The Greatest Depression In Our Lifetime Is Here According To This Accurate Model
By: Chris Guthrie
Published August 12, 2020
11:25 AM GMT
The stock market is on the verge of an epic collapse set to occur now. The greatest depression in global economies that any of us have or will see is here according to this accurate model. My 'crystal ball' is not based on the quarantined talking heads filling air time with circular-referenced positivity in an utterly negative market.
Some loyal readers are wondering why I have not publicly published in more than a year, and no it was not a jail sentence. Up until May 2019, I had been manually running and tweaking an algorithm based on Elliott Wave Theory. I ran my algorithm and model in June 2019 which forecasted the beginning of a major market crash beginning in the first quarter of 2020. You can find the public mention of it here.
After running the model and seeing what was to come, I needed to find a better way of running models in the future that is quicker. I spent the last year learning how to code and write computer programs. I knew there was a learning curve and it would take time, but I would be able to get much more work done in the future with the investment of time now. Previously, I manually studied about 5 stocks and ETFs at a time, and each one required hours of work and crunching numbers through Excel and Google Sheets. Now I am running algorithms against hundreds in a matter of minutes. My hiatus from public market forecasts has been worth it.
Now back to what you care about, the looming market drop. My program calculated every wave according to my interpretation of Elliott Wave Theory for the S&P 500 dating back to June 1, 1932. This is the estimated date that the index began its epic 5-part Grand Supercycle Wave 1. I reference waves and durations based off of this chart. Grand Supercycle 1 is comprised of 5 Supercycle waves which tend to last between 40-70 years, but there is no concrete duration. The cycle that I have charted has lasted approximately 21,671 trading days from June 1932 until February 19, 2020 which is nearly 88 years. These 5 completed waves have only ended Grand Supercycle 1 meaning we have just entered Grand Supercycle 2, which is a significant and lengthy correction wave. On average, corrective number 2 waves last about 16 years from top to bottom and are reflected in a 3 wave ABC pattern. Wave A (comprised of 5 waves) goes down, wave B (3 waves) goes up, and the final wave C (5 waves) hits the bottom. We are in the very early stages of wave A slated to take the market and index down for 4-6 years, which I cover potential causes below. Wave B is projected to rise over 4-8 years possibly creating a new all-time high (ATH) in the index before Wave C finally hits the bottom in 4-12 years after B ends.
Although the index has charged hard and nearly recouped all losses observed during the early COVID-related shutdowns, the steam is gone. This 'V-shaped recovery' has been more mythical than actual recovery. The index is back to where it was before jobs were lost, schools were closed (forcing some parents to quit their jobs or find new childcare expenses), restaurants operate at half capacity or less, tourism died, travel was restricted across states, nations, and borders. The market says everything is fine, but the hidden reality is things have been propped up to appear great again on the surface.
I input all of the data from the last 88 years into my program to reveal where the next market top will occur from the March 2020 lows. I currently have the index in Minor wave C of Intermediate wave 2 of Primary wave 1 of Cycle wave 1 of Supercycle wave A of Grand Supercycle wave 2. This means the end of Minor wave C will also end Intermediate wave 2 and begin a new chapter down.
The data from the minor waves were entered into the program to find reversal points. Minor wave A lasted 53 trading days and moved 1041.27 points. Minor wave B lasted 15 trading days and shed 233.39 points. As of the close of trading on August 11, 2020, Minor wave C has lasted 30 days having seen a maximum upward move of 381.27 points. My program returned 110 market tops and 110 reversal dates. I currently have the market topping between August 7, 2020 (Minor wave C day 28) and September 10, 2020 (Minor wave C day 51). This range was determined by the following chart of potential lengths of Minor wave C.
The peak price will occur between 3335 and 3435. This range was determined by the following chart of potential reversal levels. Normally I read these chart by find where the high points begin get sparse. The highest chart on the above chart has the most data pointing to wave C lasting 23-24 days before the frequency begins to decline until 36 days is 0. A straight line can be drawn from the high point to the 0 point at day 36. An additional decline is also observed beginning at the same high point and reaching zero around day 48. I interpret this as wave C's length lasting between 23 and 48 days in length. I did add a slight 3 day buffer to end, however, assess the strong move up to the close of trade on August 11 and sharp decline on this date builds a case the top could be in already.
Both charts found the most frequent projected data points for lengths of the wave and market top. The most important data point is the ATH of 3393.52. Even though the range outlined by the program determined the reversal point to lie above the ATH, a move above this threshold would violate a significant rule in Elliott Wave Theory. Wave 2 should never end before the start of a Wave 1. Most theorists live and die by these rules which leads them to many disappointments. A move above this level does not worry me, however, the index should reverse before it meets this point.
The chart below shows where the index has been and the green box displays the model's projected reversal zone. The dashed white line is the ATH of 3393.52 for reference.
Real World Application
The unprejudiced nature of COVID-19 was the initial jolt to the table propping up the global economic house of cards but the final wrecking ball is likely tied to the 2020 elections in the United States. The most telling parts of the Grand Supercycle wave 2 align with Presidential terms over the course of the next 16 years which will see a minimum of 3 Presidents in the United States.
When I first saw the market dropping in early 2020 before a potential White House shakeup, I strongly believed President Donald Trump would not rock the boat of the stock market as he heralds it as proof of competency and success in his Presidency. That debate can be held somewhere else. Once COVID hit and the market dropped, the end of Grand Supercycle was on cue and not directly related to the Oval Office holder. Since this time, the Fed has gone on a printing spree, some persons have lived rent-free and afforded the ability to not pay down debt (likely racking up more). This party will end. It is inevitable. These actions are keeping economies on life support, but all life support ends.
The reversal point (end of Minor wave C) will lead to initial social distancing from the most recent market high. This could be apparent with a major drop, or a more likely slow deviation from continued upward movement. Major cascading drops will occur eventually if not right away. If the newest top is forecast before mid-September, the results of the November election could be the first batch of cascading losses.
A Joe Biden Presidency
If Vice President Joe Biden or another party wins the election, massive uncertainty will take over, whether it is warranted or not. Fear of tax increases, socialism or policies thereof will lead to imminent declines whenever election results are finalized and the other candidate concedes. If those fears become a reality, this will would likely fuel further declines over the length of his party's control of the White House.
No one knows what Vice President Biden will do until he does it. My initial forecast is for major market declines and depression to last 4-6 years which likely mean his entire first term. If things go very poorly for the country during the first-term, a second-term is unlikely. Hence a 4-8 year reprieve for the stock market as projected. It is the wave C cause that is most intriguing. If a Democratic party presidency fails and a new party revives the country, why would there be a leadership change afterward? This is where wave C occurs. A change in parties, policies, and tactics is slated to bring the country down for another 1-2 presidential terms before the bottom is actually hit. Things will begin to improve around 2036-2040 and will likely be a long road to recovery. Eventually new ATHs will be reached and the global economies will soar again.
A Trump Second-Term Presidency
How could the economy collapse if President Trump is re-elected? Simple. It already is. The policies, tax-holidays, unlimited greenbacks are just the beginning of likely causes. The world has quickly learned which jobs are 'essential' and which ones can be done from home. We do not need all the office parks. We do not need schools that fail to adequately teach our youth when the best programs can be streamed online to the masses. The U.S. government still has not found a way to pay for the Tax Cuts in 2018 and now less money comes into the Treasury while Congress and Executive Order spend even more.
President Trump also has nothing to do to get re-elected. Not to say he would sit on his hands. He will likely try to strong arm China, Iran and others into policies meant to help the U.S. Unfortunately, these countries can wait out his clock because they know he will be out of office in 4 years. His pushing the limits with others could inadvertently isolate the U.S. When he leaves office in 4 years, a new party or leader will likely implement policies to aid in their re-election. This would likely help with the 4-8 years of upward movement in the stock market. Once that presidency ends, the track is still setup for 4-12 years of declines and ultimately the bottom of the market.
The S&P 500 Index has met its match and the absurd valuations cannot continue. The end result of the 2020 U.S. elections will likely escalate the downward movement no matter who sits in the Oval come January. Time will tell how accurate my program and model continues to be. I will continue to learn and improve my program and future programs based on the observed results.
Disclaimer: I do not currently have any positions on the index or funds discussed in this article. I have purchased volatility call options. I do not intend to enter additional positions at the time of writing. This article is for reference only and should not be solely relied on to predict future movement. Historical movements and technical indicators should never be the sole basis for entering positions involving risk. You should not take a risk without fully understanding the system, market, and having established a trading discipline. Make sure appropriate research is conducted prior to taking any risk in a marketplace. The author and Limitless Life Skills LLC do not have an interest, outside of the disclosed positions, or relationship with the companies mentioned in this article.