CRB Index ... bull market over?

G

gharghur2

How about a real curve ball from none other than Elliott himself. Wonder if he could throw one :)

The CRB index has been in a bull market since October 2001.
Yes, way before the FED even thought of inflation.
It has progressed in a very nice wave structure:
primary one/two 10/01 - 03/03
primary three/four 03/03 - 11/05
The first intermediate term advance from the November lows formed a diagonal triangle !!! And, the CRB tanked like it was a diagonal.

Since diagonals can occur in first waves there is no reason to ring the alarm just yet. Not until there is a close below 311: the low of primary wave IV. This would confirm the end of the 5 year bull market in the commodity complex. There is also a year long uptrend channel on the weekly charts, and the recent low bounced off of it.

Something to keep an eye on, as a new bear market in commodities would surely dampen the bull markets in cRUDE and Gold: which are also in primary wave five.

And we thought the market was already confused :confused:

My buddy William and I analyzed this index

Chart below:
 

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http://stockcharts.com/

China has had avg. 9.5% GDP growth for 26 yrs. Last yr. auto sales were 5.95 million nosing out Japan @ 5.8 million to rank #2 behind the US. None of this is going away. They are moving through the phases all developing economies do, going from net exporters of commods, to value added manufacturing ( getting only a small piece of the pie) for other's name brands, to developing name brand products that keep most of the profits at home. An example is IBM's pc biz purchased and rebranded Lenovo, they just started selling world wide under the Lenovo name this week. Chinese auto co's are currently setting up auto dealerships in the US. The same people will laugh that laughed at the Japanese.

As China developes capital inflow distribution to it's working (middle) class it's focus will shift from the neccessity of exporting to selling it's own burgeoning production capability into it's domestic population, keeping more of the profit at home. They will become the worlds consumption engine, replacing the US who has been that since WW2.

Two points to consider: We are standing in one of those moments in history that presents difficulties in measuring the future with the yardstick of the past. The expansion after WW2 was primarily a mechanical based effort. Industrial machines were created by men to create products. All phases of the process were very labor intensive. Manufacturing speeds were limited to the labor processes, they never outstripped the availability of raw materials, it was possible to get more raw materials than you could process into goods. Enter the silicone/ digital revolution. Factories can be purchased turnkey to mfg anything, the capital base can be converted to a fully functioning production base within months. Because of this there is too much production capacity in the world. This creates a new reality, they won't be able to get enough raw materials out of the ground to fill the needs of production capacity. Enormous production capacity will drive finished goods prices down untill they are mitigated by scarce raw materials cost.

Point2: Japan's flaw was that they could mfg more than they cuold consume domestically. This meant they had to sell into the worlds mkts which engendered not only splitting the pie but also currencey risk. China will sell into it's own mkts and keep all the profit from every stage of production. The last time this happened in history was the US for 20 yrs after WW2. Thats how we became rich and the dollar the store of value. China's well aware of all this and has determined Shanghai will be the worlds money center by 2020 instead of London, New York. This is way too much before my first cup of coffee and I'm fading here.

fwiw, I would rather go to a race track blindfolded and pick horses to bet on than bet on eliot wave,lol.

post won't take complete link. Go to above link, click candleglance in left column, enter $CRB, click on chart and scroll down to weekly view. If you're going to fight the trend at least wait till it breaks that line.
 
Quote from gharghur2:

Since diagonals can occur in first waves there is no reason to ring the alarm just yet. Not until there is a close below 311: the low of primary wave IV. This would confirm the end of the 5 year bull market in the commodity complex. There is also a year long uptrend channel on the weekly charts, and the recent low bounced off of it.
More...

I agree with you about China. Whether or not they are able to execute that potential is the next question.

Don't agree with your opinion of EW. But opinions make horse races, and markets.

Very thorough post thanks
 
the money that Greenspan injected to abate the 2000 tech stock crash and 9-11 has made it's way into all things of stuff....

the printing presses are still on autopilot..........

so if your see Bernanke with a chainsaw in the forest, don't stop him, we're counting on him to sustain the US Welfare state at home and Warfare state in the middle east.....
 

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Just an update:
The CRB slammed right into that trendline again today. Lets see if it holds this time around. Remember, the first test was 5 waves down from the highs of this 4+ year bull market, after forming a potentially terminal diagonal triangle primary fifth wave. A close below 311, confirms in my opinion, the beginning of a new bear market.

tony
 

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My novice opinion is that we might be in wave 4 and big wave 5 (which is typically the biggest in commodities) is yet to come. Still, I think this wave 4 may be corrective enough to get people thinking that the bull market in commodities is over.
 
True, thinking that it might be over is all it takes to help the stock indices and bonds.
I counted a diagonal triangle fifth wave as primary V. Wasn't expecting it to end so soon, but there it is. It can still hold and move higher, but it will need gold and crude to do that right now. Not much room on the downside left before it all comes apart.
 
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