…Multiple signals are not evidence of ineffectiveness;
they convey a higher degree message.
…The longer that bearish factors remain in place,
the greater is their ultimate import.
—Robert Prechter, At the Crest (1995)
In the rarest of market events, market cycles of seven, thirty four and fifty two years duration will bottom simultaneously in the late Spring of 2016. For this reason, analysts at Elliott Wave Int’l. have been projecting the lows in the stock, bond and commodity markets for that time.
The shortest cycle, 7.2 years, rolled over into its hard down phase in late 2012, putting it in sync with the larger cycles. While new highs on the averages have not altered the analysis–the counter trend rally since March ’09 has maintained its bearish characteristics–the duration, coming so close to the time frame for the lows, has been a real head-scratcher. The explanation, if there is one, must be that the top is of Grand Supercycle degree, a mammoth top, indeed.
So, we’re running out of time for the second, most severe phase of decline. But this is not without precedent. The Last Grand Supercycle top occurred in London in 1720, and the market lost almost all of its value in two years. Something like that will have to happen this time if the cycles are to have their effect.
Meanwhile, all of the negative factors I’ve cited in past postings are present and they have worsened. Valuation runs from extremely high to insane. Investor sentiment is even more bullish than at the 2000 top. Investors have plunged into stocks in the last few months at record levels. Junk bonds have been issued and snapped up by yield-hungry investors in unprecedented volumes, always a sign of a topping market. There is no caution in the market place and there is no cash in either individual or institutional portfolios. Everyone is all in. That’s how tops are made.
From the top, we should expect three down waves with violent counter trend rallies between the first and second. The form suggests that 2014 will be steady down, 2015 will be the biggest, most fearful crash, and the final decline should take the market into its lows about June 2016. The accompanying depression should bottom a year later.
The only good news in this picture is that, if the market reaches the Elliott Wave objective of Dow 400, it can be bought for 2 1/2 cents on the dollar in today’s terms. It may only be worth fifty cents by then, but it will be an awesome opportunity.
No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.