TSX encore (see previous blog)

TSX aug 8, 2015 big

I found this, semi-log, chart on Trading Economics. It is the longest I could find starting in 1950. I have changed or added a little bit to the count shown yesterday on an arithmetic chart. Both can work and it is more credible when they do.

In my comments yesterday, I omitted to mention that invariable there should be an extended wave somewhere in any 5 wave sequence. In this case the extended wave is wave 3, and more specifically wave 5 of 3. This is not unusual when you take into consideration that the TSX is dominated by gold, lumber, materials etc.etc. stocks.

The highly unlikely possibility of us being in a diagonal – for one thing it clashes with the periodicity that is clearly evident – is enlarged as there are actually two different diagonals possible. The one in blue as mentioned yesterday, but also the one in beige that starts years earlier and would allow for a deeper dip now and then still make a new high. Paradoxically the larger diagonal, because it is less steep, would not reach the highs of the smaller diagonal. We give both of these possibilities very little weight and even if one of them were to occur the new high would still be on the channel’s upper trend-line. Also it should stay shorter than wave 3, see the green line.

I entered the retail advisory business in the early ’90-ties. The time from 1988 to 1993 was, in my opinion, probably the most boring in the history of this , but others also, stock index. For the entire time the index rotated around the 3000 level. With the benefit of hindsight, I have accordingly labelled that period a wave 4 of 3 triangle and adjusted the rest.

EW is pretty well useless in terms of timing. But quite apart from that I show a certain periodicity that seems to occur repeatedly, which is the whole point. Roughly the pink arrows connect the highs in a cycle. They occur more or less every 8 years. Interestingly the “Benner” cycle operates on a frequency of the same length. If this rough pattern holds into the near future then stocks should start dropping seriously soon as otherwise there will be no time to return to a “high” before the 8 years are over.

Another point to consider is that this chart with it’s time period, probable best represents the “baby boom” demographic  phenomenon. Baby boomers were first born in 1946 and, assuming 65 is still THE age, retired in 2011. Instead of investing they are now divesting and quite a bit more than first anticipated given the terrible returns on bonds etc. The wealth transfer that is going to happen upon their demise will, for the most part, lead to more divestures as kids use the money to pay off mortgages etc.  Even if you are not in the demographics-explain-everything camp it is good to remember that there are many who are.

By the way, the on this chart is 217.50, the high 15657.53 which clearly underscores the well known fact that being born rich is the best way to prepare for retirement. Choosing your parents is the single most important investment decision in your life. Making sure your siblings do not steal it all, the second. Efficient Market Theory, diversification and all the other stuff is mostly pure rubbish designed to solidify the advisor’s position.

There is an error in the last two blogs. Where we refer to the 4th wave of previous degree the level is not around 6000. That is the 4th wave of this wave up. This wave is supposed to be the 5th of the 3d. with 4 and 5 of a super cycle degree still to come. We do not have the means to properly verify that. However, if that is correct than the level of the 4th of previous degree is closer to the 217 level. Probable nobody would take that seriously, nevertheless it is what it is.