This was taken out of Gary North's most recent e-newsletter. It's interesting although I don't know anything about Elliot Wave Theory. I thought some others may have comments about this and the recent manipulation of the market, not excluding Gold and Silver in the C.B.O.T.
Also, I believe the DOW is in the 11560 range currently.
-------------------------------------------- The Dow Jones Industrial Average touched 11,568.73 on December 30. Then it fell back. Just one decade earlier, to the week (maybe to the day), the Japanese stock market peaked at just under 40,000. It has never come close to 30,000, except on its downward slide.
This 11,568.72 number is curious. Let me explain.
I am not a follower of Elliott Wave theory. It's too complex a system for my abilities. But last May, I received a detailed essay from a Jean Comeau of Quebec, a commodities advisor -- registered, he says, in Chicago. He wanted me to post the essay on my site. It was not Y2K- related, I told him, so I didn't.
Yesterday, he sent it to me again. His essay said that the Dow's top would be 11,550-11,600. He wrote,
"WAVE 5: WHEN DOW JONES HITS 11560 TO 11600
POINTS. END OF MAJOR BULL MARKET, PERIOD.
He then got even more specific:
Wave 5 or 1999 = Fibonacci number 34 times 339
equals 11526 plus 43 (crash low) equals 11569.
I do not pretend to understand this system. Robert Prechter is an Elliott wave theory proponent. I read his book, AT THE CREST OF THE TIDAL WAVE (1995), and I reviewed it in the November, 1995 issue of REMNANT REVIEW. The market has gone far above what he predicted. In fact, he predicted a fall to Dow 1,000, beginning in late 1995 or 1996. But Mr. Comeau's number is highly specific. I do not care that it is 0.28 above 11,568.72. It's close enough.
Mr. Comeau is predicting a fall of over 5,000 points in the Dow in the next two months. I think I will ask him to do more writing for me as soon as it falls by 2,000.
I am no Elliott Wave aficionado. It's too technical for my taste -- strictly numbers-based. I see no reason to believe that Fibonacci numbers control stock market average prices, especially one market, the Dow Jones Industrial Average. I see no reason to believe that this index, and not some other, is THE number to watch in preparation for a worldwide depression. I think the Federal Reserve can still do a lot to forestall a crash, such as buy S&P 500 futures. The money pouring into the stock market from pension funds today is an ocean. Short of an unexpected crisis -- such as a lock-up of a major bank's computer system or default by some heavily leveraged hedge fund-- I cannot imagine a fall this rapid, now that the Y2K rollover is behind us.
Still, I will pay close attention to the Dow. Let's see if it penetrates 11,569. If it does, will it then penetrate 11,600? If it doesn't, I may develop a new interest in Elliott Wave theory -- at least until the end of February.
I also listen carefully to two other men who own sophisticated proprietary stock trading systems that call major reversals. Both of them are out of the market. One of them has shorted it.
I will keep you informed of their opinions if the overall stock market starts down. If the NASDAQ is the leader, it looks bad for the general stock market. But maybe investors are merely coming to their senses about BUBBLE.COM. Of course, if they come to their senses about price/dividend ratios, it's also bad news for the market.
WHY NO POST-Y2K MARKET BOOM?
Most people did not act on Y2K. They told pollsters that they would, but they didn't. I think this is why the rollover's good news has not created a boom in the U.S. stock market. The Dow started down on Monday and continued lower on Tuesday, then reversed. The NASDAQ was up on Monday but hit hard on Tuesday. It was down again on Thursday. In 3 days, it fell almost 10% from its high.
As Y2K optimism grew in the final weeks of 1999, the U.S. stock markets reflected this. But the pessimism had never been deep. So, we are back to fundamentals. The fundamentals are these: The FED pumped up the money supply in late 1999, and now it is unlikely to stoke the fires of inflation. The money spigot will be tightened.
This is a presidential election year. Traditionally, this means more fiat money to fuel an economic boom to get the incumbent's party re-elected. But Mr. Clinton has just reappointed Mr. Greenspan to another term as chairman. Mr. Greenspan's career is going to be longer than Mr. Clinton's. So, I do not expect the FED to play the political game this year, not after the recent Y2K-related expansion of money. Mr. Greenspan is no fan of "irrational exuberance" in the stock market. This market boom -- the NASDAQ especially -- has the marks of a financial bubble. "Infomagic" has called it BUBBLE.COM.
