In Friday's update, I noted that the charts suggested further
downside was imminent. Friday's market indeed closed in the red,
and as of Sunday evening (September 29) anyway, futures are
implying a 10+ point gap down for the
(INDEXSP:.INX) cash open on Monday.
The big news item right now is the looming threat of government
shutdown. I'm not going to comment on the sides in this debate, but
I do find the reaction of the public extremely interesting: A
New York Times
poll shows that eight in 10 Americans disapprove of the threat of
government shutdown, from either Congress or the president. I have
no intention of debating who's right or wrong here, however, I do
have some thoughts I'd like to share about a larger trend in
A different yet conceptually related Gallup poll ostensibly shows
that 53% of Americans think that compromise in Washington is more
important than sticking to principle. In my mind, that poll result
is at least partially suspect, though, since the way the question
was phrased almost certainly impacted the result. The question is
reprinted below: Notice how "compromise" was linked to "in order to
get things done," whereas "stick to beliefs" was linked to "even if
little gets done." The poll would probably have turned out at least
slightly differently if they had linked "stick to beliefs" with "in
order to get things done" and vice-versa. But being the crazy
radical that I am, I'm going to challenge the entire question.
I believe two presuppositions behind the above question are
First: When did compromise for its own sake become any kind of
meaningful ideal? Pardon my French, but what a bunch of balderdash.
Compromise isn't an ideal -- by definition, it's what happens when
you bend your ideals. Of course, compromise
be a good thing, as it often is in a marriage -- but it can also be
a very bad and harmful thing, depending on what you're
compromising, and with whom you're compromising. If my neighbor
suggests that he wants to burn my house down in order to improve
his view of the ocean, I'm not going to compromise simply to live
up to the ideal of compromise. And I'm not going to compromise for
the sake of "getting things done." I'm going to stand on principle
and try to subvert his intentions, even if he accuses me of being
"an argumentative obstacle to progress."
Which brings us to the second fallacy: Even if compromise were an
ideal, compromise simply for the sake of "getting things done" is
not necessarily positive, because "getting things done" is not
unilaterally synonymous with progress. I can drive my car off a
cliff, or smash all my toes with a ball-peen hammer, and I'm
"getting things done."
Further, my idea of progress may not agree with yours. Progress,
whether in Washington or elsewhere, is really nothing more than
someone's opinion. And since opinions will always differ, we simply
cannot "all just get along" via the vague ideal of compromise as
the solution. Nor should we want to. Do any of us really want to
live in a country where nobody stands on principle, and nobody
truly fights for or against anything? I don't think the majority
really want that; I think they simply haven't thought it through.
In my opinion, ideals that have real value are those that are
the right course of action regardless of circumstance: ideals such
as honesty, integrity, kindness, etc. Those are things we can and
should strive toward at all times. But compromise simply cannot be
an ideal that stands unto itself, because it's not always the right
thing to do.
The fact is, the seemingly painless solutions we sometimes reach
with "win-win compromises" are often only painless over the short
run. Over the long run, bad ideas eventually have lasting
consequences if put into action.
We face a possible government shutdown, and most Americans feel a
shutdown would hurt them -- so compromise seems to offer some vague
solution as a way to subvert that pain. We may not really know what
compromise looks like in this situation, but we know (at least over
the short run) that it probably won't be as painful as a shutdown.
And thus we get 80% disapproval. I don't personally know whether a
compromise here would be good or bad in the long run -- I don't
pretend to have a solution, and that's not really my point. My
point is simply that I don't believe we should automatically assume
that compromise in general is necessarily always better than the
Sorry, rant over.
From a chartist perspective, it's interesting that we had the
threat of the fiscal cliff near the second wave bottom, and now we
have the threat of government shutdown near the (assumed) fifth
wave peak. One of the concepts behind Elliott Wave Theory is that
social mood goes through predictable cycles (human nature doesn't
change) -- and those cycles leave patterns on the charts indicating
the psychology of the masses is reversing from positive to negative
(or vice-versa) at major peaks and troughs.
No change in the charts and projections from the last few updates:
Click to enlarge
Near-term, it appears the market is about to enter a smaller-degree
nested third wave. This suggests selling pressure should continue
for the foreseeable near-term future, as the market will need to
unravel several low-degree fourth and fifth waves before finding a
Click to enlarge
In conclusion, the projections from last week are tracking well so
far, and there's presently no sign that any type of bottom is
imminent. As noted previously, I continue to suspect we've seen a
turn in the higher degree wave structure, and that the market is in
for an intermediate decline. Trade safe.