Greed versus Fear
Elliot Wave theory postulates that Social Mood drives markets - the cycle of Greed and Fear. Hence, the wave labels indicate the cycle of emotions. Normally I wouldn't label a five wave impulse in real-time, because the waves are not symmetrical. Nevertheless, the attenuating wave form presenting in the Value Line is too clear to pass up...
Human herding at its finest
Below, consistent with EW theory, the clear accelerating rising wedge indicates that each dip has been shorter than the last - ever less patient greed. However, this 5 wave impulse is FAR more lethal than most, because it has been artificially "enhanced" by Central banks and HFT algorithms. It's a manic market on steroids, sprinkling its pixie dust wealth effect across society - making everyone feel wealthier than they really are - tempting them to buy cars and houses and iWatches. It's history's largest ever Jedi Mind Trick. Even those who own no stocks have been somehow caught up in the manic contagion. Human herding at its finest.
A Manic Blow-off
The fifth wave is the overthrow - the rally since October - the last lunge of frenetic buying. If the theory holds, it will be taken back very quickly. And so will the rest of the six year artificially fabricated rising wedge, which is solely a function of monetary policy stranding investors from economic reality.
Value Line Arithmetic Average (red line)
Black line is the Rydex Bullish:Bearish asset allocation which peaked late February:
