A Plausible Reality

By: Joseph Russo | Thu, Sep 3, 2009
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Half Empty circa 1930
In similar fashion to the present wisdom held by the majority of professionals, it is with certainty that the majority of those embedded in the '29 quagmire viewed their 48% V-shape rally in the Dow as the start of a full economic recovery, an end to the crisis, and a sure sign of a permanent return to prosperity.

As the record clearly shows, their optimistic perceptions could not have been more wrong. Although we are not predicting a repeat or rhyme of this diabolic sequence of devastating events, we wish simply to bring to readers' attention the very real plausibility of such an outcome.

Was our modern day 54.4% 18-month crash in the Dow simply an overdone anticipation of Armageddon, or was it an initial warning shot across the bow as was the case in 1929?

In our view, the Dow's March low of 6469 could easily have been "in early stage process" of pricing in Armageddon rather than "overshooting" to the downside providing what many are touting as an extreme "under-valuation" long-term buying opportunity.

The largest financial coup in the history of humankind
What stopped the road to ruin? It was yet another epic financial coup engineered by none other than the Fed and Treasury affecting every means necessary to rescue an irreparably insolvent system.

With the unique benefit of monopoly over the worlds reserve "make-believe" currency, without limit or immediate consequence, the Fed and Treasury reflexively trounced the constitution, changed rules, and threw as much of their monopoly money at their global banking and wall street buddies as was necessary in order to effect yet another "do-over" for the status quo elites.

If Bernie couldn't do it, Let's try Ben ... Let's go Ben ... Let's go Ben...
Only time will tell if the world will buy into this diabolical scheme in the same way that feeder funds and astute investors bought into Bernie Madoff's version of reality.

In the five months following our modern-day March low, the Dow has rallied 48.84% to its intraday August 28 high of 9630, which is eerily similar to the percentage gained off the 1929 low.

Shy of the 1930 retracement, the modern-day rally into August retraced only 40.88% of its entire decline. Should we match the 52.26% retracement achieved in the V-spike from 1930, the Dow could trade as high as 10,500 and still risk total collapse.

What might that look like, and what may follow such a plausible reality? The chart below ponders one such path that the Dow may take in event such dire conditions impose themselves on the masses.

A thirteen-year "M" shaped recovery
The above chart pattern illustrates a five-wave 13-year secular bear market triangle consisting of waves "A" through "E" at cycle degree. The massive cyclical bull and bear markets strewn over the course of the next ten years might form what may come to be known as the long and torturous "M" shaped recovery.

Are you prepared to invest or trade such an environment, or perhaps one that entails a hyperinflationary run up to fresh all-time highs? Rest assured that we are, so join us in our ongoing quest to journal, forecast, and trade the greatest events in financial history.

For those who wish to obtain a visually graphic, easy to understand actionable guide to the various disciplines and real-time actions needed to achieve a broad array of objectives at every level of market engagement, look no further than Elliott Wave Technology's PLATINUM publication. Those with a more narrow focus may select from the below list of PLATINUM'S three subsidiary sister publications.

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1. The express focus of Elliott Wave Technology's Near Term Outlook is to provide equity index traders with actionable guidance over the near and medium term.

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Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the dot.com bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/