 Does the recent Australian election result contradict a key Elliot Wave theory? Australians recently changed governments. The dumped administration was one of the longest serving governments in Australian history. It had presided over one of the biggest economic booms, if not the biggest in Australian history, driven largely by China's insatiable appetite for Australia's mineral wealth. All year the ASX has climbed to record highs, including the month immediately before the election. Yet since the beginning of the year newspaper polls had consistently shown that the incumbent government would be dumped come November. All year I had been looking for the ASX index to confirm what the polls had been consistently telling us since January. But as I said, it continued to make record highs, apart from a dip in August which it soon recovered from. So, Australia's social mood has clearly changed, so why hasn't the stock market reflected this?
--Mark
Actually Rudd’s election conforms quite nicely with EWI’s observation that incumbents tend to get ousted in bear markets. Recall that we have also noted that this effect can be quite immediate at long-term peaks. In the current case, which is the biggest stock market peak in generations, for instance, the house cleaning actually appears to have started well ahead of time. We noted here in May of last year, that three out of four of Europe’s major political leaders were replaced through the final phase of the current advance. Since then, the fourth transfer of power came in France when Nicholas Sarkozy became France’s new leader earlier this year.
Now it’s Austrailia where John Howard’s loss to Kevin Rudd marks the first time a Prime Minister of Australia has been unseated from his own seat since October 1929. In that year, Liberal Party standard bearer Stanley Bruce (Prime Minister from 1923 to October 1929) lost the election and his electoral seat. “Within a week of the new Prime Minister, James Scullin (Labor) taking over from Stanley Bruce (Liberal), the 1929 stock market crash occurred. Same events, same parties, same supposed issues today and 1929,” says an observant Australian subscriber. “Howard held his district for 33 years, and his four straight national election victories made him one of Australia’s most successful politicians. He lost despite 17 straight years of economic growth. Few in Rudd’s team have any federal government experience. They include a former rock star—one-time Midnight Oil singer Peter Garrett—and a number of former union officials. Rudd’s election as Labor leader 11 months ago marked the start of Howard’s decline in opinion polls.” The bear market political craving is for outsiders.
In the U.S., the president looks more and more like Lyndon Johnson every day. Johnson presided over a similar b-wave rally in social mood, which topped in December 1968. So the parallel to a past peak of similar significance runs deep. |
