Still the same

I am not into this bullish hype.

Still keeping my views that this rally is not the start of a new bull.

2 reasons. And that's the only 2.

1. Wave structure since Mar 09 is corrective, a double zigzag 5-3-5 x 5-3-5 or abc x abc. A bull market is impulsive and waves will be 1,2,3,4,5.

2. Vix is forming a bullish positive divergence on weekly charts which portends higher volatility ahead.

As per my previous post, I foresee a bullish breakout on Gold and it happened. I am long term bullish on commodities and precious metals.

If Fed is ready to increase interest rates to prevent inflationary pressures and prevent a USD collapse, Gold will drop initially, but will still maintain well above its long term trend line and continue to go higher even as Fed increase rates. The Fed will soon find themselves unable to contain high inflation. At one point, the continual increase in interest rates to prevent inflation will soon turn out to be creating contraction and disaster to the economy. That's when the 1929 depression style economy will set in. When that happens, look for Gold to peak as the traders prepare for a turn to lower interest rates again.

Bank holiday coming soon

Is a bank holiday coming soon ? Circulating around the internet are news that a FDR bank holiday is approaching.

Abstract from marketwatch.com

In its current issue, HSL reports rumors that "Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."

HSL's suspicion: "Another FDR-style 'bank holiday' of indefinite length, perhaps soon, to let the insiders sort out the bank mess, which (despite their rosy propaganda campaign) is getting more out of their control every day. Insiders want to impose new bank rules. Widespread nationalization could result, already underway. It could also lead to a formal U.S. dollar devaluation, as FDR did by revaluing gold (and then confiscating it)."

The Amero - is it real ?

The alleged replacement of the US dollar, Canadian loonie and Mexican Peso with Amero raises eyebrows. Just like Euro which is the common currency of the European Union, the Amero has been rumoured to be the currency for North American Union, consisting of United States, Mexico and Canada. This is supposedly the agenda to be one step closer to UN dreams of a one world government.

The amero coins and bills has already been printed, though its announced to be more of a collective nature rather than real currency.
Try googling up amero, and you'll find plenty of news on it.

I've been thinking about the US debt. Their debt is probably going parabolic, the government is not a bunch of stupid people. They know what they are doing. The huge and perhaps, unrecoverable debt makes the dollar worthless. If, assuming the rumours are real, and that the powers will be creating a new currency to replace the greenback, then it makes sense to chalk up a mountain of debt. Since you're not going to repay your debts in dollar anyway. So you spend and spend, buy and buy...

I've no idea if its true. Time will tell.

Asia (China ?) has been agressively buying Gold & Silver. Both these precious metals have finally broken out and up of its diagonal triangle, so this means the short term direction is up, targetting a Gold target of above $1000. As for Silver, its still below its all time high of $21, lets hope it can reach that level soon.

As stated in my previous posts, will Gold & Silver follow the deflationary trend in equities ? My guess is no at this point of time, because I suspect the upcoming tsunami will be triggered off by public's confidence in our very existing monetary and fiat currency system. The currency storm.

The bear may have begun

SPX may have topped at 1039, close to the pivot 1041.

It is now trading at 1000, lets watch if it can maintain support at 990 level. If it doesnt and the wave looks strong and impulsive, this increases the possibility that the bear has resumed.

VIX on the other hand, has maintained a bullish momentum and broken out of its descending wedge. This is very bullish, especially with a positive divergence and RSI. Of important interest, is that the divergence has been forming since October. Its been building a 1 year base. And because of this, I have been mainting a bearish outlook on the markets and do not believe in the recovery story painted by the media.

As noted by Atilla in his blog, some giant options player has betted on a bloody November. Call options at VIX 40 is being bought. This means some very very huge player is betting a volatile market then.

China is now back in a bear market status. The other markets should start to peak and roll over.

Little thoughts on Swine Flu

Somehow, my brain cells was in hibernation mode this afternoon. So to prevent it from going into full hibernating mode, I did some readings on H1N1 Swine Flu. Partly because I was going to US soon and more importantly, there was a warning from health authorities that the swine flu epidemic may run its peak in the fall season and will affect 30% of the US population. That's a awful lot.

So here it is again. I am skeptical of almost everything even though on the surface, I may appear to agree. Including the wild conspiracy theories of the New World Order etc etc. But sometimes, I do read a bit to gain an insight to both sides of the equation. Truth comes from skeptical questioning and real understanding.

I was particularly concerned when I saw Baxter had patented the H1N1 vaccine in 2007. That was 2 years before this virus infected the human population. The media reported that the source of virus came from pigs. And so, how in the world can this vaccine be created and patented then ? Unless, it was either deliberate or by mistake, that the virus was already experimented and created in the laboratories and somehow got to the outside world. And worse still, this vaccine may be contaminated with the deadly H5N1 avian flu virus. Inject with caution is the word. Gosh, sometimes I really hate myself for being too inquiring.

Animals. When can we ever learn to love them with respect and care. They are always the scapegoat for human errors because they cannot fend and fight for themselves.

An abstract from "The Liberty Voice".

"Baxter has been chosen by the WHO to head up efforts to produce a vaccine for the Mexican swine flu that is spreading throughout the U.S. and Europe.

The decision was made despite further revelations last month that vaccines contaminated with deadly live H5N1 avian flu virus were recently distributed to 18 countries by a lab at an Austrian branch of Baxter.

Initially, the company attempted to stonewall questions by invoking “trade secrets” and refused to reveal how the vaccines were contaminated with H5N1. After increased pressure they then claimed that pure H5N1 batches were sent by accident.

However, the probability of mixing a live virus biological weapon with vaccine material by accident is virtually impossible."

Read on. Copied from Case about bird flu

Off to the final race

Last night, SPX busted through 1018 easily, the activity surely resembles a wave 3. From my last post, I mentioned SPX need to exceed 1013 quickly else the momentum will be to the downside. It surely fulfilled this yesterday. So now with the structure clearer, we can narrow our probabilities. The H&S formation of SPX has been cancelled, but the triangle of Gold/Silver remains. Short term target is US$1085 for Gold if it breaks to the upside. However, it will best to stay neutral at the moment and not second guess the direction. Remember, a breakout from a symmetrical triangle can go either way.

SPX is now in the final upleg. There are 2 possibilities here.

1. Its in major wave 3 of C of C. We should expect a weak corrective wave 4 and a final rally to SPX 1041 to complete the entire rally from March lows. Major resistance remains at 1044. The great bear should resume thereafter.

2. Its in minute 3 of major 1 of C of C. This paints a more bullish target of Dow 10k and SPX1121, a 50% retracement before the bear resumes.

We will know by then if the market has topped. The reversal will be strong and violent, befitting of the status called "Great Bear".

Watch for negative divergences on the RSI/MACD of weekly charts as prices make a new high.

As prices makes new highs while volume is decreasing, distribution is also going on silently as institutions and big boys unload their holdings to retail investors. Be careful not to be the one to carry the last bag.

Deflation or Inflation

My last post talked about Pretcher's call for US$650 Gold bottom. He supports a deflationary view.

I do agree so far with his call on the equities market. Been pondering over and over again and I got to say I am still skeptical about his precious metal direction. For the past few days, both Gold and Silver had been consolidating in a diagonal triangle. The break, after ABCDE is completed, is either to the upside or downside in a big, fast way. On the other way, equities seemed to paint a Head & Shoulder picture and if 1013 is not surpassed quickly, the momentum should be to the downside. Price was up last night on SPX, but volume down. This is bearish.

At this juncture, most are on the consensus that the trend of both equities and commodities are in the same direction. USD is opposite. Hence, most expect them to be down at the same time, drawing similarities to the crash of 08, where fund managers and institutions liquidate their commodities holdings to raise cash.

What IF, and a big if, this time is different.

Looking at the long term chart of USD, its clear it has been in a secular bear market. Within a secular cycle, there will be cyclical bull markets. But overall, the long term trend is down. Focusing on the weekly charts, I saw a double top in USD. And there is a clear 5 wave impulsive structure down after the double top formed. If, USD has bottomed for wave 1, and is now retracing in a typical 50% or 61.8% of wave 1 to form wave 2, we would expect USD to crash in a nasty wave 3 after wave 2 is completed.

With a wave 2 rally in USD ongoing, equities should be on a decline at the moment. Commodities as well. Although the structure of correction defers. Equities forming a H&S (bearish) and commodities consolidating in a triangle (can be bullish or bearish depending on the direction of breakout). Which brings us to the next scenario. Most seem to think USD has truly bottomed at least for the next couple of years. What if this time, it turns out differently. Markets have a tendency to leave 80% of the people behind and wrong. So when most people agree on the same direction, its perhaps beneficial to try and step back and look at the other side.

Could both USD and equities crash at the same time ? Why not...

If the very existence of Fed itself and the monetary system comes into question, all hell will break loose. This might be the next catalyst for a crash. The world which we lived in now operates on a fiat currency system. There is no backing on Gold or any other precious metal. President Nixon removed the Gold Standard since 70s/80s. Hence, the value of our currency lies in our confidence of it. In the crash of 08, capital flew to treasuries and greenback as a flight to safety took hold. If Fed comes under scrutiny by the public and the nature of its existence is being questioned, I don't think people will still consider USD as the safehaven then. Where else will these capital flow to ?

Not in equities, not in USD nor any fiat currencies, so what else left ? Gold & Silver ?

Even if we are in a deflationary environment, it doesn't mean Gold and Silver should fall as well. If Fed manage to control inflationary pressures, gold and silver should continue to perform well if the cause of the next downfall lies in the confidence of our monetary system.

Here is Congressman Ron Paul's campaign on the auditing of Fed, HR 1207.

"I have been very pleased with the progress of my legislation, HR 1207, which calls for a complete audit of the Federal Reserve and removes many significant barriers towards transparency of our monetary system. This bill now has nearly 170 cosponsors, with support from both Republicans and Democrats. Senator Bernie Sanders has introduced a companion bill in the Senate S 604, which will hopefully begin to gain momentum as well. I am very encouraged to see so many of my colleagues in Congress stand with me for greater transparency in government.

Some have begun to push back against this bill, and I am very happy to address their concerns.

The main argument seems to be that Congressional oversight over the Fed is government interference in the free market. This argument shows a misunderstanding of what a free market really is. Fundamentally, you cannot defend the Federal Reserve and the free market at the same time. The Fed negates the very foundation of a free market by artificially manipulating the price and supply of money – the lifeblood of the economy. In a free market, interest rates, like the price of any other consumer good, are decentralized and set by the market. The only legitimate, Constitutional role of government in monetary policy is to protect the integrity of the monetary unit and defend against counterfeiters."

China Bubble Drop Updated

In my previous article on SSEC falling 5% signalling the change in trend, we may get the sell signal soon. They made the high on 4 Aug and have dropped 12.2% since then. Its now sitting above the 200ma, but below 50ma. Once 200ma breaks, the odds are high that the bear market rally Wave B is over and it will be the first to roll over.

Thereafter, the rest of the markets should start to roll over one by one.

Robert Pretcher issued a bulletin end of February advising his clients to close short positions as the market was in extreme bearish mode (3% bulls) and was tightly compressed. Shorts will be slaughtered if they are not out of the way of the ferocious bear rallies. Bear market rallies had been known to be fierce and fast. This had happened.

Pretcher once again, just released his latest bulletin, abeit a week earlier in order to prepare his clients for what lies ahead. He advised the unwinding of long positions as we await for the nasty Wave C/Wave 3. In his 10 page report, he mentioned the likely disintegration of GE during the next wave down. Besides GE, hundreds more who had remained resilient during Wave A/Wave 1 will be impacted and weakened this time round.

He mentioned precious metals as well, forecasting a US$650 bottom for Gold. USD should start to rally for the next 3 years. Gold/Silver will take a hit as USD rallies. But they will be the buy of a century after the bear market bottomed (2012-2016).

The USD bottom

The USD seems to have completed their correction and bottomed last Thursday/Friday. The rally off Friday's low looks strong. Will it continue and signify a change in trend ? Lets watch it closely over the next few weeks.

Both SPX and USD moved up on friday. For the past few months, both indexes had moved opposite of each other. So, which one is a headfake ? I tend to support a down-move in SPX for the next coming weeks/months. However, though I still believe we are peaking soon, I need to avoid the major pitfalls of a trader. That is, letting your emotions rule.

To be a successful trader, one must cast aside his bias on a specific direction. He must learn to look at both sides rationally and choose the path with the best probabilities till it is proven otherwise. Stops must be in place to prevent excessive losses if a trade goes against you. Failing to adhere to these, a trader will find himself losing control and letting his emotions rule over his head.

Back to the markets, the SPX has retraced 38% of the entire decline from 1576-666, stopping at 1018 last friday. While SPX and Dow both hit new highs, NASDAQ did not follow suit. A case of intermarket bearish divergence. In Asia, SSEC/HSI had retraced at least 50% or more. The minimum retracements for a B counter rally had been met. Will the markets continue higher into fall season ?

A grand supercycle backtest

The Wave IV Grand Supercycle ? I hope not. Wave 4s are corrective waves. It typically retraces 38.2% of the previous Wave 3. Though not a large percentage, the degree of correction does matter. I had my count in a supercycle degree correction, however if things are really that bad and we are indeed in a grand supercycle correction where year 2000 is the peak of grand supercycle wave 3, we are in serious trouble. A grand supercycle lasts 100-200 years. Even if a mere 38% correction in price and time, we'll not going to finish this bear until 2020s. I am familar with this time frame due to the sign of Pluto in Capricon. However, the indicative bottom value of DOW is giving me the goosebumps. I knew Pretcher had already set the targets to the end of this bear at DOW 400. Yes, 400. However, I've always found him to be a extreme bear. So I've always tried not to take him too seriously, especially with global central banks taking a pro-active approach to induce credit into the markets and trying to prevent deflation.

Greenspan kept interest rates too low for too long, creating the dotcom bubble. After the cycle correction of 200-2002, capital flowed into the housing markets. Another credit induced bubble appeared, this time the housing bubble. Bernanke tried to prevent deflation and pumped liquidity into the markets. He tried to keep inflation in check as well. But will he succeed ? Watch the CPI.

Deflation is sometimes neccessary to wash away the excesses so that a new and better system can evolve. Preventing deflation is postponing the inevitable, not solving the crux of the problem. No one wants to be remembered as the one who caused the misery of the world. But if "morphine" is injected to a sick patient trying to keep him afloat, there will come a time when I do not even dare to think about.

Courtesy of Daneric's Elliot Waves :

I've been showing a lot of long term charts lately because I think we are nearing an important juncture: the resumption of the Great Bear market and on the precipice of a very scary move downward. So I'd like to revisit the Supercycle wave V theme yet again.

As most of my readers are everyday traders, you will know what I mean when I say a backtest may be occurring. Simply put, I am proposing that this Primary wave 2 rally is nothing but a massive "backtest" of a very long-winded Grand Supercycle upper channel line that resides very near where the market is today. Allow me to explain.

Elliott Wave theory, as laid out by Robert Prechter, proposes that the 2000 market top was a Grand Supercycle wave III top (in orange on chart) that stretched some 220+ year. It virtually aligns with the birth and rise of the United States. Within that Grand Supercycle wave III, there exists 5 subwaves of Supercycle degree (in purple on the charts). 1929 was the top of Supercycle Wave (III). After the Supercycle wave (IV) price low in 1932, a final Supercycle wave (V) impulsed upward in 5 subwaves of Cycle degree (blue). We cannot see all the activity prior to 1900 on this chart engine as I am unfortunately limited in what I can effectively show. So I make some assumptions based on sound EW theory. Allow me to explain some more.

A basic tenet of EW theory is the concept of channeling. Basically the price peaks of wave's 1,3, and 5 connect on a trendline and the peaks of 2 and 4 connect on a trendline. These trendlines typically form parallel trendlines, or whats known as a "channel". Again, channeling is a key concept of EW theory and gives us some of our basis for how we interpret very long term charts.

Every 5 wave structure from the submicro, to the Grand Supercycle, adheres to the concept of channeling. Just because a wave is very large (220 years long) does not mean it is more complicated. On the contrary, the larger the wave, the more closely Fibonacci expansion ratio targets are met and the more channeling adheres to basic concepts of connecting wave peaks 1,3,5 and 2 and 4. However there is something known as "Overthrow" on very powerful waves no matter what the size. That is where my charts come into play.

Again looking at the chart, Supercycle wave V (purple) lasted from the 1932 low to 2000 top. This 70+ year wave consists of 5 "Cycle" subwaves, labeled in blue. In theory, the blue Cycle subwave I, III, and V peak should have connected on a channel line (blue) just as subwaves II and IV connect. But something happened at where the Cycle wave V peak was "supposed" to end at about the red shaded dot area.....it extended above the channel line.

So looking at the charts, Supecycle wave (I) (not shown as it peaked in about 1837) , (III) and (V) should have also connected on a channel line (proposed purple). But purple Supercycle (V) also overthrows the purple channel line.

So based on this we can assume Cycle wave V should have ended at the touch of the upper blue channel line in about 1996 at DOW 5500. This is the red dot shaded area on my charts. You can see it struggled here yet it finally plowed on through and this is when the market got really extended and things got crazy. It kept on going until the 2000 orthodox price peak occurred. This 2000 top is the green shaded dot.

The advance above the purple upper Supercycle channel line was the result of a hyper-extended cycle wave V at the top of a Supercycle wave (V) in turn at the top of the most bullish Grand Supercycle wave III in history. It experienced "overthrow" of the channel and ran wild for a few years. This overthrow was largely the result of the expansion of credit which allowed people to borrow their way to a way of life that nature would normally keep in check. This is what Prechter could not possibly foresee nor predict.

Social mood was, in effect, "borrowing" from nature's laws. It did this through the Great Asset Mania, the greatest in the history of mankind. People were in a good mood and it reflected in both social and economic activity, asset valuations, and speculative fever. Laws were loosened at the very time when they should have tightened. Such is what happens at the top of a 220 year Grand Supercycle wave III. No one can see the top and no one can see the subsequent drop.

Then the Great Bear market began. A retrace Cycle wave "a" back to about 7250 occurred in 2002 and the DOW eventually met back up with the Supercycle purple upper channel trendline. This is the blue dot area in 2002 I show on the charts. It bounced off this trendline (blue dot area on the charts) and credit expanded yet again in another bubble of asset mania. Except this was a "b" Cycle wave and was actually a false rally built on a house of cards. The DOW was forming a corrective "expanded flat" in which the b wave price high (black dot area) goes higher than where the previous wave 5 price high occurred in 2000. We suspect this is a b wave because "real" valuations stopped long before the actual 2007 price peak. In other words when you were buying Valero (not a DOW member but just an example I thought of) at $75/share in 2007, when they are/were loaded with debt, you were buying a fantasy b wave cycle top. You can be sure that corporate debt fueled this expansive b wave valuations on the DOW 30 stocks. Prices were pumped way up on credit and the subsequent drop from 2007 - 2009 was harsh.

Regardless the market managed to stay above the Supercycle wave upper channel (purple) line after bouncing off in 2002. But in 2007 the party was waning and b wave was waning. The nasty Cycle c wave would begin. So the DOW actually topped in 2000, had an expansive Cycle (in blue) "b" wave rally that carried prices above the 2000 top in yet another credit -expanded bubble in an expanded flat. An "expanded flat" b wave occurs when the preceding wave was of such power that the main trend continues to "carry through" on the subsequent corrective wave. So the 2007 DOW top was a b "corrective" Cycle-sized wave and a false rally wave at that. The extreme sharp drop after the top confirmed it in my book.

So the Cycle c wave of that expanded flat is playing out now. Since an expanded flat is a 3-3-5 pattern, the current proposition is that Cycle wave c will consist of 5 Primary waves down that will eventually try and reach the lower purple channel line of Supercycle degree. Hence the less-than-1000-DOW target in a few years I show on these charts.

But Dan, the DOW seemingly traced 5 waves down from 2007 peak already! What gives? So aren't we done with the bear market for now??? Doesn't those 5 waves down form the Cycle C wave of your proposed 3-3-5 Expanded flat? The theory is no, we are not! Why? Because we had likely only 5 Intermediate-sized waves down which only formed Primary wave 1 at the March 2003 low. Toggle these charts to unlog scale and you can see it doesn't look at all so wrong.

And hence the "Primary Wave 2" (P2) rally we are in now. And after P2, comes a nasty P3 in which prices seek out the lower purple Supercycle channel line I show on the charts.

Which brings us to my main point: P2 is merely a massive "backtest" wave testing the upper purple Supercycle channel line (the purple shaded dot on my charts). And as traders, you all know that when a backtest fails, it heads to the lower channel line. And since there was significant "overthrow" of the upper channel line, the theory holds that there may well be underthrow on the way back down.

In addition, allow me also to state why Prechter theorizes that the DOW will head back to the DOW 400 (yes four hundred) area: Because if we are in a Grand Supercycle wave IV then according to wave patterns this correction should take us back to the previous subwave (IV) price range. That is a basic tenet of EW theory and you can see me often point that out on squiggle charts....so yes they should apply to Grand Supercycle wave charts too!

And the previous subwave "4" of Grand Supercycle wave IV is Supercycle wave IV which was...DOW 400 or less from 1929 to the Supercycle price low of 1932. So the theory holds prices should retrace to this area. Yes it seems unbelievable that the DOW could again be less than 500 but it was only 1975 when it was 570. So go figure.

P2: A Massive Supercycle channel backtest that should fail. Nothing more, nothing less.

And Cycle C wave should consist of 5 primary waves down forming the back end of an expanded flat on the DOW or something to that effect.

Are the markets topping soon

Newsweek released a publication stating the recession is over. Pundits are talking about a new bull market and GS gave a target of SPX1000 as well as upgrading GE yesterday. GE shares rose, was up 9% intraday.

On the contrary, I have my doubts. Filtering out all the noise from CNBC, newspapers and TV shows, and plainly looking at charts and sentiment.

As the market retrace approximately 50% (target for the end of this bear rally around SPX 1121), caution is warranted at this juncture. Looking at the weekly charts, the SPX is tracing out a perfect ABC from March lows. We should be in major C wave of Primary B now, once this C wave is over, the entire ABC (Primary B) should end as well, marking the top. At SPX 997, negative divergences are starting to appear on all timeframes. There are 2 probabilites here.

1. The 5 impulse waves off the July 869 low is Intermediate wave A of Major wave C of Primary B. After a zigzag intermediate wave B correction, Intermediate wave C will bring the indexes to new highs, targetting SPX1121.

2. A truncated Intermediate wave A of Major wave C of Primary wave B ends the bear rally.

In both situations, another downtrend will occur to end this bear market (Primary A 1576-666, Primary B 666-? (target 1121), Primary C 1121 - ?)

We are now 5 months into this correction. If comparing this bear to a similar 1929-1932 supercycle degree bear which also retraces approximately 50% of its A wave in 5 months duration. And thereafter, it finished the bear in a devasting C wave.

Another indicator of a top will be public sentiment. Bullishness should akin to that of Oct 07 top, with media declaring a new recovery/bottom etc. Watch GS as well. Remember last year when GS announced a target of US$150-200/barrel oil ?? Soon after, oil hits US$140 and it fell thereafter.

VIX which represents volatility is also showing positive divergence. Once its MACD turns positive and it breaks out of its wedge, volatile times should return again.

Also of particular concern are the oil and precious metal markets. They bottomed in Oct/November, months before US indexes bottomed in March. They have since marked the top in June 09, with oil forming a double top. Even with the SPX and DOW making new highs recently, oil is not conforming. This is intermarket bearish divergence.

For Asia markets, they made their temporary bottom in Nov 2008. The Shanghai Composite Index has met its major resistance and dropped 5% 2 days ago. Though it seems like a change of trend, we need to monitor for a couple of days more to confirm if thats indeed the top. There seems to be a shift in the balance of power, or market leader. Asia and Commodities markets bottomed first before US or Europe. And if they now mark the top first, this would probably mean that Asia will lead the recovery first after the final bottom is made.

By then, fear will be everywhere in the global markets and there will be no bulls around. Thats the time to cast your fears aside, step in and BUY. I believe after the final bottom is made, US markets will be quite stagnant for awhile, hence a L shape recovery. Asia could be different. This transfer of the balance of economic power could perhaps be the major theme in this bear market.
With all these reasons, its now perhaps time to load puts or pile up on shorts and exit longs as we prepare ourselves for the next Wave C. The big bad one.

Good articles for reading

Here are some good articles to spend your weekend away.

1. Martin Armstrong July 10 article on "The Goldman Sachs Conspiracy - The Real Dark Pool"


2. Martin Armstrong article "It's Just Time".
This articles talks about his Economic Confidence Model and PI cycles. Included are also topics on Kondratieff Wave, Gann's Fibonacci and the Mayan mystery.


3. Kondratieff Long Waves
The Long Waves follow a cycle of 60 years. And its broken up into 4 phases from Spring to Winter, each lasting approximately 20 years (plus-minus). Many who studied the K-Waves believed we are currently in the Winter-K wave phase. A K-wave winter is characterized by a three year collapse, followed by a 15 year deflationary work out period. Quite coincidently, the Long Depression featured in an earlier post on KV, was a good example of a K-wave winter, as was the Great Depression of the 1930's. This period also seems to coincide with the attributes of Pluto in Capricon (2008-2023).

The original translated 1926 paper.


4. Elliot Waves Theory by R.N. Elliot
This is the core of my trading techniques. I used both EW and technical analysis in my evaluation of stock market trends. Using this theory, bull markets follows 5 waves, and bear markets 3 corrective waves. The degree of each wave determines the depth of correction and whether there will be sub-waves within each major wave. We have supercycle, cyclical, primary, major, minor, minute waves (from the largest degree to smallest). E Waves do not forecast or have the ability to pinpoint exact tops or bottoms, rather its more into knowing at which the trend of the current market and highlight probabilities of certain pivots and turning points. Together with technical analysis and fibonacci guidelines, it enhances a trader's ability to forecast with greater accuracy. E waves can be confusing, because people using them have different perspectives on the markets. If one believes we are in a supercycle degree correction right now, the targets for the bottom of the stock market will differ from someone who thinks we are merely going through a cyclical correction. The theory is never wrong, however the ones who use them are, hence counts are frequently altered. Even Bob Pretcher, the founder of Elliot Wave International were years early in his famous bear call and missed out the boom years from 2003-2007.

He marked year 2000 as the peak of stock markets. Following the NASDAQ bubble and dotcom crash, the US markets underwent a bear correction from 2000-2002. The bull years from 2003-2007 were not confirmed by DOW Transports. According to Dow Theory, non-confirmation is a warning signal. And if we view the SPX/DOW in real terms, he was right on. The stock markets were firing up in these years and so was silent inflation. If we measure the SPX or DOW in terms of gold, real growth peaked in 2000. The years thereafter were fuelled by low interest rates and inflationary growth.

Cycles

I am a believer in Cycles. I believed things are not created equal and though we strived to be so, it will never meant to be, at least not within our current age or eon. Perhaps, one day, human consciousness will move towards a higher state of being, but that era should be sometime away in the future. Throughout the vast span of time, matter is born, created, peaked, decline, die and the cycle continues. From the beat of our hearts, the sunrise and sunset, the moon cycle, the galactic cycles and whether its caused by the big bang, God's creation or karmic forces, human evolution has never ceased to stagnant or stop its ever changing path.

Life is about maintaining equilibrium. Finding peace and harmony from within. I had been searching for the answers as to why there is inequality. I feel sad whenever I see the underpriviledged. I always believe that one day, life will be equally good for everyone, even if that one day may be far far away. However, now that I realised, life was never meant to be a one-liner. I no longer feel the anger inside me. It is a sense of quiet calm and peacefulness after realising the truth. This is a sad truth, but on a positive note, inequality spurts growth and changes.

Opposing the natural path may bring more pain and unwarranted unhappiness. Communism, perhaps, has ended more lives, separated more families than what it initially stand for, equality.

Ancient civilisations had come and gone, Atlantis, Mayans, ....
Empires come and gone....Roman, Egyptians...
Countries come and gone....

From the past till present, history always seemed to repeat itself. In the cycle of human evolution, are we currently in the fifth root race of Aryans ?

There have been lotsa doomsday topics, which I probably take it with a pinch of salt. Not saying its not true, it will come true one day. But I guess that day is still far away. If you are a Christian or Buddhist, you'll probably be aware of the second coming of Christ or the next Buddha, Maitreya, who will be descending to Earth some 50,000 years later. So, we still have time haha.

Disclaimer : I am a free thinker and I do not specifically promote any religion in my blog. These are merely my findings and thoughts which I'll drop a line or two but will not go into details.

Perhaps one "end of the world" talk which is coming close is the 21 Dec 2012. This is the date where it marks the end of the Mayan's long count calendar and signifies the end of their times. They are skilled astronomers, and in no way had they particularly mentioned that this date is the end of the world. These are rumours that are unfounded. However, I do agree that this day probably heralds the start of a shift in human consciousness towards a higher level as we moved from the Age of Pisces to the Age of Aquarius. Hence, the end of their long count calendar marks a beginning of another era.

21 Dec 2012 is a special day, because it is also the day of galactic alignment due to the precession of the equinoxes. A rare occurence every 25,800 years which coincidentally, is end of a galactic year, also known as "cosmic year".

Additionally, in financial astrology, the period of 2008-2015 has been predicted to be tough and challenging in the global markets. It will climax in the year 2012 when the planets square one another in the Cardinal Climax. A good read from one of the renowned financial astrologers. Merimman Market Analyst.

According to Nasa experts, they are expecting a peak in solar activity in 2012. A good time to watch the Northern Lights heeheheh. I think there is a movie coming out in November that is based on this upcoming solar storm.

I'll share some information on economic cycles, particularly, Martin Armstrong and his PI cycle in my next post.

The September Dream - Choosing the right cruise ship

Hoo Ra ! I have not been blogging for sometime coz my mind is focusing on the september dream ..yeah ... its finally coming !

This is quite a last minute decision as I did not initially plan to go anywhere for the later half of this year. However, just suddenly wanted to travel so much and picked up my long abandoned plan to go Alaska. I loved Alaska, the pristine wilderness, the whales, glaciers, seals, otters, brown bears, i simply adore them. I dreamed of going there for honeymoon, but Jon is not a scenery lover and prefers artifacts, culture and buildings. So we went to Europe instead. I have always wanted to see the northern lights too, they are just so amazing.

Finally after nagging in his ears for 2 years, Jon agreed to go hahah. This trip may also be my last long haul one, for at least the next 10 years. No, I am not pregnant lol. But its probably time for us to start serious family planning from next year onwards. With a kid, I guess chances of such trips will be far and few. So I better grab this chance and chiong. . so in a tight timeline of 2 months, I have to start crash planning.

The first is to source for the right cruise ship. There are a couple of reputable ones such as NCL, Royal Caribbean, Celebrity, Princess etc. Each have their own pros, cons and caters to different markets. The ones highlighted below are some of the common ships which sail to Alaska and Caribbean.

NCL, Royal Caribbeam, Carnival - these are "fun ships" and are usually huge in size. Around 2000 to 3000 passengers onboard. They have more amenites and caters to families, kids and young people.

Holland America, Princess, Celebrity - these are the more premium lines. They have more exquisite and award winning menus. Services are usually much better. For Holland America, most ships tend to be smaller in size, allowing them to cross passages which are not available to bigger ships. The passenger size is also smaller, allowing for a better space ratio, without everyone squeezing on deck just to see glacier calving.

Cruise West, Regent Seven Seas, SilverSea, Azmara - these are luxury cruise ships and are also smaller in size. These are fantastic ships to be on, if you have the budget. They are all inclusive ships, which means gratituties, shore excursions, alcoholic beverages are included. There is a promotion going on right now by Regent Seven Seas. They offer 1 for 1 cruise fare, free and unlimited shore excursions for 2010 vogages.

Many cruise lines are going to reduce their sailings to Alaska in 2010, hence prices could probably incease. So, another good excuse for me to go this year haha.

NCL is a good choice for people who prefer freestyle cruising, ie, no restrictions to dress code, no fixed dining hours. I loved it too, but was quite put off by reviews mentioning that there are always long queues on every restaurant during dining hours. One thing I like about NCL, its famous Chocolate Buffet ! Yummy !

After much consideration, we decided to go for Holland America (HAL). HAL cruisers tend to be more "mature", meaning older in age. HAL has a long history of traditional cruising, yet is also modernly equipped to keep up with the times. Frankly speaking, I prefer a more mature crowd. Kinda make me irritated if I have to see kids shouting and chasing each other around the decks. Its also smaller in size, which I prefer as well. I am not into entertainment, so no night parties is fine with me. Food and service are excellent. And also, one important factor, is HAL's staterooms. After comparison, they have bigger staterooms than most other ships, making it more spacious and cosy. They also take good consideration of beddings and duvets. If not wrong, their beds are Sealy's.

All food are included in the cruise fare, no matter which cruise line you take. Hence everything that you order in the restaurants are free, except specific specialty restaurants. For drinks, only tea, coffee, plain water are foc. Alcoholic drinks and juices are payable. But these will be included in the luxury ships.

There are usually 2 formal nights for a 7 day cruise. Gentlemen are to be decked out in dark suits with tie or tuxedos. For ladies, it will be evening gowns. Most cruise ships observe these dress code. It is a good experience and it can be fun. But we have decided to skip the formal nights and dine in Lido restaurant during those 2 nights. I do not mind bringing an extra pair of heels or gown if I am just going to Alaska. Its just troublesome having to bring these for 2 nights when we are heading to Rockies and Northern Canada after the cruise. Hence, we'll dine in the Main Dining Room on normal nights, and Lido on formal ones.

More on the Rockies later, to be continued.....

The Silent Currency War

In my last article, I mentioned that China is holding vast amount of US dollars. China aint stupid. In the face of a weakening USD, it will not be beneficial for China to continue hoarding them. There had been rumours that China is dumping USD. But, how are they going to do that without alerting the community, since the amounts are huge enough to trigger people's attention when its being sold.

Selling them will cause attention. They have to do so in small amounts in staggered periods. Using these depreciating assets to purchase other assets is also a smart way. Oil, precious metals, commodities are priced in US dollar. They have a inverse relation with USD. If USD weakens, these assets will rise in their values. The commodity and precious metal market has been in a secular bull market since 2000, when USD peaked. Secular markets traditionally last 10-20 years. And this bull may still be in its infancy. Hence, with the transfer of USD into appreciating assets, even if the USD tumbles, China need not fear.

A good article by "Financial Ninja".

China is dumping dollars, but far more cleverly than you might think.

Immobilienblasen has noticed a rather curious tendency for China to overpay in "China Inc." Deal Premiums. What exactly is that all about?

Well, imagine you had a bunch of money... err... US dollars for example. You've also got a bunch more of these US dollars coming in daily. You don't believe they will hold their value. So you don't really want them. That is quite a problem.

The first trick is to get rid of them... without actually seeming to get rid of them. The second trick is to get rid of them in such as way as to not destroy their value.... yet.

The single best way to do this of course is to use your US dollars to buy hard assets. This looks "normal". It isn't nearly as obvious as "diversifying" your currency reserves. China is doing exactly that. The "China recovery" story is nothing of the sort. The Chinese demand for commodities is not a function of economic growth but rather a function of hoarding. There are Consequences to this Phantom Commodity Bull Market which will become apparent soon enough.

China has been buying into oil with size and at a premium. This has analysts puzzled:

"Sinopec’s offer is equivalent to $34 a barrel of proved reserves and $14 a barrel of proved and probable reserves. The African transaction average in 2007, when the average crude price is similar to current prices, was $14.40 a barrel for proved reserves and $9.90 for proved and probable reserves, respectively. On a proved basis, the 2007 average suggests $3.1 billion total value for the deal. Therefore, $7.2 billion implies a 135% premium."

But when it becomes obvious to investors the world over that a US dollar devaluation is the only possible way to manage the kind of debt burden the US has accumulated, those premiums will vanish instantly. Oil quoted in US dollars could easily make new highs beyond $147 in such a scenario. China will not only have safe guarded the wealth of its citizens by owning oil fields, but will also have increased the global political power of the country thru the acquisition these strategic assets.

While the US empire has stumbled and is desperately trying to avoid a faceplant, the Chinese have taken the opportunity to break out into a sprint. Even in a best case scenario where the US pulls off a miraculous recovery, valuable ground will have been lost and the global balance of power will never again be the same.

China Reiterates Call for New World Reserve Currency (Update4): "China’s central bank renewed its call for a new global currency and said the International Monetary Fund should manage more of members’ foreign-exchange reserves, triggering a decline in the U.S. dollar.

“To avoid the inherent deficiencies of using sovereign currencies for reserves, there’s a need to create an international reserve currency that’s delinked from sovereign nations,” the People’s Bank of China said in its 2008 review released today. The IMF should expand the functions of its unit of account, Special Drawing Rights, the report said.

The restatement of Governor Zhou Xiaochuan’s proposal in March added to speculation that China will diversify its currency reserves, the world’s largest at more than $1.95 trillion. Chinese investors, the biggest foreign owners of U.S. Treasuries, reduced holdings by $4.4 billion in April to $763.5 billion after Premier Wen Jiabao expressed concern about the value of dollar assets. That reduction came a month after China boosted its holdings by $23.7 billion to a record.
“Zhou Xiaochuan sees the current international financial system is flawed, putting too much emphasis on the dollar as a reserve currency,” said Kevin Lai, an economist with Daiwa Institute of Research in Hong Kong.

President Barack Obama needs the support of China as the U.S. tries to spend its way out of recession. The Dollar Index that measures the currency’s performance against six trading partners fell as much as 0.8 percent to 79.779 at 1:11 p.m. in London. U.S. Treasuries were little changed with the 10-year yield at 3.53 percent."

What About Me

Kenneth posted in his blog to ask me to talk more about myself instead of some boring federal government stuff. Hahaha. I never intend to blog about my personal life too much on public blogs. Maybe I am a shy person lol. Its just kinda weird. Anyway, I will try to write something here.

Talking about myself, let me think....hmmm.... Ok, here it is, I was an ambitious person. WAS. But actually, I still am. It depends on the definition of ambitious. I was a career minded person in the past. I seek to excel, perform and achieve more than what I was supposed to do. I was a top telecollector for 2 years consecutively and remained in the top rank every month. It was no easy feat. The agents would asked me how I achieved that.

Yes, I was ambitious, I wanted to climb the corporate ladder. Performance wise, I shared my experience that speed and negotiation skills were key to achieving good performance. But it was more than that. I remembered there was something more than just trying to hit the top targets. I had a persistent voice in my mind that is even more so important than just my personal incentive. It was this thought that kept me going, pushing my limits and exceeding them month on month. CE (Collection Efficiency) is always knocking in my head. It is the focus, the centre of every action and speech that I execute. I watched CE closely, and if they were lacking behind the targets, I pushed myself to work even harder to help the company meet them. Working cohesively as a team is extremely important. No one person, no matter how efficient he or she is, can help company achieve a good CE by himself. Everyone in the team must be united in thought, speech and action. Every member of the team needs to do his job properly and even more so, for the one whose scores are leading. If his scores are leading, he too needs to lead the team to achieve company's targets. I remembered when I wanted to give a particular customer a final reminder call, even thoughh I knew he would be paying, I would still place a review call to be made 2 or 3 days later. I knew doing that means sacrificing my incentive, but not doing that, customers may forget to pay and ultimately, CE suffers. I placed a higher priority on the company's profits then my own incentive. Responsibility is the word. Being responsible to the team members, our customers, our shareholders. With these thoughts in mind, I did not really watch my incentive closely or monitor my scores. It somehow just fits into place nicely.

A good website which I came across few years back by Jim Collins, I bought the book as well, but I think I left it with Adit. Oop. Here's the link.

When I subsequently got promoted to the role of Dialer Specialist, I learned not only how to manage the dialer operations efficiently, but also on managing the team. It was a different experience. There are more complicated issues such as managing human relations, customer relations, interdepartment relations. It is also in this role that I started to experience the word called "power".

I am not a powerful person nor do I wish to be one. However, power comes naturally to those seated in higher positions. Power, to me, is a privilege. It is an honour to have, for its ability to create goodness. It is so important that power must always lie in the hands of the morally ethical person. If power is abused, suffering will ensue. However, the illusion of power sometimes mislead people to think they have the authority to do what they want irregardless of others. This thought perpetuates their minds and they forgot they are a person, a being, no different from any others.

Customers have the power to complain and grumble. Some think customers are always right. I do not agree. When I was a telecollector, from time to time, I would lecture my customers on their poor money management skills. There was this customer who was the solebreadwinner, he had couple of kids, and took loans from a few banks. His pay was meagre and he was practically paying one bank for one month and delaying another 3 months, just enough to keep himself going to avoid bankruptcy charges. I asked him why he took our loan. He told me he wanted to pay his installments for his furniture. Not only that, he had also bought some other expensive stuff. I was fuming mad when I heard it. He was being so irresponsible.

In my current role as a team lead, I do not seem to have changed much haha. When customers wanted to speak to manager, they probably would have thought they can get anything their way. Not through me. I probably would have gotten a few of them in shock. Of course, the way to structure my words and tone would have to be slightly different depending on circumstances.

Yes, I am still ambitious. But perhaps, in a different way. My learning path changes as I grow. Leading to goodness, I hope. I do not have a desire to climb the corporate ladder. I realised the higher I climb, the worse I see in people. It is a complicated and complex web up there and I have no wish to participate in it. I loved the simple things in life, the simple people who talks about mundane things (of course, without silly gossips). I seem to find myself happier that way. I am not trying to avoid seeing the bad side of things, they do exist as and they will exist so long people exist. Humans are naturally imperfect and with imperfection, both good and evil will be on the surface of Earth. This is the natural way of life.

Trade Imbalances

Are we fighting a trade war ? Perhaps. A shift of economic power ? Maybe.

The Westerners love to spend, and the Asians love to save. Both have virtues of their own. Except when it gets out of hand.

Spending. There are different forms of spending, government spending and consumer spending. Money is spent on goods and services, thereby stimulating the economy. when the economy weakens, government usually spends in the form of infrastructure, heathcare, education etc to create jobs. Just as during this current crisis, the Obama administration has pledged to spend to inflate the ecomomy and create jobs. There is a huge supply of money in the capital markets, but banks are not lending as much as before, and until they do, some of these funds will not be filtered into the rest of the economy.

There is a difference when someone spends using credit or when he spends on what he can afford. Spending on credit means using future money at this moment. It can get out of hand when proper controls are not enacted and monitored. Most banks now operate on a fractional reserve banking system. Problem arises where there is excessive leverage and credit. It becomes a monstrous bubble when people turned greedy, leveraging to an excessive and unreasonable limit, rather than what they can truly afford.

Markets will always find their way into maintaining equilibrium. In a credit bubble, deflation must take place to wash away the excesses that had piled up. This is what is happening now. I will talk about cycles in another article.

In Asia, manufacturing and exports are important sectors of the economy. China exports its goods to the rest of the world, and US is one of its biggest importer. So US is spending (mostly on credit), and China is earning and saving. It becomes a problem when the dollars earned are not spent and rotated back. So, now China holds a vast amount of US Treasuries.

US has a widening trade deficit with the rest of the world, in particular China. The US dollar has weakened considerably since year 2000. With a weakening dollar, the trade debts that it owes will shrink and hence, the trade gap tightens. The markets will always find its way back into equilibrium naturally.

The Fed & Debt

Recently, I read an article about The Federal Reserve of New York. Only then did I realise they are not part of the US government. The Fed was created in 1913 by a group of private bankers. Rothschild, Bank of America, JP Morgan, Goldman Sachs belongs to the Fed. Or can I say, they are the owners of Fed. So in essence, they are a private entity or corporation that controls the money supply of US.

I recalled these events that took place. JP Morgan bought Bear Sterns at a initial proposed amount of $2 per share. Bank of America took over Merill Lynch. Paulson (ex chairman of Goldman Sachs and ex treasury secretary) allowed AIG to tap into bailouts, but let Lehman go. Both happened in the same week. The collapse of Lehman caused an enormous amount of panic and volatility in the global markets. Short-sellers were everywhere, shorting the shares of banks and of course Lehman. However, just as the short-sellers target Goldman Sachs and JP Morgan shares, SEC halted short sales temporarily. How clever.

There had been rumours that this financial crisis is pre-mediated to consolidate the powers of banks and their the elite owners.

I wondered why the creation of money and control of interest rates are left to a Central Bank that does not belong to the government ?

I particulary like a quote by Thomas Jefferson "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."

The Fed is created as a Central Bank. It controls the money supply, interest rates and having control over these equates to having control over the entire economy, the lives of American people. The US dollar is the reserve currency of the world and it makes the FED even more important as any decision made now influences the global economy.

As a bank, it supplies money to the US government. But, it comes with a interest rate. So now, this supply of money becomes a form of debt to the taxpayers. Everyone knows US has huge amounts of trade deficits.

And how are they going to resolve this imbalance ? I'll probably talk about the trade deficits, the currency markets and inflationary pressures in the next post.