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The Case for the Bulls: Two Sides of the Coin


Our own Jeff Cooper and David Waggoner analyze the Elliott Wave.

Editor's Note: The following was posted in real time on our premium Buzz & Banter(click for a free trial). It's being shared here for the benefit of the Minyanville community.

Both Sides of the Coin
Professor Jeff Cooper, 11:10 a.m.

The market often times feels like a 2-headed coin that lands on its edge, with the big-picture buy-and-hold bet being tails.

Nevertheless, it's always important to look at both sides of the coin as to the short-, intermediate-, and long-term picture.

A chart from 1937/1938 from my report this morning (see below) shows the analogue to the current pattern with 1937 resembling 2008. Noteworthy is the big November low in 1937 and 2008 and the big low near March in 1928 and the low that was just carved out in March in 2009.

Click to enlarge

Cycles aren't circles, however. And, while history may rhyme, as Mark Twain said, it doesn't repeat exactly.

If one wanted to paint a bullish picture one could assume the W V bottoming formation in 1937/1938 was repeating. I'm no Elliottician, to be sure, knowing enough to know that a little knowledge is a dangerous thing, but if you wanted to construct an extreme bullish view, couldn't you say that the decline from the peak in 2000 to 2002 was an A wave with the marginal new high in 2007 being a B wave and the decline into 2009 that undercut the 2002 low being a C wave crash. Just asking. I'd love to know what Minyan Waggoner or any other Elliotticians think about that?

Noteworthy is that following the "breakout" after the V in 1938 there was a sharp flushout. More important is the fact that the bear market did not actually end until 1942 with the 1938 low being undercut. The next great bull market did not begin until June, 1949. So the influence of the Great 60 year cycle due June 2009 will be interesting to watch, lest we see an inversion this summer.

Response to Both Sides of The Coin
David Waggoner, 2:10 p.m.

In response to Professor Cooper's Buzz: The A-B-C at the cycle level of degree has been my larger thesis since early 2008 and is the context for almost everything I write about. This is the chart I posted in my debut article. The question is whether or not the C wave is now complete. My buzz this morning suggested that it might not be complete.

Click to enlarge

Other Elliotticians believe that it's complete, but that doesn't matter: It's only wave 1 (of 5) of a larger C wave at the the Millennium cycle level of degree. I don't have access to enough data to corroborate or disprove that thesis, but the implications of it are so extreme that even if you short it all the way down, there won't be an institution left to pay you.
No positions in stocks mentioned.

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