This purpose of this blog is to document my own education in the study of Social Mass Systems and Behavioral Finance. Please read the disclaimer below.
THE PREDICTIONS AND ASSESSMENTS MADE ON THIS BLOG ARE FOR EDUCATIONAL PURPOSES ONLY. DO NOT TRADE OR RELY ON THESE FORECASTS OR ASSESSMENTS. NOTHING POSTED ON THIS BLOG CONSTITUTES FINANCIAL ADVICE AND ALL INFORMATION IS POSTED SOLELY FOR EDUCATIONAL AND ARCHIVAL PURPOSES.
The chart below is my wave count for the past few days and the dotted and solid red lines indicate my prediction for the rest of the week, and perhaps a bit of next as well. The chart, as you might have noticed is the $DWCF, which is a measure of all equity securities that have their pricing information available.
I noticed, upon discovering this chart that it really seems to hug the Elliot Wave pattern much more closely than the DJIA. I am not sure if it is more widely traded, but it does seem to be a really nice EW indicator.
The count for the DJIA is substantially similar to the count for the DWCF and my prediction for both this week is the same. We should see a drop in price which is followed by a push back up. The drop will occur either tomorrow or friday. It is also possible that the market will move sideways and then up. The termination price is listed on the chart and it is likely that the DJIA will follow the same pattern by percentage change.
In essence, this weeks market prediction is very simple. I believe that the market is at or near the completion of wave 2 (black), which means that the next large movement will be a 3-wave down and will move the markets very quickly in a negative direction.
It is possible that the correction we have seen in the past week is only part [a] of a larger three wave correction. However, given the fact that this wave sequence is an impulse and not a corrective wave in the larger scale, I think that the correction we have seen for the past 3 weeks will be most the upward movement we see for before a strong pull downward.
P.S. During the corrective pattern we have seen over the past few weeks Gotye's "Someone I used to Know" has fallen to number three on the weekly songcharts and has been replaced by the decidedly more upbeat both in tone and message "Call me Maybe" by Carly Rae Jepsen. I thought that was a neat correlation.
While I have recently become too busy to map out an entire count, my rough estimate is placing the markets near the end of their upward correction. As a result I am expecting very strong negative movement across all the major indices very soon. The last time I attempted to call the top of a correction such as this I was off in terms of amplitude. While that is possible again this time, I think the wave structure is now in its motive form and overthrowing "b" waves as was the case through the winter of this year should not surprise the 5-wave count. I will post more as I find the time.
I was pleased with yesterdays prediction, as the market traced it extremely closely in completed wave -d- (blue). It still has to fill out sub-minor waves b and c (black) to complete wave -e- (red), which should also be wave [b] (black).
61.8% of the length of minor wave a (black) of -e- (red) would bring the bottom of -e- (red) to ~12,372. This is an alternate low however, since the baseline resistance should be found again at $12,410. Again, given the strong building downward pressure of the larger wave cycle, -e- (red) ending ~12,372 is very feasible.
After wave -e- (red) / [b] (black) completes, an upwards moving C wave will likely bring the market up to ~$12,840 in a simple 5-wave structure which I will channel more accurately upon the completion of sub-minor wave 1 of that larger [c] wave.
[Socionomic Observation]
For a brief socionomic correlation to the overall market sentiment, check out the two following videos. The most recent video "Someone I use to know" features a simple recurring / descending melody in the key of D minor with a high C acting as a leading tone for a sixth which then falls to the fifth before finally descending again to the tonic of D. In English, this is what is typically regarded by listeners as a REALLY depressing scale. The bleary eyed nude male singing the lyrics face on recalls in his lyrics a relationship that has passed. Expressing nostalgia however he seems to note that it wasn't a very good experience even before the now nostalgically recalled. At one point he declares " I am addicted to a certain kind of sadness". Since this song is at the very top of the present charts, I don't think it is a stretch to say that mass social mood is identifying and reflecting an emotion that correlates with the present and coming Bear markets. While this is obviously just something that I have picked out, I would argue that the same general sentiment can be found across the most popular songs since late April of 2011.
As a measure of comparison, take a look at what is generally popular in terms of styles of music today and compare it to the "Swing Revival" of the late 1990's, which hearkened back to the start of Bull market cycle wave III in the early 1940's. Social mood in 1997 /1998, the peak years of the past century's bull market 5-wave sequence, produced the following sound.
The "Zoot Suite Riot" begins with a forceful brass blasting set of saxophones (which barely fade throughout the song), also in a minor key (G), but resolving the major second of that key in an ascending form and heavily complemented by an incredibly colorfully dressed front man. Smiling and dancing, the singer encourages the listener to "throw back a bottle of beer" and advises that "you can't run fast enough". While this is a far cry from today's mostly dark / passive hits, it seems very in line with mass social mood in 1997/98.
One last thought. While "Someone I use to know" centers around the idea of individuals who share a relationship alternatively fading into the background....literally, "Zoot Suit Riot" features a very strong individual singer whose ecstatic confidence is made plain and who is centered by a spotlight. Popular advocacy of individual achievement is also tied with Bull markets, while more collectivist mentalities are expressed during societies more fearful and pessimistic times.. i.e Guilded age vs. Great Depression.
After the DJIA bottomed at $12,411 before breaking back upwards in a 3-wave pattern. The good news is in terms of my own observations that I got both the market direction and timing with yesterdays prediction, even though I went too far down on the morning low end. The good news is that I think that this pattern is a primer for a triangle pattern which expresses itself in waves a,b,c,d,e (5-waves). This is tentatively confirmed by adopting what I believe to be a more accurate wave count, based on today's wave structure.
As a result, the market should drop tomorrow. It will do this probably after coming a pinch closer to at least the lower resistance point, though given the strong underlying sentiment, it is possible that it may drop right out of the gate. The baseline is roughly $12,400. I think the market will remain at or above that level since flat B patterns generally follow zig-zag A waves. [labeled as A (black)]. After filling out point -e- (red), the market should begin its upward thrusting wave C (black). The length of wave C (black) will depend greatly on how low the market goes tomorrow.
I am expecting this b wave (blue) to terminate in and around $12,319, as it still has to complete waves iv and v of its 5-wave sequence. (labeled in chart). This b (blue) is comprised of a 3-5-5 wave structure which began on 6/7/12. After wave b (blue) completes, there should be a strong upward movement as wave c (blue) will advance upward to form wave 2 (black) at its completion which should be in and around $12,850. However, because of the strong downward pressure associated with the upcoming bear market three wave, it is possible that the completion of wave c (blue) may be somewhat truncated as the weight of mass pessimism will be quite strong going into the next 5-wave bear sequence, which will be the 3rd wave, within a larger 3rd wave. In other words I am predicting that the completion of wave c (blue), which will likely be comprised of a 3-3-5 pattern, will mark the start of a significant selling frenzy in the markets. In terms of time, I would expect the completion of wave c (blue) / 2 (black) to occur on or around 7/12/12, though a more precise time may be given once wave c (blue) has developed enough to graph its channel.
The following chart is a rough wave count for the days ahead. I miscounted the daily 5 wave sequence on my last post which incorrectly was looking for a subsequent 5th wave to complete the daily progression. Based on my correction to that mistake, we are currently experiencing an "a" wave. The 61.8% retracement level of this wave is very close to a 1.618 x the leangth of what I have marked as wave a. Once wave C of this wave cycle is completed a very powerful third wave will bring the market down in price level very rapidly.
I will update in greater detail as I have the time later on this week.
The following two graphs represent my daily wave prediction for the coming week. Both the S&P500 and the DJIA are demonstrating an upwards correction diagonal correction, which I believe will be followed by one last wave down in the labeled 5 wave sequence. The larger corrective trend in the markets will be a 3-wave pattern and occur after the completion of this final downward move. The turning price points where corrective wave 4 ands and wave 5 will begin are noted on the charts.
