Wednesday, June 15, 2011

6/15 10:25

A comment was posted with a link to an Elliott Wave analyst named Pater Tenebrarum.  In terms of his short-term wave count:
I agree that apart from NDX the decline appears corrective. That does not mean that this rally will be a 5 up to new highs. Pater, like EWI, has had and still has doubts on how to properly count the 2009-2011 rally (which is not uncommon for corrective waves). If the 8-day lead is intact then I'll use a return below 10.5 on the short-term timing component to know when the rally is kaput.

He also launches a criticism of EWI Grand-Supercycle (GSC) wave count and an opinion on the basis of social mood.  My reaction:
I believe in the concept of the GSC.  According to EWI our current GSC began in 1786.  Watts patented his steam engine in 1775 and it began to be used in manufacturing in 1783.  Bar iron (to replace pig iron) depended on a process patented in 1783.  So the launch of major technologies seems appropriate as the start of wave 1 of GSC degree.
Wave 3 began in 1859 which corresponds with the ascendency of the United States as an industrial power and the application of steel and oil to all aspects of daily life.  This ended in 1929.
Wave 5 began in 1932 and it encompassed electronics but also began the debasement of world finance.  It's fuel was both technological and fiat and the chart is breathtaking.   However, the financial system that it created was increasingly dominated by government and the capital of many generation was gradually depleted.  We are now left with 70 years of Keynesian economics gone wild and desperate actions by political believers are piling absurd leverage onto a debt-based system.  It becomes plain to me that the correction of GSC will destroy the financial system and many of the governments built upon it's fiat promises.

As to the origins of social mood I believe that the mind operates at multiple frequencies simultaneously and that at different times the dominance of these frequencies shifts.  Major technological advances launch people into education, training, and careers that bring different frequencies forward.  That is to say, their world view becomes dominated by these frequencies.  Likewise, people are affected by other external events, some environmental and some political/financial that bring different frequencies forward.  Since the GSC is a sequence from technological to political dominance it is easy to see this in operation.  In the end governments self-destruct and new ones are born.  The GSC downcycle of about 60 years means complex shifts in social mood, appropriate investments, and lifestyle choices during this period.


  1. Nice post, Steve.

    You wrote "However, the financial system that it created was increasingly dominated by government and the capital of many generation was gradually depleted. " I would say it's become the other way around. That is, the government is increasingly dominated by (completely controlled by!) the financial corporations.

    Regarding the GSC, last time I looked at EWI's GSC I though that they had the 3rd wave of the GSC topping out at the year 2000 highs, and we're now in a big 4th wave with a 5th to follow. But your discussion here has the 5th wave of the GSC completing at the year 2000 highs, right?

  2. Looks like Mr. Market has answered your question about whether we'll go up or down from here. The problem of the CDS's on sovereign european bonds sold by US and other banks all over the world is morphing into a worse problem than the recent US real estate crash. They seem intent on proving that they are NOT too big to fail.

  3. Looks like DX has broken out and closed (hourly) above your critical MA envelope.

    5 min DJX is very near its lower env boundary, 15 min SPX and 30 in /ES are BELOW their lower envs, and 10 min /YM is right at its lower env.

    So how do you play this? Nothing to do as long as price rides these lower env boundaries (assuming you're already short)?

    Will you go long DX on a pullback? If so, will you use Fib retracements or look for it to pullback to the MA?


  4. What is the technical composite after today's bludgeoning you think Steve?

  5. I'm anxious to find out myself. 8pm EDT.