With rates rising it’s still an extremely safe way to outperform stocks over the longer term in this sideways fourth wave market.

Of course, all markets go up and down in waves fractally, so I also imagine that they trade the wave turns at certain points of higher confidence.

I’m curious: I’ve been warning people about this inevitability for a year, both here and via email. Is anyone paying more attention to this now than they would have otherwise? Has anyone taken preparatory action? Anyone care to share examples?

Any thoughts on what the city and county governments (or the DDA, AADL, etc.) should be doing policy- or otherwise to protect financial assets and make our community more resilient to the economic stresses we’ll face? Pretend it’s 2007 and you know that 2008 is ahead. What would you suggest we do?

(If there were another forum to discuss this kind of thing, I’d be writing this there, but there isn’t. The city’s environmental commission considered a resolution several years ago to create a peak oil task force, which could have served that purpose—energy and finance are intimately connected—but CMs Teall and Hohnke led the ‘we’re-already-doing-enough’ complacency camp in voting it down. So here I am. I continue to appreciate the Chronicle allowing my attempts to ‘be generous’ in this way.)

The Fed has been doing its thing for decades. It’s just one more factor that influences social mood. Prechter made a pretty good case in one of his newsletters this year that the Fed doesn’t set rates, the market (money market, not the stock market) does. If I can find the specific case I’m thinking of, I’ll share it later. The Fed just follows along. Rates have risen. Did that happen before or after the Fed announced the new rates along the way?

Growing optimism allowed the Fed to do what it has done to influence the stock market (the only bright financial spot over that past couple of years aside from a countertrend bounce in real estate). But that appears to have run its course. The Fed couldn’t prevent the deflationary crashes of 2002-2003 or 2008. How will it prevent this next one?

“Then the party started again.”

Yup. Another wave of optimism. This S&P 500 B wave played out in a double zigzag, and it’s wrapping up. Similarly in the Dow and NASDAQ. Resistance trend lines have been met, and other indicators (record high levels of investor optimism and leverage) support a top, not the middle of a rally (as in the case of a hypothetical triple zigzag, for example).

The economic indicators you linked to support the B wave interpretation: not a strong recovery, but a phony built on speculation and leverage.

The few times we have seen a dip this year have been when the Fed seemed to be backing off their policy. Then the party started again.

If the markets *don’t* play out in waves (of social mood) in the present as they did in centuries past (assuming that they did then—and the evidence supports waves if not necessarily also the social mood driver), how was Robert Prechter able to predict the bull market of the 1980′s during the tail end of the late ’70s fourth wave as well as many turns at many levels since then? And why did that bull market end in 2000 after five complete waves, to be followed by a sideways, A-B-C expanded flat as fits EWP guidelines? And more generally, why do they ocntinue to consistently play out in Elliott waves from the Super-Cycle level all the way down to the Minute level? I don’t have any idea. Coincidence? Does Occam’s Razor apply? That is, is the EWP the simplest explanation? It is for me, but then I’ve studied it, and I’ve found flaws in the explanations of other market and finance writers.