Tuesday, December 7, 2010

Delaying Tax Vote Could Crash Stock Market


at this point, any number of rationalizations could "crash" the stock market. the market is probably going to crash anyways, based on investors' extreme optimistic sentiment. There are so many bulls already invested that it will be difficult to find new money to drive the market higher. And those already invested have done so with a high degree of leverage that requires higher returns than the market can continue to provide for much longer.

social mood in a downward wave of major degree predisposes politicians (and their political bases) to reject compromises and coincidentally predisposes equities to "crash". moderates will appeal to compromise and blame a "crash" on lack of compromise. true believers will reject a compromise and claim that the crash came because the compromise was a lousy deal.

notice that Obama, not Congress, came out proposing a deal (in principle, no actual legislative language yet). and in his statement he fretted that there are those on both his left and his right that are reluctant to deal. (Obama is playing the moderate triangulator, just like Clinton did after midterm losses in 1994.)

whatever you think of Obama and the supposed deal on extending tax cuts, the overall picture is that Obama is trying to play the moderate, while legislators of both parties are trying to appeal to true believers. moderates' time to shine is in upward trending cycles, while true believers prevail in downward trending cycles. since our EW analysis predicts that 2011-12 will be a downward primary wave 3 of downward cycle degree C of downward supercycle degree A, it is likely that Obama will not successfully endear himself to the electorate as a moderate.

that Obama would attempt this strategy is socionomically understandable as the upward primary degree 2 reaches its climax. but contrary analysts understand that the trend will not continue. and a strong downward wave, favoring confrontation over moderation, will reassert itself from now until his (failed) reelection attempt.

One indicator of Obama's trouble is (and will increasingly be) the prominence of "Miss Me Yet?". Yes, George, we do miss you badly. Now more than ever!!