in the forecast for 2012 with a duration of 4 to 6 months.

Tea Party Resurgence

As another indication of the larger bear market trend back in force, we are seeing a resurgence of the Tea Party in the political arena. In the last several weeks, we have seen Sarah Palin's approval rating bottom and start rising again while Obama's approval rating falls after the bin Laden bounce evaporated.

During the bear market rally that unfolded from March 2009 to May 2011, Obama's approval rating held steady at around 50% while Sarah Palin's approval rating continued to fall. With the advent of Primary wave [3] down, the trends have changed with the Tea Party starting its second resurgence and Obama's approval rating on the decline.

A recent development is the surge of Michele Bachmann in the polls as she is now even with Mitt Romney in Iowa. Today, Michele Bachmann announced her candidacy for President in Iowa. The development is indicative of a declining social mood within the larger bear market trend. This is yet another precursor of the coming Palin Administration Period as Michele Bachmann is a strong proponent of the Tea Party.

Although Mitt Romney is the presumed GOP frontrunner now, increasing polarization in the political arena will change the picture. Mitt Romney will be seen as "Obama-like" by the Republican Party, and the recent term "Obamneycare" coined by Tim Pawlenty underscores that trend. Mitt Romney will probably win New Hampshire and Nevada in the early part of the Republican Primary, but he is already losing ground in Iowa and South Carolina. Expect either Tim Pawlenty or Michele Bachmann to win the Republican nomination.

The Tea Party is already starting to regain steam, as evidenced by Michele Bachmann's rise in the Iowa polls. This trend is just getting started. This is a precursor to what will characterize Primary wave [5] down : The Palin Administration Period from 2017 to 2021 as the worst of "The Great Deflation" unfolds in full force.