I could go on for a while about the rubbish we've been served by the financial media the past two days (June 5-6), to wit:
"Wall Street surged Thursday as investors looked past a sharp rebound in oil prices..."
"The price of oil surged more than $6 a barrel Friday morning...
sending the stock market into a nose-dive and reversing Thursday’s gains."
But instead of going on, I'll just assume that I need say no more than:
Oil-Drives-Stocks-Except-When-It-Doesn't...
The silliness speaks for itself.
So, allow me instead to broaden the time horizon from the past two days to nearly a year ago -- specifically July 13, 2007, when a Bloomberg News story declared, "Lehman, Bank of America and Barclays Say the [Credit] Rout is Over." Yes, dear reader, not one but THREE of the world's largest investment banks told the world that the credit crisis was "over," when in fact it had barely begun.
Of course, I do realize that Wall Street and the media have a collective attention span that measures approximately 10−21 (one trillionth of one billionth of one second), so it may not seem completely fair to bring up what they were saying 11 months ago. On the other hand, we've been hearing the same "worst is over" stuff for several weeks, right up through yesterday's rally, which a Wall Street Journal article attributed to "...Wall Street's newfound confidence on the economic outlook."
Hence my wish to revisit the conventional wisdom of last July. And rather than a lot of words to explain how ridiculous it was to say the crisis was "over," I can show you a chart which does the job and then some. It shows the Junk-to-Treasury spread, or the difference in yield between low-grade vs. high grade bonds. Among other things, this spread has often proven to be a reliable "early warning indicator" of major trend changes in the financial markets. (Please humor the amount of white space in the chart, more about that below.)
This chart is on page six of the current Elliott Wave Financial Forecast, and is actually one of two charts in a before & after analysis. The "before" chart first appeared in The Short Term Update on July 13, 2007 -- when the Bloomberg story appeared. At that time, the line on the chart ended where you see the arrow pointing -- and what followed comprises all that you see here in the "after" chart.
As for what The Short Term Update said back then, I need only quote three words: "It's just beginning."
Time after time, The Elliott Wave Financial Forecast really does deliver "Tomorrow's News Today" to subscribers. You can read our latest commentary and see up to the minute charts right now -- click here to learn more.