For example, as of this writing, on an Elliott Wave basis the current advance is a 5th wave of a large multi year Cycle degree. Break it down as follows –
- Cycle Wave 1 is from approximately 1900 to 1929
- Cycle Wave 2 is from 1929 to 1932
- Cycle Wave 3 is from 1932 to 1999
- Cycle Wave 4 is from 2000 to 2009
- Cycle Wave 5 began in 2009 and I anticipate it unfolding over a period of 8 to 15 years.
The period of expansion from 1932 to 1999 was corrected over 10 years forming an “irregular” A-B-C pattern where Wave B extended beyond the staring point of Wave A (creating a new high in the DJIA) and climaxing with the global economic collapse of 2008 – 2009. From that bottom in early March 2009 the current Cycle Wave 5 and economic expansion began.
Economy Talk – The Status Quo is Changing!
Conventional wisdom theory would tell us that based on history the global economies and markets will just keep on chugging higher and higher and higher. Reality tells us different and excess in any form is usually dealt with by a “bursting of the bubble.”
Here is an important subtlety about economics – when considering the demographic pyramid (the poor being at the bottom of the pyramid) and disposable income within a developing economy (India, China, Mexico, Indonesia) versus a developed economy (United States & Canada, Europe, Japan, Australia) an increase in disposable income is best viewed from a commodity consumption point of view when looking at emerging economies. Developed economies on the other hand, (United States, Canada, Europe, Japan) tend to spend their increased wealth on services. Poorer countries tend to increase the commodity consumption of their households, which in most cases would include an increase in energy consumption. This ultimately could lead to a disproportionate increase in commodity consumption.
Current credit conditions within the global developed economies (debt level increases) that have been brewing for the last couple of decades and reveal that emerging economies are far less indebted than developed economies. The ultimate result is likely a major shift in economic leadership. Currently that role is firmly in the hands of the United States, Europe and Japan. The change will have a much more dramatic impact on commodities than what has been seen thus far.
If you consider the current global debt bubble did not suddenly appear in the last 12 months. On the contrary it has been in the making for several decades. The point to remember: This type of change spreads its impact over a period of perhaps 12 years not 12 months creating a longer lasting increase in price volatility as supply and demand as well as speculative trading ebbs and flows.