I have been watching this thing play out since early January where I first postulated that a large 4th wave HT could be forming. Once the E wave was thrown under, we had to expect 5 more waves to the upside, something that was also clearly documented as a high probability in these pages. But after that 5th wave play out, the best case is for an a-b-c to the level of the prior 4th. At this point that stands at 17040. Worst case, well, would be much worse.
Importantly, we know that one thing is most likely true: 5 waves up have completed. We know this because the wave has retraced below the green line which marks the top of green 1. Thus, this pullback is not likely be 4 of 1. However, there is an alternate count where by the orange horizontal line marks the top of wave 1 meaning that this could still be a very weak 4th wave. If this is the case, and I would not count it out because it could be the basis of a final DDT AKA the owl, then we should see 5 waves up per the red model.
However, if the market decides to cut and run then the blue path could as easily be taken next week. When the orange line is taken out then we know the current wave is over but there is still an outside, very remote chance that the recent peak will be just 1 of 5 of C. I do not think that will be the case but I will be reporting on it as time permits to keep minds focused on the possibilities so that too much risk is not taken while a potential trap might be getting laid.
In either case we know that the markets are very, very weak by this wave action. The second portion of this rally (green waves 3,4 and 5) was, to be coarse, dickless in nature. Almost every day the futures would be slightly red even if they would eventually reverse to the upside on average during the trading day. But daily gains have been small and the volume has been pathetic. Its like a few large players are propping this up trying to instill confidence where broader confidence has evaporated. They are too smart to do this forever. At some point they will cut and run.
The news is also telling. The reason I report all of the stories about new waves of conservative behavior, the loss of big bank control by the NY fed, Senators getting indicted for felonies, etc. is that they are all major warning signs that the observations of George Carlin, namely, "... and nobody seems to notice, nobody seems to care..." has peaked. Let me coin a term here. What do you prefer? Peak sheeple? Peak Patsy? Call it what you will, the people are no longer so damned lazy, distracted, sleepy, apathetic and ignorant. In fact, from the looks of things the people are awakening at an exponential rate. As I have written so many times in the past, you an fool some of the people all of the time and all of the people some of the time but when the Ponzi enters the collapse stage the con man suddenly finds he can't fool anyone ever.
This is why big bank governance was recently ripped from the control of the corrupt NY fed and this is why QE was stopped. People say Yellen can't raise rates. I say that they are skyrocketing right now without her consent. Yellen and her team will look out for number 1 now. They are corrupt as Hell but if they don't do something honest, something to convince Mark and Patsy not to kill them in the streets then that actual fate might await them. I know it sounds crazy and I agree that this is not likely to occur at present but the more the federal reserve backs wall street and slits the throat of main street, the more likely that it will happen. Importantly, as I posted back in October, Yellen broadcast in her income inequality speech that she knows this. So I want to be clearly on the record as predicting that you will see the fed cut off a hand or an arm or a leg (AKA banking buddies) so that the fraternity of fuckhead elite, Mammon-worshiping, people-despising money changers will survive. This does not make them our friend or our protector, it just means they are less dangerous for now. It also means we should press the attack.
Even before Yellen's speech I pointed out that the elite knew income inequality was an important thing for them to consider lest there be a pitchfork revolution. As Nick from that article says, history shows that civil unrest has always been the result when income inequality has gotten bad and right now it is at historic levels. Thus the stakes are far higher than most people understand. But the elite? They understand it folks. They do not see it as a conspiracy theory. They see it as a high odds occurrence if they don't back the Hell out of our faces for a time. You think Wal-Mart and other stores which recently announced wage hikes wanted to do that? I doubt it. I think they were told to do it. They were promised benefits and favors down the road if they would give some of their profits to the rabble in order to calm things down. They were also threatened that if they didn't give a partial raise voluntarily that the people were going to push their reps to make it law anyway, and at $15. When you are talking about this kind of money, nothing is left to chance, it is all scripted and run through the game theory sim.
Income inequality leads the supposedly stupid sheeple into self organizing along the lines of Podemos and Syzira of Spain and Greece respectively. These parties and the power that comes with them are the direct result of income inequality in those countries. Before, the EU would easily deal with a puppet leader in Greece but suddenly, and seemingly from thin air, a new, smart, young leader named Alex Tsipras who was a complete nobody on the global political scene 6 months ago has risen to sit at the big table with Germany, staring Merkel down and matching her move for move. This is what happens when you lean on the people too hard and steal too much from them. Yes, this could easily happen in the US. Yes, the fed knows it. These people are not stupid like the common people say they are. Is the con man stealing from you to be called stupid? Evil? Yes. Crafty and duplicitous? Certainly. Stupid? NO! Traitors? YES!
The recent top might have been the top of the great stock market bubble which began in 2009 with unprecedented federal action to blow the bubble up to historically unequaled heights. Under guidance of the federal reserve in the form of the Bernanke put, the market was coaxed, convinced and conned into taking on massive debt in order to buy shares. It happened in the form of margin use by traders which is now at an historic extreme. But it also happened via the magic of debt fueled share buybacks by corporations who saw low interest rates as an opportunity to pump the shares up so that their execs could get bloody rich on fake, debt fueled valuations. I reported on this while it was happening in posts like this one on Philip Morris.
If you go to that link you will find that one intelligent but ignorant commenter challenged my views. He is convinced that debt based buybacks were a smart thing to do. I don't think he his an evil shill or anything like that. I think he just doesn't understand the nature of a debt Ponzi or probably more to the point, believes that I am a conspiracy theorist who imagines problems where there are none.
What he didn't know, what he didn't understand is that I wasn't just talking about PM in that post. I was talking about all debt fueled share buybacks. They will all come home to roost in the deflationary collapse that must come and therefore will come. It is the historical precedent that no debt Ponzi ever ran forever that drives my certainty on this matter. It was the mathematical certainty that no debt Ponzi can possibly run forever that caused that history to occur.
My certainty is not based on the usual inputs of gut feel or discussion of the so called fundamentals but rather on the high level big picture view based on many thousands of hours of study, thought and observation. There is no soft landing from a pyramid scheme and no it won't be different this time. The fed huffed and puffed and blew up another monster asset price bubble without materially fixing the economy. Not because they didn't want to fix it mind you. Ranchers always want the best for their livestock. No, they didn't fix it because their only tool in battling deflation is to take on more debt and this is now having diminishing and even negative returns. That is the only real fundamental in play here: debt based prosperity always comes to diminishing and then negative returns.
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