From Robin Landry of Raymond James
Since the last update the market has fallen to test the 1810 area as seen on the attached chart. The news and various indicators I use are getting more bearish. The world is drowning in debt and the central banks are showing themselves to be powerless to turn the economies of their respective countries around. Now they are moving to negative interest rates which only confirms my view of the world being in a DEFLATIONARY trend that has years to go. The talk of doing away with currency and moving to a digital currency is also showing the desperation. I believe a digital currency is coming much sooner that most people realize. The count shown in the attached chart is the one which gives a little larger view of where I believe the market is headed over the next few months if the top is already in. The rally happening, as I write this, is mainly due to the rally in oil. If the market is to make a new high, as I have suggested in earlier updates, this rally must break through the resistance in the S&P 500 around the 1950 area on increasing volume. If it fails, then the decline will drop to the 1740 area which I have repeatedly said MUST HOLD or the markets are in a MAJOR BEAR MARKET that will test the lows reached in 2009.
A Chief Investment Strategist that I have great respect for has always said that people don’t care whether things are good or bad but ARE THEY GETTING BETTER. The evidence I am looking at does not say things are getting better. THEY ARE GETTING WORSE!!! I have been in the investment business for over 40 years and have found that the charts of the various markets tell me what is going on in the longer term. I have repeatedly said that the Central Banks and the various Governments CAN change things over the short to medium term but THEY CANNOT CHANGE THE LONG TERM. Cycles have always existed and while they may be skewed to the left or right for awhile they ultimately happen until they are finished.
In Graduate school I took a Humanities course which I hated and was one of the few which I did not make an A in. Life is funny because that course taught me something which has turned out to be one of the most eye opening things I have experienced so far in my 69 years of life and my 40 plus years in this business.
The book used in that course was a book about Civilization. It outlined the dominance of Eastern and Western countries and how the Dominance changed every 500 years with a smaller 250 year cycle inside that where the major country in that hemisphere also changed. For example, the dominant hemisphere over the last 500 years has been the West. For about 250 years it was Great Britain, then it has been the United States. Now it is time for it to swing back to the East and we can easily see that happening every day in the news. China appears to be the next leader in the world, at least the way it looks now. You might ask what does that have to do with the stock market? Everything!! While the change does not happen overnight, it does happen and involves great turmoil. I got interested in cycles after reading that book in the Humanities class and wrote my Master’s thesis on the stock market. In that process I ran across the Elliott Wave theory. It allows one to map, as best as I have ever found, where we are in cycles at various degrees. One of the things that stands out in the study of cycles is that approximately every 80 years or so there is a Depression and then every 250 years an even greater change which I call a revolution. I believe that is what we are in the very early stages of. In the revolution cycle governments fall and new one’s rise. Look at all the changes going on around the world with everything changing in ways many of us would have never dreamed unless we had studied History and Cycles.
I won’t attempt to explain the Elliott Wave theory in this update. Robert Prechter along with A.J. Frost have written a book titled “Elliott Wave Principle” and explains it far better that I ever could. Elliott Wave International’s website is www.elliottwave.com. There you can find his book, newsletter’s and other materials if you want to learn more. The reason I bring this up, I have said in recent Market Updates that if we have already topped out in the stock market, then the market decline will be the biggest one anyone alive has ever seen and the result will be changes in every aspect of life that few people have ever dreamed of. It has been said that because the wave structure pattern can be very subjective that you can have 3 experts in Elliott Wave in the same room and have 3 different opinions. I have worked to take as much of my own opinion out of my analysis by using various technical indicators others have created over the years to help me determine where we really are in the wave structure.
I have expressed my opinion that we are in a large Cycle wave 4 correction and once it is finished a final 5th wave up to new highs will happen before the big downturn starts. Very few other EW technicians agree with me and think the top is already in and the downturn has already started. That is why over the years I have shown charts with my preferred count and my alternate count. What my personal opinion is does not matter. What does matter is what does the wave structure and the technical indicators say. They are telling me we are at a critical juncture. There are numerous supports from the recent low around 1810 down to the 1740 area which I IMHO believe will determine what the true count is. I am hoping for the best but also trying to prepare for the worst. I could go on for hours explaining all the things which tell me why I believe this support area is so important but I do not have the time and my typing skills are almost nonexistent.