U.S. Wage Growth Continues to Disappoint

In the graph below, aggregate corporate profits after accounting for changes in inventory valuation and capital consumption (blue line) is plotted against the real median wage of U.S. workers (red line). The term 'real' in this case indicates that the data has been adjusted for inflation. Historical evidence over the past 40 years suggests that, despite increases in productivity and corporate profits, wage growth continues to disappoint. The situation begs us to ponder how an economic…

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Equity Markets in Full Retreat

In a recent article, we predicted that the equity markets were in trouble and in the process of topping out. During the summer, it appeared as though the B wave within the A-B-C retracement was complete. Although the move sub-divided, it became one of three legs to make up a greater B bounce higher. Hence, we witnessed marginal gains that served to test market price highs. Our analysis concluded this move to be a bull trap, providing…

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Moment of Truth for the U.S. Dollar

The U.S. Dollar is on the ropes and its next move is critical... Investors have an important decision to make -- one that is largely tied to the overall confidence in the equity markets. Should stocks tumble, money will inevitably flee to safety. This means currencies of perceived stability (USD, YEN) and commodities where the underlying asset stores value (gold, platinum, precious metals, etc.) should appreciate in value. In the Dollar Index (DXY) chart below,…

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Elliott Wave Predicts More Pain for the Dow

That common phrase, "Sell in May and go away" is likely to be regurgitated on the financial news outlets over the next several months as the Dow Jones Industrial Average begins a deep and dark descent, according to our own Elliott Wave analysis. While the main catalyst for lower price lows is yet to be determined (trade war, summer selloff, political change, etc.), we do know that the initial equity market price decline in early 2018…

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10-Year Treasury Yield Breaks Key Trend

Over the past week, investors have been fixated on the sudden volatility present in the equity markets. The Dow plunged almost 5% on Monday, the sharpest decline in almost seven years. While we believe this is likely to be the beginning of a larger-degree pullback in the short to intermediate-term, the overall upward trend remains intact -- for now. The underlying cause of this sell-off is not a simple matter of profit taking, but mainly, the…

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Reflex’s Chief Investment Strategist Q&A

Q: If the Elliott Wave Theory is so good, how come after 86 (?) years, it’s not being used by everyone? A: That’s a really good question with many answers attached. I’ll start out by saying that technical analysis fills a small niche within the investment community. And if you focus in on just TA alone, Elliott Wave Theory ultimately becomes a niche within a niche. It is but one of many approaches to investing.…

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Elliott Wave Analysis: Dow Jones (DJIA)

In retrospect, there's something fascinating about the Dot-com bubble era and how the Dow Jones Industrial Average (DJIA) price peak at the turn of the century served as an internal third within an even larger-degree Wave I. We then witnessed a final internal fifth move higher from 2003-2007 that was abruptly cut down by a Financial Crisis, bringing the domestic and global economy to its knees. It now appears that the 2008 pullback (Wave II bottom) and…

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U.S. Interest Rate Cycle Since 1790

The chart below is loaded with important historical interest rate data going all the way back to the founding of the United States. From our perspective, the era of cheap money is just about over. Eventually, yields must rise to counter: 1) U.S./global inflation, 2) the sale of domestic bonds as the Federal Reserve reduces its balance sheet and 3) a slowdown in demand for U.S. Treasuries by key Asian countries (China and Japan). Good investing,…

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Perpetual State of War

The United States has been at war 93% of the time… That means that we’ve been involved in some type of conflict in 222 out of 239 years since our country’s founding back in 1776. In fact, the only time the country went at least five years without war (1935-1940) was during a Great Depression “isolationist” period. In other words, you could be reaping a fortune betting on a perpetual state of war – if…

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Raiding the Most Hated Industry in America

The big four, JP Morgan, Bank of America, Citigroup and Wells Fargo, are under fire again with renewed scrutiny and pressure to break up. Taxpayers who initially propped up these financial institutions in 2008 with a $700bn bailout are concerned that they’ll be on the hook once again if the underlying problems continuing to plague the industry remain unresolved. So what’s snapped the issue back from the dead? Well, we’re entering the U.S. presidential cycle.…

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