My problem with the Elliott Wave Principle, as it was last Spring, is its tenacity for muckraking. When things don't turn out as forecasted, they're not necessarily wrong in their projections...just delayed.
The "evil speculator" at www.evilspeculator.com has little doubt that this is still a bear market, but now the forecast for the market to crash is delayed until October. Based on the earlier charts, all three scenarios said September. However, a new analysis now pushes that crash out further despite three separate analyses that said otherwise. Not only is this frustrating and drudging, but it really seems to be meant for day traders. Just my opinion.
In the long term, the evil speculator could be absolutely right--we're in a bear market rally still and it's going to crash sometime soon. However, when is soon?
It's like making a long-term bet that a good football team is not going to the Super Bowl. Only, there are side bets as to whether the team will score more points than the other team in the first quarter of a game. Then, the second quarter. Then, the third quarter. That team may or may not keep scoring more points. They may even win the game. Or a few games. So--you made some money. But you're not going to know you're long-term projection until that team has lost enough games that it can't make it into the playoffs. Or, that team could make it into the playoffs but lose the championship game and not make it into the Super Bowl. Great. You were right long term, but look how long it took to find that out.
In this case, a crash might happen in the fourth quarter as companies report poor third quarter earnings based on overzealous analyst opinions. Fact is, many companies reported second quarter profits only because they cut overhead through layoffs. Really, the P/E (profit/earnings) scenarios are not matching up.
However, that doesn't necessarily mean a market crash if investors are focused on the banks, and the Federal Government continues to prop up banks through accounting rule changes and cash input. Investors may also be watching unemployment closely to determine whether this is a deflationary economic cycle and whether consumers will start spending soon.
Personally, I think it's deflation because there's no telling how long banks will be able to provide debt to businesses with all the "toxic" debt they're holding. When unemployment doesn't fall as expected in the 3rd quarter of 2010, the market could crash then and there because most economists expect unemployment to begin to decline at that time.
If that's the case, then the supposed crash was not in September or October 2009 but maybe sometime late in the month of September 2010--next year at this time--when the U.S. starts to unexpectedly see the unemployment rate remain steady or increase. It's the unexpected that swings the market to extreme ups or downs.
That said, judging the stock market today is difficult because many of the same rules do not apply. I'll once again refer you to Mike "Mish" Shedlock who provides some historical perspective on corporate bonds and treasuries. First, it's easier to follow if you read it a couple of times and, second, it's a pattern likely to not suddenly change.
Here's the link to Junk Bond Defaults Worst Since the Great Depression. So Why Is the Market Rallying?
Personally, I just watch for a market peak--probably 10,000 but 11,000 at most, and go conservative on mutual funds. Unless you're an expert, many who are experts say now is not a good time to start playing the stock market.
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