EWS & the DJIA: October 2008 Stock Market Crash Revisited in March 2009?
Stock-Markets / Financial Crash Mar 08, 2009 - 10:10 AMBy: Eric_Chevrette
Mind you, the title of this weekly paper does NOT refer to what did already happen since March 1 st with US and global stocks, BUT to what should take place from now on until the end of the month and maybe into the early days of April. Before we proceed to unravel why the real panicky free fall has not yet begun , we would like to remind you how EWS is working as a step by step advance. After global stocks do lose ground week after week since the early days of January, let's have a “fast rewind” about this “step by step process”:
|
janv-02 |
mars-06 |
% var |
| VIX | 39,19 | 49,33 | 25,874 |
| USD | 81,86 | 88,65 | 8,295 |
| XJY2XEU | 0,782 | 0,814 | 4,092 |
| OIL | 46,34 | 45,52 | -1,770 |
| CRB | 233,92 | 206,53 | -11,709 |
| OXH | 79,9 | 66,93 | -16,233 |
| XAU | 123,43 | 119,56 | -3,135 |
| GOLD | 879,5 | 942,7 | 7,186 |
| ADR | 640,72 | 458,59 | -28,426 |
| COMP | 1632,21 | 1293,85 | -20,730 |
| NYA | 5915,73 | 4284,49 | -27,575 |
| SPX | 931,8 | 683,38 | -26,660 |
| DJA | 3174,63 | 2232,45 | -29,678 |
| DJIA | 9034,69 | 6626,94 | -26,650 |
| NIKK | 8859,55 | 7173,1 | -19,035 |
| HSI | 15042,81 | 11921,52 | -20,749 |
| STI | 1829,71 | 1513,12 | -17,303 |
| MXX | 23254,68 | 17008,61 | -26,859 |
| RTSI | 631,89 | 559,09 | -11,521 |
Global Market Table_Jan 2 to March 6, 2009
As we started with the renewal of the global bear (see chart #2 “Why 2009 deleveraging crash is ripe” published on Jan 4), we did not mention any specific extension for green wave 5 ; a week later, “Global stocks and commodities crash 2009” did specify a red i/ii/iii/iv/v extension for green 5 (see chart #8 ). But it was not until February 9 (see chart #2 in “Few more days of strength ”) that we would gain total grasp over the complexity of red wave ii ; as of February 23 (see chart #3 in “Why black Tuesday should lead to free fall”), it would become clear that red wave iii was going for an extension as brown 12345 . In fact, we had to LET (we mean WATCH ) red waves i&ii unfold BEFORE we would gather serious indications about the entire move; alternately, WATCHING the beginning of red wave iii unfold would lead to understand how red wave iii would extend as brown 12345 .
In other words, EWS is a way to anticipate the direction of the trend BEFORE you can hold a full vision of the extent of the move into the assumed direction: that's why you RIDE a wave and never hold it ; as you WATCH the move advancing, you can gather factual indications about the size of the entire move and steer your “surfing”. Indeed, how could you possibly get brown 12345 into your EWS framework before you could watch blue i/ii/iii/iv/v BUILD UP brown wave 1 AND make the related assumptions about brown wave 2 ? After last week's dive did confirm that February 27 IS definitely the 1 st day into brown wave 3 , we should now WATCH what did unfold and try to gather more factual indications relating to size and duration.
Chart #1
In the first instance, a weekly view (see chart #1 ) is confirming that the BEST of ADR red wave iii should not have come yet: indeed, we can easily see how VIX blue wave iii should now extend as green 12345 ; moreover, while the dive into red wave iii does look like a runaway slide with no pause for ADR , the green 12345 extension of VIX blue iii is somehow revealing the brown 12345 extension of red wave iii which otherwise does only show with a daily chart for ADR (all comments for ADR valid for any global US index).
Chart #2
After we did reveal last week the trending picture of the DJ Composite (see chart #5 in “Elliott Wave Synchronicity and the DJIA bear market”), let's enjoy the EWS analytical benefits to be gathered from another trending index.
Chart #3
In order to better grasp these benefits, you should keep a curious eye on both charts #2&3 at the very same time; after last week did register only ONE day up for global indexes on Wednesday, March 4 (please note that Friday, March 6 was a MIXED day with some indexes up and others down), we should know what to do with that single rise: that is where the OIL sector ( OXH ) does look like it should hold the answer about that day; indeed, as it can be best gathered from chart #3 , the March 4 rally was so strong with OXH that it did retrace a good portion of the dive from Feb 27; in other words, according to the EWS principles of “relative size” between converging waves, the March 4 one day rally can be NO MORE BUT NO LESS than a “wave 2” , which is why we are automatically driven into the assumption that brown wave 3 is actually extending as black i/ii/iii/iv/v AND the 2 following days (we mean March 5&6) are the early stage of black wave iii ……….
Of course, we should envision the possibility that black wave ii would still be unfolding, but we have the following fact to consider: the market is accelerating to the downside, which means that any subsequent counter move should currently last less than brown wave 2 and that wave did not even last 3 full days; under the given circumstances, a one day rally should be enough for a sub wave within brown wave 3 ……
Chart #4
In order to complete our understanding of the current situation, let's have a look at chart #4 presenting USA and Canada together inside the same EWS .
All that we get to see thru charts 2&4 is a classical case of “time wasting process” until the time-price balance does allow for another time window where price would run ahead of time (like it did in October 2008).
To be more specific in the comments made in this paper, brown wave 1 is supposed to be echoing red wave i which took place around mid September 2008; under this compelling EWS scheme , black waves i/ii should be currently echoing the last days of September 2008; as this similar EWS situation is arising with the clear backing of VIX about to enter an explosive stage thru green 3 of blue iii (see chart #1 ) , we should set our minds for a sharp dive taking place next week.
Should the technical set of EWS evidence not be enough, we would mind the additional message from Canada: after TSX red wave ii did complete a breakout failure (see the violet circle in chart #4 ), we would remember from past experience (see chart #3 in “Elliott Wave Synchronicity and the DJIA bear market” and the BKX runaway dive from 45 to 25 taking place after another case of breakout failure) that such occurrences always speak volumes about the severity and swiftness of the next move in the direction of the prevailing trend; in plain words, the TSX index (Canada) is standing in the forefront as a naked warning of what should now materialize for global stocks…….
The table below is a “fast rewind” about the numbers of points captured since a long term bearish EWS stance was adopted on August 20, 2008.
| closing price | closing price | POINTS | |
| 2008 aug20 | 2009 mar06 | CAPTURED | |
| DJA | 4,091.92 | 2,232.45 | -1,859.47 |
| DJIA | 11,417.43 | 6,626.94 | -4,790.49 |
| NYA | 8,276.91 | 4,284.49 | -3,992.42 |
| SPX | 1,274.54 | 683.38 | -591.16 |
US Market Point Table_2008, Aug 2 to 2009, March 6
|
|
|
|
|
|
brown 3 |
| top | low | top | target | target | ||
| brown 2 | black i | black ii | black i size | black iii | black v | |
| DJA | 2580 | 2290 | 2390 | 290 | 1926 | 1665 |
| DJIA | 7400 | 6700 | 7000 | 700 | 5880 | 5250 |
| SPX | 780 | 695 | 725 | 85 | 589 | 512,5 |
| NYA | 4800 | 4300 | 4550 | 500 | 3750 | 3300 |
US market table for brown wave 3_March 9, 2009
As you can see in the table above (price targets were computed with the 1.6 and 2.5 ratios), the 500 point mark should only be an INTERMEDIATE stage for SPX in the course of green wave 5 ; with 683.4-512.5 = 170.9 more points that should be lost around the peak of brown wave 3 , we would already get a sub total of 591+170 = 761 SPX points captured since August 20, 2008. All in all, it already does look like more than 800 SPX points should be captured from August 20 at last.
The table below is there for your information about what some bear ETFs did deliver so far thru the current market turmoil; though it is a recent ETF with little “history”, we did ad BGZ, a 3x leveraged fund which did overdo itself.
|
|
|
|
|
from Jan2 |
from Aug20 |
| bear ETF | 2008 Aug20 | 2009 Jan2 | mars-06 | % | % | |
| index | DJIA | 11417,43 | 9034,69 | 6626,94 | -26,65 | -41,96 |
| index | DJA | 4091,92 | 3174,63 | 2232,45 | -29,68 | -45,44 |
| index | SPX | 1274,54 | 931,80 | 683,38 | -26,66 | -46,38 |
| index | NYA | 8276,91 | 5915,73 | 4284,49 | -27,57 | -48,24 |
| index | COMP | 2389,08 | 1632,21 | 1293,85 | -20,73 | -45,84 |
| 1x | DOG | 67,28 | 66,58 | 88,11 | 32,34 | 30,96 |
| 1x | SH | 68,45 | 69,96 | 92,1 | 31,65 | 34,55 |
| 1x | EFZ | 88,65 | 82,98 | 111,46 | 34,32 | 25,73 |
| 2x | RSW | 96,35 | 106,88 | 180,59 | 68,97 | 87,43 |
| 2x | DXD | 62,5 | 50,58 | 86,51 | 71,04 | 38,42 |
| 3x | BGZ | 53,28 | 110,01 | 106,48 |
US INDEXES VERSUS BEARISH ETFS _August 20, 2008_March 6, 2009
Should you wonder why the current market slide is seemingly “refusing to find a bottom”, maybe a quick look at chart #5 could make you grasp the dreadful reality of the current recession/depression; alas, it is NO chance if we meant a GENERATIONAL DEPRESSION on August 20, 2008……….
Chart #5
Moreover, the message from chart #5 should be clear: if you plan to keep on behaving and trying to make money the same way you did for the last 25 years (this remark does include the financial markets), you will most likely be punished in a stiff manner; considering the massive bailout measures which are NOTHING BUT A CONTINUATION OF THE PAST POSTURE , it looks like even the shrewdest heads of state in this world don't get it that “fighting the tape” is amounting to make matters WORSE in the end: as the curve from chart #5 is telling, the TREND HAS REVERSED , so any PAST posture is NOTHING BUT a SUICIDE . If the FED bubble (some would call it the Greenspan bubble) has to deflate until US lifestyle is back to normal (when personal spending would be limited to 88% of the disposable income), maybe it would be wiser to let it happen as fast as possible without trying again to over boost spending with misplaced credit practices. So far, all we get to hear and see is about spending money that does not exist in the first place, except as a growing debt for future generations. So, if some government authorities are willing to “fight the tape” and commit financial suicide, maybe they should avoid doing it with monies that do belong NOT to them but to future generations…
If a well hidden though machiavellian way for current fake democracies is to rule and stay in power by dividing people and pitting them against one another thru a “no win no loss” game in the name of “liberty”, it is a fact that any government is always well aware that the pitfall of this balancing societal act is lying with the risk of “civil unrest or even “civil war” when the haves do confront the haves not; while keeping in mind this hidden truth about western “democracies”, one may wonder if “democracy” is so much worn out in its efficiency that the last way out for “rulers” has become nowadays to divide generations and families (because children are a different generation) between haves and haves not by means of an intended “generational bailout” policy; but a sound mind could hardly understand how replacing “civil unrest” by “family unrest” would benefit the minimum peace which the viability of any societal system does require in the end……….
In other words, the INSANITY which drove the 25 year bubble you face in chart #5 is still in FULL command, not only in the US but anywhere else in the so called “developed world”; so far, we should be led to conclude that “development” has become a kind word in the mouth of our leaders for “hole digging” concepts in disguise; let's hope at least that the new “holes” we should soon experience in the world financial markets can blow some much needed gaping “holes of innovation” into the heads of our world leaders; for example, if banks can make use of their computers to “centralize” trading orders, why wouldn't they for a change centralize “credit demands” in order to gain a clear overview about the solvency of any customer, no matter if private or corporate? Shouldn't the bank of all banks, we mean the FED , be the one centralizing ALL credit demands? Shouldn't it be ONE of the new rules our ears are getting battered with every other week without getting any to read in the end? After all, maybe the FED has far too many trillions of $ printed out of thin air floating around to care about solvency. Anyway, the people in command should know better and they keep on repeating that it is not a solvency crisis but a liquidity crisis, so why should you and I worry? .......
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.
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