Curt Renz Capital Resources

Updated Monday through Thursday evenings following market days

 

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Our commentaries are provided as general information and not investment recommendations.  You are responsible for your own investment decisions.  Our opinions are based on historical research and data believed to be reliable.  There is no guarantee that results will be profitable.  We are not responsible for errors or omissions.  We may hold positions in vehicles that are mentioned.

It was up’s turn for the popular averages on Monday. Talk of a merger between Hewlett Packard (HPQ) and Electronic Data Systems (EDS) seemed to excite folks. The full extent of economic disaster may remain hidden until the prices of commodities join the real estate collapse. It will then become obvious that deflation caused by a lack of confidence should be the real concern. That would set up the second and most serious stage of a scary recession. Equities would have to tumble a lot more before true value appears.

Above is the one-year chart for the S&P 500 exchange traded fund (SPY). Beginning in October the price descended in a five-wave Elliott pattern typical of bear markets. The recent three-wave advance recouped about 50% of the bear market decline. That’s normal bear market procedure. The 50% level (yellow line) marked bottoms in August and November and the January peak. It has again proven resistant and may have set up the next big five-wave decline. The six calendar months from May through October are usually the worst for the stock market. The poor showing of the previous six months should not be thought to have negated that.