Thursday, September 24, 2009

Today Primary Wave 2 Peak?

  • Today was likely the peak of the primary wave (2) or "b" of the current bear market. After the Fed meeting optimism was at historic extremes (very bearish) and the market sold off rather quickly after a weak breakout attempt. Of course today might not have been the very peak, however a peak is imminent and the start of primary wave (3) or "c" is coming.
S&P 500 Index

  • Wave C is going to be long and hard, this is the wave where our current debt bubble will collapse and the zombie financial system will be cleansed. Wave C is likely to bring dramatic social and political changes to the United States. It is safe to say, if primary (2) peaked today, that we are witnessing the end of an era and the United States will never be the same, as it is today, again.
  • Notice on this chart, showing our debt/GDP ratio, that debt is at historic levels never seen before in the United States. That debt bubble has not popped yet, just as the debt bubble of the 1920s didn't pop until 1930, a year after the stock market peaked. I have mentioned before that this bear market is on a scale higher than the 1929-1930 one. The debt/GDP chart puts this in perspective.
United States Debt/GDP Ratio
  • This bear has only just begun to awaken. Right now we are where the Dow was in 1930 at the peak of "b", debt was still rising, the market had rallied 50% from the lows, and people were speaking of a recovery. What followed was a total debt collapse and a 80% drop in the stock out....wave C is upon us....

Dow Jones during The Great Depression

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