Diamond Rated - Best Financial Markets Analysis Article Before we turn our attention towards the need to do some fine tuning about the DJIA target around the end of the current bear leg with global stocks, it might be appropriate to look back and see where we do come from, especially with regard to market volatility ( VIX ).

Chart #1

If you refer to “Why 2009 deleveraging stock market and commodities crash is ripe” published on Jan 04, you will be in a position to measure the progress made over the last 4 weeks as it is presented with chart #1 (VIX) and the Global Market Table featured right below.

	janv-02	janv-30	% var
VIX	39,19	44,84	14,417
USD	81,86	85,89	4,923
XJY2XEU	0,782	0,868	10,997
OIL	46,34	41,68	-10,056
CRB	233,92	220,37	-5,793
OXH	79,9	76,76	-3,930
XAU	123,43	124,01	0,470
GOLD	879,5	928,4	5,560
ADR	640,72	547,72	-14,515
COMP	1632,21	1476,42	-9,545
NYA	5915,73	5195,79	-12,170
SPX	931,8	825,88	-11,367
DJA	3174,63	2798,52	-11,847
DJIA	9034,69	8000,86	-11,443
NIKK	8859,55	7994,05	-9,769
HSI	15042,81	13278,21	-11,731
STI	1829,71	1746,47	-4,549
MXX	23254,68	19555,95	-15,905
RTSI	631,89	535,04	-15,327

Global Market Table_Jan 2 to Jan 30, 2009

So far so good, as expected, currencies ( US $, XJY2XEU ) and VIX are UP , global stocks are DOWN while raw materials offer a mixed picture, especially with regard to Gold; but as we did point out last week (refer to chart #7 in “Crash 2009: global stocks on edge of cliff facing DJIA 5,500” ), “good money is always chasing bad money”; as a consequence, it should be much wiser to remain suspicious of Gold's latest performance over the past 2 weeks, especially as everything is definitely hinting at an accelerated rise of the US $ in the coming weeks (this point being dealt with later on).

Because a renewed rise of VIX should clearly be at the heart of the deleveraging process currently at work since July 2008, it is especially worth noting that VIX is sticking to the expected EWS path : after it was surmised on Jan 4 that VIX was then touching a final intermediate bottom closing red wave 4 (see chart #1 ), all that we got to SEE over the last 4 weeks does look like nothing but the early blue waves i/ii of an extended red wave 5 , which does come out with no surprise after the assumption made on Jan 4.

As we shall now discover, the use of EWS (Elliott Wave Synchronicity) should be raising the certainty level of the assumed global crash by a wide margin; as a matter of fact, putting together VIX , currencies and global stocks into the same EWS tower is fully revealing the synchronicity of a 5 wave ENERGY IMPULSE simultaneously propelling stocks, currencies and VIX since Jan 2.

Chart #2

Chart #3

As I did NOT explain about EWS (Elliott Wave Synchronicity) in “Global stocks and commodities market crash 2009” published on Jan 11, the basic but forbidden principle of energy is that ONE source of energy is able to produce different visible shapes in different places at the very same time. This principle could nowhere be better revealed (we mean “made visible”) than with charts #2&3: as a matter of fact, the surmised blue i/ii with VIX is perfectly falling into harmonious synchronicity with red i/ii for ADR and blue i/ii for XJY2XEU and the US $ ; in other words, a full EWS tower including VIX, XJY2XEU, the US $ and ADR would be the best way to grasp that the SAME energy impulse should be materializing as a 5 wave move at the very same time thru these 4 indexes/markets.

Of course, according to that crucial statement, one should consider that the latest rise of the US $ from 80 to 87 starting 4 weeks ago is only representing “wave one” within blue i/ii/iii/iv/v coming as red wave 5 (see chart #2 ). That would imply a final top for the US $ with blue wave v around 83.6+((87-80)*2.5) = 101.1; of course, US $@101 would coincide with DJIA@5,500 (target from previous paper, Jan 26, to be adjusted later on in the present paper).

Chart #4

Beyond the high level of certainty reached with this weekly EWS tower , a daily view with chart #4 should be offering more reliable help about the short term outlook for global stocks; after we did point out blue 12345 as red wave i of green wave 5 in previous papers, it does look like the latest rally into blue wave 4 marked the standard end of red wave ii after an irregular red abc counter move (indeed, red b reached below red i ). As a consequence, while Jan 2 could be labelled as day #1 for green wave 5 , we should now assume that Jan 28 was day #1 for red wave iii .

Chart #5

Though the final target for red wave v at the end of green wave 5 should be adjusted according to last week's rally into blue wave 4 , we're facing a really minor change. With the true low of VIX blue wave ii now standing at 39.66 (see chart #1 ), we may expect a final top for VIX blue v around 39.66+(2.5*19) = VIX@87.16 instead of VIX@93.5 . After the true red wave ii tops now read as NYA@5,501, DJIA@8,375 and ADR@580 (respectively, instead of 5,196, 8,077 and 544), we get adjusted targets for red wave v around NYA@3,491 (compute 3,186+(5,501-5,196)=3,491), DJIA@5,819 (compute 5,521+(8,375-8,077)=5,819) and ADR@340 (compute 304+(580-544)=340) . Nevertheless, DJIA@5,819 is still a 27.2% drop from last week's close at 8000.86; as to ADR , we should be ready for a 37.9% drop from 547.72 and the NYSE Composite would still give away 32.8% from 5195.79………

As chart #5 should clearly point out, the currency deleveraging process is going to send more selling pressure for OIL in the coming weeks as XJY2XEU and the US $ both proceed thru their respective blue waves iii to v .

All in all, despite the fact that the last 2 days of the week (please see chart #4 ) were most likely part of some “wave one” into the extended red wave iii for global stocks, it does really look like the Davos summit ending on Sunday, February 1, 2009, had little to nothing worth mentioning to oppose the current economic and financial slaughter; in this regard, it should now be clear that the overall length of the liquidation wave at work since Jan 2 should exceed the initial 8 week assumption made in previous papers……….

By Eric F.M. Chevrette
France
eric_chevrette@yahoo.fr
Fone: 00.237.9.660.53.59

© 2009 Eric F.M. Chevrette
Eric Chevrette translated Bob Prechter's “Elliott Wave Principle” in 1989 after graduating in 1984 from the ESCP (Ecole Supérieure de Commerce de Paris, see http://www.escp-eap.net ) which has been ranked 6 best business school in Europe by the Financial Times in 2006. He since has become interested in “market forecasting” and “global economical analysis” since 1987 and is currently helping people to protect and grow their assets while anticipating the big trends.

Eric Chevrette Archive

Comments

Steve Goldberg
23 Feb 09, 23:53

Gold as a hedge

I doubt that N Korea is planning an attack on the U.S.; although I have been wrong before (about once every ten years). It takes a lot of palm greasing to get the economy of the U.S. destroyed. The Nazis were able to delay U.S. entry into WWII by several years and the war effort was about half what it would otherwise have been.

Gold is far better used to bribe corrupt government and industry officials. These people would nurder their own mother for an ounce of gold if they thought they could get away with it.

Do not use gold as a hedge fund.

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