Wednesday, August 11, 2010

(EWI) The Economic Crisis No One Saw Coming: A Convenient Untruth

August 9, 2010 By Elliott Wave International

The single most convenient untruth about the 2008 (and counting) financial crisis is that it was unforeseen. For two years policymakers have insisted "There was no way to know ahead of time" that the liquidity boom would come to a screeching halt. Back in November 2008, in fact, the usually tight-lipped Queen of England herself publicly described the turmoil of international markets as "awful" and openly asked a panel of experts from the London School of Economics "Why did nobody notice?" Her Majesty is right: Most financial authorities did NOT notice the crisis before it was too late. Comedy Central's "The Daily Show with Jon Stewart" of all places provided the most poignant evidence: A March 2009 video montage shows executives and economists from the world's leading financial firms repeatedly forecasting continued upside strength in stocks, plus renewed bull market growth in financials -- right as debt markets came unhinged and the US stock market headed into a 50%-plus selloff.

Dubbed the "8-Minute Rap" (after the "18-Minute Gap" of Nixon's Watergate tapes), the Daily Show video feature sent an equally powerful message, as the clip below makes plain.
Yet even as the mainstream authorities failed to detect the economic earthquake moving below their own feet, somebody did "notice" well in advance. That person was EWI's president Bob Prechter. The clip below is from a 2007 Bloomberg interview. Clear as PLAY, the foreseeable nature of the crisis emerges from Bob's October 19, 2007 interview.

As the historic trend change began to unfold, Bob issued this timely insight:
"We've seen the first crack in the credit structure with a huge drop in commercial paper... These are the harbingers of a change toward the downside for the stock market, commodities including oil, and the debt market itself."

Don't believe the convenient untruths. Get objective market analysis today. Download this free report that contains valuable market forecasts directly from the desk of Bob Prechter.
This article, The Economic Crisis No One Saw Coming: A Convenient Untruth, was syndicated by Elliott Wave International. EWI is the world's largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

S&P500 Short-Term: Trendline break

Last post on the SPX500 called for at least a consolidation from the wedge formation. We got one now with the trendline break, and sharp one too! Although oversold in the very short-term, with the possibility of a weak bounce, we can expect further downside into next week.

Any bounce up will be capped by 1100-1105spx, before turning down. In the unlikely event of a further push up, 1120-1130 will definitely contain the price in the short-term.


Price is right now at 1090 support. A convincing break below will see next support around 1060 & 1040. SPX behaviour at 1010 is key for medium-term direction.

Elliott Wave Labelling

Looks like wave B(or 2) correction has ended, and wave C(or 3) down has started. Just before the last trading session, Robert Prechter of Elliott Wave International released an Interim Elliott Wave Theorist, warning of imminent downside action, along with his wave count.

Check out the "Education & Resources" section if you need more information on Elliott Wave Theory. All the best!