Monday, March 9, 2020

SPX and INDU: Counts Confirmed, but It Brings No Joy

Futures are limit down tonight, and oil crashed (again).  Neither of these things come as a surprise here -- on the forum, I posted on Friday that it was high probability Friday's low would fail directly, and that we could see a large gap down on Monday (the market created a glaringly-obvious b-wave low during Friday's session).

I haven't updated my oil forecast in a year because there's been no change -- my standing count has been that the last crash was the bottom of wave 3 and that a new low was likely still needed.  I first called the top in oil back in 2011, when oil was still trading over $100, and gave a price target of $25, which everyone thought was insane -- but here we are now nearly 9 years later, and the "smartest guys in the room" have finally caught up:

Welcome to the party, I guess.

Incidentally, I called the bounce from 26 to 55, then adjusted my target higher in real-time to 70-72, then called the secondary top in oil as well (I was a little early, but within 4 points), back in May of 2018.  Considering Goldman Sachs apparently missed the top by around 40 points in the wrong direction, I consider that pretty good.  For posterity, here's the last chart I published on oil, in 2018 (it's marked 2019 because, while I can read a chart, I apparently can't read a calendar):

All of this begs the question:  Why isn't Goldman paying me an 8 figure salary?  We may never know.  But what we do know is that the system is going to be getting very stressed now.  

And all of this has left me in a pensive mood.  I have three children; my oldest is in her first year of college.  My youngest is still in grade school.   And the system is garbage.  We all know it.  We've all known it for years.  But the endless cycle of debt and booms and busts has, more or less, worked for the past 50 years.  The problem is, those have been 50 REALLY GOOD YEARS, in terms of humanity's struggles.  We haven't faced any true existential crises in that time.  We haven't faced extinction-level event asteroids, or massive solar flares, or, say, a killer virus that spreads before symptoms are present.  

In fact, we've become so spoiled by these prolonged good and prosperous times that we have to invent pretend crises, and the politicians repeat them every election cycle.  "Oh, the climate crisis, yada yada."  Apparently these people have never looked at the long-term climate of Earth long enough to learn that we are in living in one of the most stable and life-conducive climates of the past several hundred thousand years.  I mean, the end of the last glacial maximum was only ~21,000 years ago, and since then, sea level has risen 400 feet.  But, of course, if it rises another few inches in the next century, we're all going to die (insert "rolleyes" emoji here).

Even short-term, one doesn't need to look back very far (in geological time) to find TRUE climate crises:

Anyway, don't get me sidetracked into this, because I've studied climatology for the past two decades and have literally hundreds of gigabytes of peer-reviewed scientific papers and historical weather data stored on my hard drives, so I could probably write a book on it at this point.  Suffice to say that most what you hear on the news is NOT science, it's hype and superstition designed to get your attention and sell advertising -- it is not designed to inform you in any way, shape, or form.  Most of it is not even mainstream science.

The point I'm getting at is that humans, when they have no true struggles, tend to invent pretend struggles.  It seems to be in our nature to make our own lives seem difficult -- like we don't believe we deserve our lives to be without struggle.

And we've had a long, long stretch of prosperity to the point that few people alive today have (as a collective, not individually) known struggle the way, say, the generations that fought World War II, and lived through the Great Depression did.

And my larger point with all this is that -- during this extended run of prosperity -- we've invented "new" systems that work DURING THE GOOD TIMES.  These systems have not been tested in bad times. 

These systems will fail in bad times.  Again, many of us have known this for years -- but try telling the guy who's hitting jackpot after jackpot on the slot machine that if he keeps at it, he's going to lose all his money.  He won't listen -- not as long as the jackpots keep rolling in.

We're stupid that way.

Anyway, I got to thinking about all this because my long-term count has us approaching the end of Cycle Wave 5 -- and the end of Cycle 5 marks the end of a higher degree Supercycle Wave.

And the end of Supercycle rallies is a huge deal.  It's world-changing.  By my count, even the Great Depression was only at Cycle degree.  Imagine something an order of magnitude worse, and you have Supercycle degree.

I don't think we're there yet (I actually have the year 2025+/- as the window).  But what's going on now got me thinking.  More in another update, perhaps.  Let's look at the charts.

First up, the near-term count that Wave 4 (or Wave A of 4) had completed will be confirmed at the open:

Higher degree:

An even longer-term look, this time in log scale:

And a similar chart, for SPX, which has a better channel -- and a brief discussion on Cycle 4 and 5:


In conclusion, there's not much for bulls to grab onto here yet.  C down is still unfolding, and could even have much farther to run.  Do keep in mind that this is projected to be Wave 5 (since we just had Wave 4) -- so if it doesn't extend, it could complete a higher degree waveform, which could either mark the bottom of (larger) Wave 1 of C, or ALL OF C (for the alternate bull count).  Trade safe.

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