M3 for April year-over-year is down 5%. Jack says that 1st quarter M3 was down the most since the great depression. I believe that a primary reason is that the Fed has lost it's ability to force monetary policy on the rest of the world. Another is the derivative unwind. Repos and Eurodollars are included in M3. With the crisis in Europe the amount of Eurodollars should go up in future. Repos are partially tied to derivative creation in financial assets.
My count for the decline from 4/26 is a 5-wave into yesterday's low, making that low wave 1 and our current rally wave 2. This differs from the Elliott Wave International count of wave 1 occurring on the flash crash day and wave 2 occurring on the EU bailout plan. If this rally ends below 10,500 and ends tomorrow I will re-label to their count because wave 2 should last more than 4 days. If the rally takes us up beyond 10,500 or extends into next week then EWI should re-classify the count to end wave 1 yesterday. The chart also includes the 12-day M/A.
Steve
ReplyDeleteFor what’s its worth I think your count is correct. I look at it as it did not happen (flash crash) when counting. To me unless something changes here it looks like wave two will run out about where we are on the DOW 10200 before starting the next wave down. The closing today should see a large drop off. I see a lot of selling pressure keeping this wave two from going very high. Laymen’s opinion. Thanks for sharing the M3 chart.