In this chart I put together an idea of how an Elliott Wave
Grand Super Cycle would look for the United States. I also included data from the Federal Reserve
, U.S. total non-farm payrolls, to mark what would be the beginning of the end for U.S. economic expansion. It is obvious the United States saw it's last growth expansion ending in what we call the "tech bubble" or ".com bubble". The tech bubble extended the U.S. economic world dominance in the 1990's. The computer and internet growth in the 1990's caused a U.S. stock market bubble. We can see the U.S. economic expansion in the chart above, including Elliott Wave
counts marking an extended ending of a 5th wave Super Cycle (Wave 3) in 2000-01. The post bubble brought on the first sign of our slowing economic expansion. We can see this in both the Federal Reserve
U.S. total non-farm Payrolls and with the DJIA
chart marking an A-B-C corrective wave. The Federal Reserve
acted quickly to address the slowing economic expansions by quickly lowering it's federal funds rate, which caused the next bubble for the U.S, the U.S. housing bubble (peaking in 2007). When the Federal Reserve
was asked 'what prompted them to engage in such rapid lowering of interest rates', the answer was September 11th, which tells me the Federal Reserve
acted on emotion rather than planning. The U.S. Federal Reserve
emotional reaction caused not only a housing bubble in the U.S., but also around the world, which caused commodity to spike to all-time highs. After oil
reached $147 a barrel in June-July of 2008 and fell to less than $100 in a short period of time, the panic selling started taking the U.S. equities market with it (seen in Wave 4).
I will later go in deeper chart analysis on our current wave 5.
The Elliott Wave
Principle posits that collective investor psychology, or crowd psychology, moves between optimism and pessimism in natural sequences. These mood swings create patterns evidenced in the price movements of markets at every degree of trend or time scale.
In Elliott's model, market prices alternate between an impulsive, or motive phase, and a corrective phase on all time scales of trend, as the illustration shows. Impulses are always subdivided into a set of 5 lower-degree waves, alternating again between motive and corrective character, so that waves 1, 3, and 5 are impulses, and waves 2 and 4 are smaller retraces of waves 1 and 3. Corrective waves subdivide into 3 smaller-degree waves starting with a five-wave counter-trend impulse, a retrace, and another impulse. In a bear
market the dominant trend is downward, so the pattern is reversed—five waves down and three up. Motive waves always move with the trend, while corrective waves move against it.
The classification of a wave at any particular degree can vary, though practitioners generally agree on the standard order of degrees (approximate durations given):
Grand Supercycle: multi-century
Supercycle: multi-decade (about 40–70 years or longer under and Elliot
Cycle: one year to several years (or even several decades under an Elliott
Primary: a few months to a couple of years
Intermediate: weeks to months