 One revelation that comes with an understanding of Wave Principle is the knowledge that many objects of obsessive financial observation can actually be completely ignored. This understanding is invaluable as keeps one from wasting an enormous amount of time on irrelevant data and market bogeys like the Federal Reserve Board. That’s not to say “events” like today’s Federal Reserve Board interest rate announcement can’t crimp the trend in stock prices (witness today’s 150 point pop in the Dow Industrials); but the wave pattern will always ultimately wash away any short-run effects that fly in the face of the dominant trend.
Unless, you are trying to get a fix on the prevailing market sentiment or confirm what’s already happened, the IMF is another entity that can be ignored. At the current point in time, for instance, a contrarian cannot help but notice that the IMF is predicting “the highest average growth rate in four decades” even as the global economic leader, the U.S., decelerates. As recent issues of the The Elliott Wave Financial Forecast and The Elliott Wave Theorist have noted, the IMF assurances very likely signal that the opposite economic outcome, a global contraction, is in the cards. In any case, the market and not the IMF or the Fed will tell us when the next economic debacle is underway. Here’s how the October issue of the Theorist set the stage for the unfolding drama:
We all know about the insane level of American indebtedness at all levels of society. We know that the national savings rate is below zero. We know that people have borrowed record amounts from home equity for spending and that the game is up. We know that declining real estate values are forcing a rash of foreclosures, and we all know that the reckless lending of the past two decades will stress the banking system. But one cannot use fundamentals to make useful forecasts. The credit bubble represents only potential for a bust—huge potential but just potential nevertheless. None of these conditions will matter to the economy until the stock market turns down in a big way. When it does, you will know that the social mood that has kept the American financial casino going will then be working toward its destruction. Given the extremity and duration of financial optimism, I expect that destruction to be swift. We are already prepared in advance, per the instructions in Conquer the Crash, to avoid the consequences. Trying to do it in the maelstrom might prove impossible.
The DJIA is still within 400 points of its February peak. As the index puts some distance between itself and its all-time high, the IMF will confirm what the market has already told us with dire forecasts and bailout plans. |
