Thursday, October 16, 2014

Elliott Wave Stock Market Update - October 16

We had a much less volatile market today and there is even an IHS targeting 1924. However, we could still see one last leg down to test the 1814 area, so the market is not out of the woods yet. If the market breaks out tomorrow in a bullish W3 then that could signal a bottom for the entire correction, but it's best to be cautious given the manic depressive mood of the markets. I am on the sidelines but might consider trading that IHS if it materializes.

Also, per my post yesterday:

So the second there is even a suspicion of anything that might affect profits, you will have smart people in charge of economic policy make sure those profits keep coming in. A good economy for a government is not a luxury, it's a matter of self preservation. 

There are now "surprise" rumors about a continued QE program given the potential deflationary pressures on the US economy. So all eyes will be on Yellen on Friday to see if there are any signals that confirms the rumor. And again, contrary to some of the headlines of a "Hand out from the Feds" to the markets, this is an issue of making sure the economy keeps growing so those profits keep coming in so they can be taxed! What I posted about yesterday was not meant to be critical of the government, it was meant to point out why the way government works favors people who invest in business assets. To be very specific about what I am talking about, of $1 in profits generated by a public corporation, 35 cents goes to the Fed government in taxes, which leaves 65 cents. Out of that 65 cents, it gets taxed again when it gets distributed to shareholders at 20% more or less plus in my case (California resident) another 13% in state taxes. So, from $1 of profits generated, close to 60% goes to government! So technically speaking, the government should be interested in the company doing well more than anyone else. In the working world, I can only think of one profession that takes more than 50% for the privilege of doing business. And this of course doesn't include all the other taxes a company generates in income taxes from its employees and all the other etc taxes. So you see, while the government might screw up here and there, it is always watching out for itself as it is a money hungry beast by design. All those bailouts in 2009 were not meant to "Help Wall Street" as the public likes to complain about, those bailouts were meant to keep Cash Cows alive so they can keep producing. And the byproduct is the employment for workers and a general sense that the economy is doing ok. So next time we get another financial crisis and you see the government singling out companies to bail out, the best thing one can do is follow the government money as that might just make you very rich.

We will be making trade recommendations this weekend on the EWA site. For further analysis on the NASDAQ, DJI, RUT, Gold, Silver and Oil please visit

Short Term Trend = Bearish
Medium Term Trend = Bearish
Long Term Trend = Bullish trend being challenged

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

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