I’m practicing hard on my EW skills these days. So, perhaps I might as well share what I have been working on:

1. on the dollar (UUP) count, I think I see an ending diagonal playing out for 5 of C. That play is intact until now. I expected it to be a falling wedge, but more and more it looks like we’re going to have a symmetrical triangle (we’re at the very end of it, if it is so). Hochberg said 5th of C is complete… so that might strengthen the case.

2. perhaps you’re interested in long-term counts of Asian markets? I feel Asian markets generate the most optimism recently. So, I’m looking for what can cause one of the great consternation to come. I worked on south asian markets counts recently. My counts show similar results for India (^BSESN), Singapore (^STI), and Indonesia (^JKSE) — chose them because of their liberal policies for foreign money, hence similar charts.

Results:
Mid 2003 was end of 2nd, late 2007/early 2008 was the end of 3rd, early 2009 was the end of 4th. The 1st, I don’t have the data from 1998 & before for all except ^STI. ^STI’s 1st is from mid 1998 to early 2000. Pre-1998, I think ^STI had a complete 1-2-3-4-5-A-B-C count.

Right now most likely we’re going to have truncated 5th (signifying how the world economy is in trouble) and enter the major A-B-C correction. From Prechter’s EWP book, C-wave is normally the most violent in bear markets. That could well coincide w/ the 3rd of P3 in SPX/DJIA.

“With WLI growth continuing to surge through late summer, a double dip back into recession in the fourth quarter is simply out of the question,” said ECRI Managing Director Lakshman Achuthan, reinstating the group’s recent warning to ignore negative analyst projections.

http://finance.yahoo.com/news/US-doubledip-recession-out-of-rb-2235260180.html?x=0&sec=topStories&pos=6&asset=&ccode=

This guy has been pretty good over the past years in his predictions but who knows.

Love this quote from you: “The longer an extreme persists, the greater the reversal” … exactly!! So we get this 6 – 12 Month Rally …. LOL! Whatch out what happens next …!!!!! I am going to relish seeing all those Analysts squirm in their seats on TV having to explain once again that they got it wrong .. wrong .. wrong ….

Japan seems to be a society that has lost all its dynamism. The bailouts and New Deal-type infrastructure stimulus since 1989 have locked them into a mild but prolonged deflationary depression, as capital is drained from productive to unproductive uses. The corporate landscape should have been shaken up violently after their bubble, but their government has propped up the dinosaurs. This has likely had broad implications for society.

An entire Japanese life seems to be contained within a very rigid bureaucratic structure. With more freedom of capital and less regulation, young people want to get out into the world, make friends and start businesses. Between their educational system (which seems very similar to but even more extreme than the Prussian brainwashing that we get in the west), taxation, regulations and corporate bureaucracies, it is not surprising that many young people see no reason to get out of bed in the morning.

I also have a comment on their seeming obsession with brand name luxury goods. In a society with such a rigid business universe that has a lock on government power, dynasties are perpetuated. The class you are born into becomes even more important, and because so few are born into the very rich families, most will feel inadequate. Gucci and Louis Vitton provide a little bit of illusion and comfort — or maybe that’s just what girls everywhere do with disposable income!

Hmm… yes, I guess it’s inappropriate to mark 4 of P1 that way. Timewise, it will be quite outrageous. Thanks for the advice. I’m trying to learn this stuff seriously. heheh

Today the chart was behaving properly, in that the potential (best) count of 5 to the C peak remaining intact. Had a quite nervous day earlier because the market was dropping quickly in the morning — which, if it had continued furiously, may delay the start of P3 quite substantially.

What do you think of USD (UUP), Mike? Perhaps it’s trying to make the very last bottom in days to come (perhaps trumping the 23.04 to the downside) — making wave 5 of C down an ending diagonal (quite a normalcy for 5th waves)?

Psychologically, I think this will convince those dollar bears that the dollar demise is at hand (breaking lows, technically more convincing).

By the way, Japan election is looming (Aug 30). It is expected that the ruling party (LDP) will be toppled for the first-time after more than 1/2 century. Signs of social mood change going into the next stage?

Regarding Japanese social mood… I suggest you look up “hikikomori” on wikipedia and “herbivore men” on google. I image that would happen to the US social mood. Hikikomori are essential people who live with their parents and lock themselves in their bed rooms. I do not classify it as a mental disorder, but I do think it reflect the mood in Japanese were young adults do not want to go in the job market, and prefer the safety of their parents homes. Of course, the hikikomori are indeed correct that their opportunities in the real world aren’t so attractive and they made the “correct” choice by being hikikomori.

I do think a hikikomori scenario would be optimistic for the US unfortunately.

Regarding long term trends… I wonder what you think about Ray Kurzweil and the Singularity? Maybe that will cause a major reversal in sentiment.

Not to the same degree, but they raised income taxes and tariffs and strangled business with draconian labor laws and price controls. But all of this crap was phased in after the crash was well underway or done.

The govt is basically irrelevant to the crash phase — mood is going to do what it’s going to do, and part of what it will do is bring awful govt policies. Don’t get correlation and causation mixed up. Govt can set us up for a deep depression, like it is doing with taxes, deficit spending and surely more horrendous anti-business legislation of all kinds. But it is important to remember that it only does this because mood is so sour. When mood is good, taxes are lowered and regulations are dropped.

This bad mood may very well culminate in fascism and wars like the last time — expect things to deteriorate for 15-30 years beyond the 1998-2008 peak. Like last time, different nations peaked at different times — Europe peaked in 1913 and then destroyed itself. The US peaked in 1929 and destroyed what had made it great. Nothing stabilized in the west until the late 1940s, but Russia and China descended into even greater depths of mass depravity in the 1950s and 60s. This time, Japan peaked in 1989, other parts of Asia peaked in the late 1990s, the US peaked in 2000, and China, India and other places peaked in 2007-2008. By peaked, I mean mood, not just prices — in the US, the wars, fascism and political discontent since 2001 are strong clues that mood never regained the levels of the late 1990s.

It’s hard to tell how these things will play out. We’d be lucky if all we got was a depression like the 1930s and no more wars, but then the US is already scaling up the war in central Asia. Of course, none of this has to be — we do it to ourselves.

I’m not of the illusion that the general course of history can be changed by individuals — you only get one life, so just be glad you weren’t born in Russia in 1910 or Europe during the Black Death. It’s all relative. In the long run, the trend is up, but you have to accept your place history as you find it. It’s only tough for us right now because we have to adjust from a manic phase to a depression. If we were born into the depression, it would just seem normal.

I don’t see how you get 4 of P1 ending on 11/4/08. That would be a very short 4th relative to the others, and there really wasn’t much relief then — we were still in panic mode with a very high VIX and general terror. The markets hit a new low on 11/21, which you would then have to count as 1 of 5. Wave 2 of 5 would have been way too long and powerful to be just a minute wave (11/21 to early Jan and 740 to 940 — that’s just too much.) Much better to count the Nov – Jan bounce as 4 of P1 — many thought it was the “big post-crash rally” and jumped in too soon. It was false relief. Wave 5 felt like a 5th — resignation and despair, such general gloom, but in slow-mo and without panic (subdued put/call and VIX). I like the EWI/Daneric count — each wave just felt like it should in terms of breadth, speed, news headlines, commentary, etc.

Anyway, IMO strict EW can prevent you from seeing the forest for the trees. There are just so many other indicators to consider.