Wednesday, March 3, 2010

Waiting for the C leg down


The venerable Coppock Guide, and the S&P 500 adjusted for inflation, depict a situation similar to the mid-1970s, when the Vietnam War/Great Society inflation ravaged the economy.  That time we had to wait for the Fed through the reelection-killing appointment by Jimmy Carter of Paul Volcker to get its nerve up to stop the inflation. 

This time we are waiting for the the mountain of unpayable debt that the Fed has enabled to sink the economy.  This will be the Elliott wave C leg down of this bear market.  Note that the market went sideways for all of 1976 in real terms.  In a deflationary environment, the market can go down and go sideways, if that’s any consolation.  There’s always cash.  We are still at least a few years from the Big Bottom that may occur in a deflationary collapse.

When will the bottom come?  Martin Armstrong says 2011.  If 2010 is like 1976, it won’t be until 2017.

Capital preservation is the name of the game for now.

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