God, Man and Stock Market Wave Theories
Presented here are several wave investment theories, which reflect not just general stock market trends, but man’s reactions to social and cultural events, which impact his psyche and decision making. Since man is flesh, and his emotions are volatile, guess what happens next? How does this compare to what it would look like if God made the decisions?
The purpose here is 3 fold:
1. Help people understand the cycles of man’s investment thinking and the results of his thinking (Do not get bound up in this!)
2. Show where we are now, and how long it might last (more important!)
3. Compare this to God’s ways
This post is longer than usual. You do not need to focus on the financial part that closely, since what you really want to know is (1) where we are now, and (2) what to expect next. The extra details are for those who like details.-
The Basic Elliott Wave Formation
Ralph Nelson Elliott discovered that stock market charts move in a series of recognizable patterns back in the 1950’s, publishing his findings in his book, The Wave Principle. Elliott believed that the patterns reflected mass market psychology, (made up of hundreds of thousands of collective investors’ opinions) and was a barometer of man’s valuation of productive capability.
He described 13 patterns, or waves, that recur and are repetitive, whereby the structures link together to form larger versions of the same patterns.
As the patterns repeat, the waves label what situation a market is in.
The basic Elliott Wave formation is made up of 5 sub-waves that propel the market in a trending direction – called a Motive Wave.
Every one of the 5 sub-waves serves one of two functions: action or reaction.
Actionary Wave: Promotes the cause of the wave of a larger degree.
Reactionary Wave: Interrupts the progress of the wave of one larger degree.
The 5-pulse, motive wave is labeled with numbers (1, 2, 3, 4 and 5), with the actionary waves being labeled with odd numbers, 1, 3 and 5; and the reactionary waves being labeled with even numbers 2 and 4.
Figure1 : Basic 5-wave structure that propels the market in the direction of the trend. Sub-waves 1, 3 and 5 are actionary waves. Sub-waves 2 and 4 are reactionary waves.
These 5 sub-waves complete ONE wave of a larger degree.
This 5-wave structure completes the movement that advances the trend. We can label the whole Motive Wave pattern above as Wave (1) of a larger degree.
It is then followed by a Corrective Wave, which most often takes the form of 3 sub-waves. It is labeled with letters a, b and c. This 3-wave pattern, we can label as Wave (2) of a larger degree.
Figure 2: After a 5-wave move in the direction of the main trend – Wave (1) of a larger degree – the wave is corrected by what is usually a 3 wave pattern, which is labeled with letters: a, b, and c. This 3-wave correction forms a complete formation that we can label Wave (2) of a larger degree. Therefore, the diagram above now shows 8 sub-waves that form Wave (1) and Wave (2) of a larger degree.
This complete 8 sub-wave pattern is what typically makes up the Elliott Wave structure. It is important to realize that the pattern can be ascending (a bull market) or descending (a bear market). If the main trend is up – then we will see 5 waves moving up, followed by 3 waves moving down. If the main trend is down, we will see 5 waves moving down, followed by 3 waves moving up – correcting the main trend.
Gann and Elliott Wave Count Similarities
Elliott used numbers and letters to count and label the trends and reactions of a market (1, 2, 3, 4, 5, A, B, C, etc.
Elliott and Gann, noticed the exact same patterns on price charts:
Where Elliott labeled the waves of a trending market as having five waves, Gann described the same, noticeable patterns by calling each section a Campaign.
Gann Bull Market Campaign
Figure 3: Gann’s Bull Market Campaign.
1st Section: A new bull market begins with an advance from a final bottom followed by a reaction. (In Elliot terms, these are Waves 1 and 2.)
2nd Section: An advance to higher levels, followed by a reaction. (In Elliott terms, Waves 3 and 4.)
3rd Section: An advance to a new high. In many cases, Gann said that this would end the campaign. (In Elliott terms, Wave 5.)
An alternative, “bullish” shape recognized by Gann is the same as an Elliott correction against a bear trend: a Zigzag correction where Wave A is counted as one wave and Wave C is counted as a five.
(In large corrective Zigzags, the first wave – Wave A – is often fast moving and the sub-waves are lost or hard to count. But Wave Cs regularly show a visible 5-count.) Gann described the “bullish” shape making a Fourth Section:
4th Section: Gann said that if the market makes a fourth run to new highs, it is an important section to watch for a change in trend at the fourth high. (In Elliott terms, this could be Wave A, followed by a 5-wave, Wave C.) This ends a typical Elliott Zigzag, which would lead to a strong decline to new lows. (Alternatively, Gann could have been talking about an extended wave, such as a third. E.g. in the diagram above, Waves A and B could be Waves 1 and 2. The 1,2,3,4,5 count could be an extended third wave. After this, Wave 4 would fall and Wave 5 may not get much higher than the end of Wave 3. This can happen quite often.)
Gann also said that campaigns of short duration would often run out in 2 sections, especially if the move was from a sharp bottom. In Elliott terms, this would be a typical 3-wave Zigzag correction of a SMALL DEGREE, where the sub-waves would be lost or hard to count (without zooming in on a smaller time frame price chart).
Kondratieff wave – Current Economic Cycles
These are approximately 54 year cycles. With four distinct phases in the K-wave a number of analysts have compared them to the seasons. Spring (inflationary growth, expansion), summer (stagflation, recession), autumn (deflationary growth, plateau) and winter (depression).
The chart below summarizes the generally accepted phases since 1784 in the United States. We have noted the significant wars that accompanied the recession (price peak) and depression (trough) phase. We have also noted the tag name for the Autumn periods that were characterized by massive debt growth and speculative bubbles.
Many have argued as to whether the Kondratieff wave is valid for the post WW2 economy given the fiscal and monetary tools of a modern economy. Others have argued that trough of the K-wave has already passed. Their count is from the stock market trough of the Great Depression in 1932. Add the average 54-year K-wave period and we are in the spring expansion of the new K-wave.
But what the Kondratieff wave is about is a study of long cycles of debt buildup and repudiation. It is not exclusively about price inflation and deflation periods.
Deflation is caused in part by the debt collapse. It is also a generational thing as the next cycle of debt buildup and collapse is renewed every 2-3 generations as the previous generation that went through comparable periods dies off.
The old adage that “this time it is different” means the circumstances are different, yes, but they fail to recognize that the previous period was the same in terms of excesses and therefore the end result is the same
We have entered the downside of the current K-wave. This wave could last anywhere from nine to twenty years as we saw in earlier winter K-waves. The K-wave is the rise and fall of a generation and covers both the social and economic life of the period. The ancient Mayans knew of the inevitability of the cycle and took steps to mitigate its effects (although ironically in the end it did not save them).
The Winter of the K-wave is a dangerous period. But it will be eased for those holding gold or gold stocks. The winter of the K-wave is upon us. See Cliff Droke’s theory on a 2008 to 2014 “hard winter”.
So where are we now?
Winter wave is about 18-20 years long.
Have a headache yet? What would God’s pattern be, if we were obedient to him?
Answer: the trend would look like this:
God offers consistency, not a crazy, scary pattern.
The amazing comment is above, that deflation is a collapse, due to the generational buildup of debt passed from one generation to another. That is very biblical.
Deuteronomy 28 describes the blessings for obedience to God’s Word, and the curses for disobedience.
Deu 28:8 The LORD shall command the blessing upon you in thy storehouses, and in all that you set your hand unto; and he shall bless you in the land which the LORD thy God gives you.
Deu 28:12 The LORD shall open unto thee his good treasure, the heaven to give the rain unto your land in his season, and to bless all the work of your hand: and you shall lend unto many nations, and thou shall not borrow.
So far, those who obey God will have plenty, and not have to borrow money! No credit cards necessary. No Debt!
Deu 28:20 The LORD shall send upon thee cursing, vexation, and rebuke, in all that you set your hand unto for to do, until you be destroyed, and until you perish quickly; because of the wickedness of your doings, whereby you have forsaken me.
Man is inherently greedy and selfish. If left to himself long enough, he will ruin what he does.
This particular generation is really arrogant, and immoral. It is a bunch of rebellious, wacked out hippies, trying to run the world, on what brains they have left after a lifetime of self indulgence, pot and LSD. We have passed laws not only making sin legal, but we have given it a place of honor.
Because we want to get rich quick, have things easy, we have used selfish schemes to get there, instead of honest work. So now we suffer, and our children suffer. We have cursed ourselves.
It sounds unfair for God to punish children for the sins of their fathers. However, this is looking at it from an earthly perspective. God knows that the effects of sin are passed down from one generation to the next. When a father has a sinful lifestyle, his children are likely to have the same sinful lifestyle as well.
That is why it is not unjust for God to punish sin to the third or fourth generation – because they are committing the same sins their ancestors did.
But they are being punished for their own sins, not the sins of their ancestors. The Bible specifically tells us that God does not hold children accountable for the sins of their parents (Deuteronomy 24:16).
So…. We are in a downturn, which might last another 10 years. We are in a “winter” 20 year cycle. The economy is terrible, and people are suffering.
What do we do?
1. Do not put faith in the stock market. It is run by men who lie and cheat, not God.
2. If you have investments, go very conservative, with most in cash. Change the portfolio model you have. Short funds at the best.
3. Expect things to get worse. If you see positive changes, expect them to be very temporary. Do not overreact, and reinvest the cash, because in a few months, you will lose it.
4. try not to incur more debt. Pay off what you have if you can.
5. Downsize. If you cannot afford your house, get a smaller one. Same with cars, and other expensive items. If what you have is paid for, you will need less money to live on.
6. Use wisdom in spending. (Think to yourself: Do you REALLY need THAT?) Buy good, used items instead of buying new things, if possible.
1. stop being greedy, and believing every prosperity message that comes along. Be smart, not stupid.
2. repent of your sins. Do not do them anymore.!!!! Obey God!
3. give to the poor. God helps those who help the poor.
4. help, and pray for the peace of Israel. God blesses those who bless Israel.
5. be satisfied with a little, if that covers your basic needs.
6. give thanks to God for your daily bread. Thank God every day, even if you are poor. Ask God to help you see things He has given you, and ask Him to give you a grateful heart. If you are not living in a cardboard box yet, you have something to be grateful for.
7. Do not despair. Do not jump out of a window if you lose money. God will provide for you in small ways. Just ask God for provision, and keep your eyes open for his response.
8. share your blessings with wisdom and compassion. Do not give to those who would exploit you. Give to those with legitimate needs. Somehow, it will come back to you.
9. Pray and trust God for protection. Spend time with God. It does not have to be anything fancy. Ask for forgiveness of sins, and accept the salvation of Jesus, if you haven’t already. Plead the blood of Jesus over your home, finances, children, health, property, and health.
Only God can fix the stock market Click here for more
The Bible and the Stock Market Click here for more
Solar Cycle 24 and the economy Click here for more
End time transfer of wealth Click here for more
Sunspot activity, economic stress and terrorism Click here for more