Zero-Bound

By: Joseph Russo | Sat, Oct 16, 2010
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$USD

Who is fooling whom?

"It is with sheer disbelief, and utter amazement that the real world accepts such an empty unit of exchange to start with. To fathom a plausible reason for such collective behavior, one need not go any further than studying the classic conditioning experiment of Pavlov and his dogs.

More astonishingly, the entire world, which has been built and financed from such empty illusions of exchange, will require exponential infusions of the same, with every imaginable variant accelerator to keep faith alive, and the ponzi-scheme on sound footing."

The above introduction was extracted from an article we penned more than three years ago titled Gold Boom / Dollar Bust. The article is perhaps more relevant today than it was back then. Apart from some slight degree of trend modifications, our Elliott Wave analysis and technical assessments contained within the article remains spot on.

Todays updated real-time $USD charts continue to illustrate a gargantuan falling wedge pattern that is in our view taking place at SUPERCYCLE dimension. As an aside, another zero-bound market, long-term treasury yields, exhibits a similar type of supercycle architecture.

The ideal wave pattern illustrated in the upper right hand corner of the chart depicts where we stand today at the red dot noted by the <<2010 reference. There is no better pattern from which our financial masters of illusion could better engineer the most orderly and flexible destruction of currency. (The same applies to treasury yields.)

Below, we enlarge todays chart to get a bit of a closer look at the current stage of unfolding.

From where we stand today in Elliott wave terms, we see three highly plausible outcomes to the inevitable zero-bound path of the $USD. Do realize that no matter which Elliott wave path the $USD ultimately adopts; all such roads shall inevitably lead to Rome.

  1. In the first rapidly waning scenario, it remains possible that the $USD remains in the violent throws of a primary degree bull market advance, which we have labeled "B" << PRIMARY in red. Such a rally could mark its crest in 2012.

  2. In our second scenario, it may be such that the primary "A" wave down has yet to bottom. We currently have this "A" terminal positioned at the 70.70 print low that occurred in 2008. It may be such that the current slide in the dollar may ultimately retest or breach beneath these lows prior to or into the 2012 period. If the dollar can establish a solid base from such levels, this newer low beneath that of the standing 70.70 benchmark may well mark the entire primary "A" down instead.

  3. We illustrate our last and most bearish case in the purple-colored primary degree wave labels 1 - 5. In this scenario, the 70.70 low registered in 2008 marks a first of five primary waves down amid the larger cycle degree "C" wave. It is in this scenario that we can see the total destruction of the $USD sooner (2017-ish) rather than later (2020's-30's). All told, it is not a matter of IF; rather it is a matter of "when".

Between now, "when" and beyond, opportunities to protect, and preserve one's capital, in addition to profiting handsomely along the way shall prevail so long as civilization and financial markets do.

BULLS RUSH IN
All that said, we shall leave you with some closing thoughts imparted from Bulls Rush In published just over a year ago in August of 2009.

Shepherds of Illusion engender a continuation of the desired stampede
As the Dow approached its early July low, we offered readers opinion on what we believe might be some of the goals resident amid concentrated ruling elite bodies which strive to maintain full-spectrum control and order over the masses. We titled the piece "Shepherds of Illusion". Our thought summary from this piece was the following:

"In summarizing our viewpoints, the potency and effect of distortive interventionist political and monetary policies together with participants herding tendencies to "stampede" are in fact what determines that authorities' success or failure in maintaining their monopoly and status quo preferences, all of which are vital to their ongoing supreme and elite existence of full spectrum dominance and rule."

"Regimes successful in the management and chosen direction of desired policy-induced stampedes, will likely fulfill their prime directives and remain effectively dominant and in vital control of the masses."

"The most vexing concept associated with this analogous tale of intrigue, is that it remains disturbingly plausible that with continued administration of these hyper-nuclear drugs, they might just give this otherwise very dead patient, the very real impression that they are still alive and well."

"The gravity of such distortions carries the outlandish possibility of eventually delivering a hallucinogenic denial-induced rally taking equities back up toward their 2007 highs. There, we said it. As morbid as it is, until we are able to record (or admit) a time of death, so long as we remain open to constant rule changes and creative innovation, anything can happen by the hand of the wonderful wizards of Wall Street and Washington."

Until next time,
Trade Better/Invest Smarter

 


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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/