ELLIOTT WAVE THEORY PREDICTS NEXT PRESIDENT WILL NOT LAST A FULL TERM !

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Ironically, this is the one election that you should actually vote for the candidate that you "LIKE THE LEAST". Why? Because after the short, but probably very sharp rally that is due to begin between October 10 and Thanksgiving runs its course into early 2009 (forming wave B, or the intervening rally between two down waves: A and C), the following decline which will be wave C should obliterate the market lows of 2002/2003, causing financial dislocation not seen in the last 100 years. That dislocation will very likely cause the expulsion of the current government, or at least the leaders, mostly at no fault of their own.

This "scape goating" will become rampant, and take no prisoners. With this in mind, if you are an Obama fan, you don't want him to win Tuesday, as he will very likely be laughed, chased, or worse out of office before the 2012 election. Obama fans should prefer to have him lose Tuesday and be the shining light as the "what could have been" when the stuff really hits the fan in the next 2-3 years. If you are a McCain fan, you don't want him to win Tuesday, since he will receive all the follow-on blame of the Bush legacy, culminating in his early dismissal, if he lives that long. If he loses, although he'll be too old to run again in 2012, Sarah Palin could be viewed as "should have been" choice back in 2008.

Either way, the wave pattern is unmistakable, and ominous. Once wave B up exhausts itself in the 11k-12k +/-500 points in early 2009, the largest decline since 1929 is scheduled to visit not only American markets, but this time, the global ones as well. This is the first time in history that diversifying was the wrong strategy. In fact, complete concentration of assets should be highlighted into the coming wave B rally in the next 2-6 months as my 11k-12k target gets approached: 100% cash or T-bills will be the only survival plan that works.

So, again, ironically, for the first time in US history, voting for your favorite candidate will guarantee his demise as a viable political entity in the future, whereas voting for your least favorite all but guarantees several elections to come working in favor of your preferred party.

As they used to say in Chicago in the glory years of political machinery, "vote early and vote often".

For what it's worth,

Ken

CLOSE, BUT NO CIGAR...YET ! BUT WE'RE SO CLOSE !

Again, the Fed's rate lowering had only temporary success in creating the Hope that Wall Street lives on, this time only 90 minutes, prior to the anxious sellers coming in to raise cash. There is so much pain and suffering (losses) that any and all chances to sell anything are taken without question. This is PERFECT for our call for a major, multi month, low coming to fruition in the next few days to weeks.

The GOP is pulling out all the stops to try to bolster the McCain ticket into election day. The Fed's secret PLUNGE PROTECTION TEAM is historically active in the pits, buying with both hands to keep the inevitable final purge from happening prior to Nov. 4th. However, just like the attempts of the past year didn't stop the 6000 point decline in the Dow, neither will these attempts stop the final 2000 +/- point decline into the test of the 6500-7500 area, which is needed to fulfill the pattern, into the wave "A" low that is due in this time frame. If they (GOP) can pull it off, it'll be a beautiful backup strategy. If Obama wins, which polls show is most likely, the collapse will occur just after elections and the blame will be placed on the "uncertainty of the untested Obama" presidency.

Either way, like the old saying, "you can't fool mother nature", we can translate that to the current, "the Fed can't change mother MARKET"! Nothing they've tried in the past year, and they've thrown everything they have at it, has worked. In a few days to weeks, the last wave of the initial decline from 14k to 6500-7500 will manifest and the buying opportunity of the past year will be presented. From there, the "head fake" uber-rally will blast emotion, hope, and stocks higher in an inauguration day extravaganza that will be celebrated as the coming of the market messiah. Get ready, as this bear market bounce is foretold!

The test of our belief, our souls, and our portfolios will come back in the 11k-12k area early in 2009. What will you do? If you don't prepare for that exit opportunity, you will miss the last chance to save your wealth from the most severe destruction of your life. The decline following this bear market rally into 11k-12k will make the slide of the past year look like hiccup.

Bottom Line: by the middle of December, we should not only have seen the final wave of this initial decline from 14k, but should be on our way back up to what will become the Spring Fizzle rally, that rolls over and makes 2009 the biggest bust year since the Great Depression.

I'll be posting entries for the rally in a few days, as we get closer to the 6500-7500 area.

For what it's worth,

Ken

A Week That Will Live in INFAMY

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CHART AU COURANT: This is it folks, the purge/plunge appears to be at hand. Whether it shows up this week, next week, or the week after, the test of 8000 that held earlier this month, will likely break in the coming days, setting up the ultimate test of the lows of 2002/2003. That number is 7200 Dow, 776 S&P, and 1100 Nasdaq. If these levels break, the next stops will be 5700-6300 Dow, 610-735 S&P, and 800 +/-50 Nasdaq. There is a very good chance that from the lows of the coming days, there will be a 50%-100% rally within the coming 6-12 months. It's rare that so great an upside bounce has the potential to manifest within such a short time frame. But, the more dramatic the decline, the more dramatic the bounce. Like a rubber band: the more you pull it back, the harder it snaps forward. The green box at the right of the chart shows the closing price from Friday of 8378. The blue vectors show the pattern I predicted from back in the summer, and have been adhered to very tightly throughout the decline. The upward pointing ones show what the bounce should look like once this low comes in during the next few days.
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MARKETS: Since there is NO WAY to know for certain in advance, there are various strategies for entry that professionals use to act from a position of strength, rather than from a position of weakness that the public prefers.
Here they are:

1. The aggressive stance is to put half your available funds in at a test of the early October lows and the other half at the old lows of the 7200, 776, and 1100 areas, believing that any further declines below these levels will be minor and brief, especially since the decline of the past year has been so deep and fast.

2. The conservative stance will be to put half your available funds in at the test of the 2002/2003 lows, and the other half either at the test of the lower ranges stated above, or on the way back up through the spike highs this month: 9800 Dow, 1045 S&P, and 1900 Nasdaq.

3. The very conservative stance will be to put half your available funds in on the way back up through the spike highs this month: 9800 Dow, 1045 S&P, and 1900 Nasdaq and exit all stock and mutual fund positions early next year on the wave "B" peak near 11,000-12,000 Dow, 1150-1250 S&P, and 2000-2300 Nasdaq.

These options should be used for individual stock entries as well. Once you pick an option, you should stick with your plan to increase the odds of success. The key to success is "planning your trade, and trading your plan". Both are incredibly important to the outcome; without both, the other is too hard to do.

As the title of this comment suggests, this will be a week or two of volatility not seen in history. Iron-like focus and stomachs, in addition to a clear plan set out in advance of the action, are the keys to emotion-free, position of strength, decisions. Any buys under 7000 Dow, and added to under 6000 Dow if that is presented, will be major money makers in the coming months, PROVIDED THE PROPER EXIT OPPORTUNITIES ARE TAKEN. This buying opportunity is the best one of the past year, but not THE buying opportunity of a lifetime, like the one in a couple years will be. Again, that is why the exit I've described above and for the last several weeks will be so important.

For what it's worth,

Ken

ALMOST OVER (for the "A" wave down)

There was panic overnight in Asia and our markets have tested 7980 so far. Will the Dow punch under its lows of earlier in the month, or rally 2000-4000 points from here? That is the big question, but here is the risk/reward on both.

Punch lower: As I've been giving for a year now, the 7000 area +/- 800 in the Dow is the target for this initial wave "A" down. Earlier in the month, it touched 7800, or the high end of the target given when the Dow was 14,000 in October 2007. Today's lows retested it and have bounced, but there is nothing keeping it from getting deeper into the range. So let's say it tests 7000 in the next day or two. That is 10% more risk from here, after already falling 40% from the top. 10% is livable, so buying could be done from 8000-6500 Dow.

Move higher: If wave "A" is done, I've been talking about the wave "B" bounce into 11,000-12,000 into early 2009. If that happens, that would be a 35% - 45% move higher. We'd all like to join in on that, expecially since it'll eventually fail and roll over to make lows under those of the current lows. So, grabbing some while we can, and selling into it is a good plan.

Therefore, if we can risk 10% - 15% from here, we could participate in a 35% - 45% rally in the next 6 months. We call that a 3:1 winning proposition.

Good Luck.

For what it's worth,

Ken

IT AIN'T OVER UNTIL IT'S OVER...and it's not over!

I can feel the weight of the market every day...pundits trying to talk it up, and at times hailing "the bottom happened last week". Depending on your time frame, they may be right, but only if you are extremely short term biased.

There is AT LEAST another dramatic decline coming that breaks the lows of the past two weeks, and perhaps two more lows. This upcoming decline will punctuate the initial wave (call it wave "A DOWN") of the new Bear Market that began at 14,200 in Oct. 2007. Look for a Dow level of 7150-7350 for the target of this finishing move of this initial wave down. Then, a multi month wave "B UP" should last into early 2009. Unfortunately, following that rally, the remainder of 2009 and most of 2010, perhaps into 2011, will be where the big bang shows up. This will be wave "C Down", and will be a doosy! For now, let's focus on the new lows coming in the next week to three weeks near Dow 7000. That is not only the last buying opportunity for the next several years, but the set up for the last exit point in early 2009, before the big one...

See last post for a very clear picture of my halucination.

Get ready, and stay tuned.

For what it's worth,

Ken

CAVEAT EMPTOR...AGAIN !

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CHART AU COURANT: With every pundit and TV station and newspaper asking if the markets have reached their lows, I remind everyone of some numbers I posted last week, which are still valid below in red. Use the chart for reference while reading. The area between the two red lines in the chart is the expected rally point, and exit area of the relief rally. Whether it comes before or after the possible test of the 6000's is of little consequence, because either way, it will be the last chance to avoid the following test of the 5000's. Don't get hooked on the Dow numbers, just look at the picture to see that compared to the 14,200 peak and move to the recent 7,800 (a 6,400 slaughter of your wealth), the move from the 10,000 to 11,000 area down to the 5,000's is completely reasonable to imagine. If you can imagine it, you can do the math on your wealth. If your portfolio is now 40% of what is was a year ago, and it recovers to be only down 20% by early 2009, take this early 2009 wealth number and cut it in half to see a value you will have to live with if this scenario plays out. The upward pointing white line that broke last June, is the 34 year trendline that began when the old bull market was born. The downward pointing white line is the new trendline that began last June. The blue vectors at the lower right are my "path of pain" the our forecasting model is suggesting. Yes, the same forecasting model that has been giving us the pinpoint bullseyes on entry and exit points captured in these postings.
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Last week, on Oct. 9, I said: With the Dow off 40% since its high a year ago, there should soon (days/weeks, not months) be a rally back up toward the underside of the break down level of 10,300-11,000. This rally should begin sometime around the election +/- 10 days. In the meantime, there is likely a sharp, failing rally that begins with the next few hours/days that might reach into the 9800 area +/- 300. Prior to the election however, there is still better than 50/50 odds of 7800-8100 being tested first though, with 7100-7600 a respectable possibility. Any panic under 7000 should be greeted with short term joy and bought strongly. Use the stretch of the rubberband to your advantage.

There is so much emotion in the market these days that the moves that I am forecasting in the next few days to weeks are happening in the following hours to days. Within a day of posting the section above in red, the Dow screamed 1800 points. This led to another two day fall of 1600 points. Finally, another rally into yesterday's close of 750 points. Over 4000 points of travel in a week. That alone used to take years, but just happened in a week. It is prima facie evidence that panic abounds. The good news about panic is that it doesn't last long, so we are nearing the end of the 1st of at least 2 great panics of this Bear Market. The levels above in red should be used to guage your near-term risk/reward into the election. In fact, the election could punctuate the panic and create the relief rally (in between the soon-ending 1st panic, and the upcoming, in 2009, much larger 2nd panic) that could pop Dow prices back up towards 10,300 to 11,000...maybe a bit higher. However, the piper hasn't been fully paid to the downside yet, as leverage, speculation, and greed are still rampant. The proof of this is the fact that the crowd is still looking for the rally to "break even" from year-a-go values, rather than looking for a prudent higher level to exit to protect their wealth. That distinction will be the bane of their existence in the coming years with only a fraction of their former net worths.

For what it's worth,

Ken

George Santayana ROLLS OVER IN HIS GRAVE AS HISTORY REPEATS...AGAIN !

Selecting the theme to these comments is always difficult. This issue was between Santayana's "Those who do not know history are destined to repeat it" or King Solomon's "There is nothing new under the sun". Perhaps I'll use both...let's see.

It's interesting that everyone on the planet, except those that know history, are asking if the Bear Market is over, when recent (the last 80 years) history tells us that the average Bear Market lasts 20 months, not the 12 months that this current one has growled. True, one can argue that if the average is 20, then there should be some shorter and some longer, so maybe this one is of the shorter variety. If that is the argument, then we must take an average of the worst Bear markets, since never in history have we been in the dire straits we currently find ourselves. If that measure is taken, the average would push 30 months. Global history demonstrates that government intervention doesn't work over the long term, regardless if it can create temporary trend changes. South American and Asian governmental currency devaluations, Japanese governmental bailouts of stock and real estate markets, US bailouts of Long Term Capital Management, Bear Stearns, AIG, Fannie, Freddie, and the ongoing attempt to save our raped and pillaged economy, among the few off the top of my head, didn't work over time. To blame our predicament on the government allowing Lehman to fail, or on Presidant Bush, or on any single event or person requires a level of denial and or halucination of the pathologic variety.

The only way to change the effect is to change or eliminate the cause. All the bailouts to date, stimulus packages, money market guarantees, money printing, global credit facilities, etc. (I can't even remember all the "too little, too late" fixes they've tried in the last year) have rallied stock markets for shorter and shorter time frames as the situation worsens, including the two-day wonder of a rally that ended in Tuesday's open hour. The global monied elite know how to sort the chaff from the wheat, and don't need CNBC or FoxNews to tell them what these manipulations mean to their capital. The fact that the monied elite continue to sell every rally on every new desperation tells us that none of the moves so far are worth believing in. By definition, if they were believable, the market would be rising rather than falling.

Investing is just that simple, usually, as evidenced by the well know market motto: "Buy low, sell high". Anyone that tells you they can actually do this, without showing you the audited statements to prove it, is lying. As we all know, it's hard to "buy low", because it's hard to tell how low is low. Even harder, "selling high" is something we are only told about after the time WAS right. Here's the psychological rule that has served me well over the years, which plays a large part in my decision support system. The crowd mentality or direction is the red light (sell) or green light (buy). When everyone is happily bragging about their genius and its results on their portfolio, I like to sell. When the same crowd is moping about their losses, I like to buy. As I always heard in the halls of the psych department, "moping ain't coping". Coping means taking action. Action is a cause that leads to an effect. If you aren't happy with the effect, change the cause. It's that simple.

The bottom line is that we must take responsibility for our actions in all facets of our lives. We cannot be masters of our domains if we rely on other for financial decisions. If we don't understand the game, we shouldn't be playing. If we can't afford the risk of loss, we can't afford the reward of gain. The sword had two edges. For every action, there is an equal and opposite reaction. When we attend the leverage party and stay too long, we can't be surprised at the consequences. They are typically as intensely painful as they were intensely pleasurable. Ying-Yang. Seven years of plenty are followed by seven years of famine.

Buy low, sell high! Are we low here or high? If neither, then find a level that is low to buy, or high to sell. Keep it simple...trust noone, but if you do trust, verify.

For what it's worth,

Ken