Wednesday, October 6, 2010

Further fed easing won't spur growth (re-edited)

I'm sure this is a shocker for the Bulls, who have now fallen in love with the commodity trade, as they continue to price in some future hypothetical US Dollar destruction, but hyper-inflation and inflation are 2 different things, and during a currency crises, the $USD is your best safe haven, not gold, not oil, not corn, not cotton.

Until the fed finds a way to force folks to spend their money, as they have over the past 70 (boom) years the market will continue to contract, because money printing in itself, doesn't cause the velocity of money to increase.

And even "If" the fed, or the government, does step in, they are likely do so at a capitulation market bottom (as they did at SPX666), not at a capitulation top at the end of a wave 2 (where we are today give or take a few points).

I removed (several weeks ago) this chart from my published charts, during the latest rally, because it's hard enough holding into rallies like this, without staring death in the face.... You can see on this long term chart, I also called the top of primary wave 2 a little early, but a wave 3 isn't something you play chicken with, as evidenced by the flash-crash, but the flash crash was only a shot across the bow, and the 08 crash only the 1st inning.

Wave 1's typically look like a pullback to be bought, and this one was no different. This is why Elliottician's refer to wave 2's, as suckers rallies;
take a good long look at what these dreamers just bought into:
$SPX - Weekly Candlesticks: "

via StockCharts.com

"

If a small wave E can rally 120 points in a just few weeks, the same market can lose half it's value (500+ SPX points) in an intermediate wave 3 of a primary wave 3 , in the same amount of time, but actual time-lines are somewhat unpredictable.

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