Okay, here's my higher timeframe scenario if deflation takes hold. I don't see it, no way, no how, but I'm showing it because it looks so pretty. I can see deflation taking hold, in fact, I see no way around it, because ultimately deleveraging has to take place, but I see it happening with super-high inflation or hyperinflation (they are actually two totally different processes, the latter requiring loss of all faith in the currency) at the same time.

This would have the market going up while it's purchasing power is rapidly shrinking. We have that now. As of today, priced in gold, the S&P is now lower than at the 666 2009 bottom. Sure, it's up a lot as far as the numbers on the chart, but you can buy less gold (and in my mind, goods and services) with x units of the S&P now than at the low. Good deal, eh?

The numbers are a parlor trick, all that matters is the purchasing power. So, that may shrink with deflation as the money printing raises the S&P number way up, just like the Zimbabwe stock market. This will prevent what is shown on these charts. What is on the charts is what I think would happen if we had deflation and they didn't print like the insane maniacs that they are.










Charts courtesy QCharts

Note a few things on the above charts. The 5-wave sequence really fits the lines. If it dropped a bit more, it could launch off that line, then up to 1200 to 1300, the bounce everyone expects, to that next line area. Then down to the next line in an extended 'W3'. The bounce there may come after a peek through the line, as shown by the 'classic' 5-wave layout, or at the line. Then a final drop to the key area, and done. I also showed an alternate move at the lower line.

Before 2009 I'd think this had a very good chance of happening. But unless the FED were abolished, or Bern-quacke removed and a totally different, non-puppet put into place (I see the chances of that literally less than zero), the money printing in the face of falling stocks will continue at full speed, and actually ever-increasing speeds, in my opinion. So, this just can't happen. But, in memory of the free market days, I posted it anyway.