As 2008 comes to a close, the mainstream leaders are taking stock of the past 360 (or so) "Days" that the economic earth stood still. As one December 23 news source observes: This has been "the year of shock and awe for the world economy." (FX Street.com)
The biggest upset among the bunch of global economic leaders: Japan. There, the expectation was NOT for a decades-old bull to undergo a "healthy correction" (as was the hope for the United States) to a more sustainable rate of growth -- but rather, for Japan's four-year-"young" bull market "calf" to grow and strengthen into the number one leader of the financial universe.
Flashback: Summer 2007. Corporate activity in Japan is robust, bank lending shows positive growth for the first time in eight years, the nation's main benchmark average, the Nikkei-225, stands at its loftiest heights in seven years -- AND -- the mainstream pundits cheer into their Nikkei bullhorns with ear-bleeding force:
- “Japan’s Bull Still Breathes.” (Forbes)
- “Japan is back and has a rightful place in your global ETF portfolio… The bulls are rampaging.” (DJ MarketWatch)
- “Rise! Japan’s Stocks: To the 20,000 level. The whole region is seeing a lot of very positive economic news. We're still bullish and in this market, we're looking to buy the laggards.” (AP)
One problem: In mid-July of 2007, the Nikkei's winning streak came to a screeching halt as prices took step one DOWN of a 13-month long (so far) freefall to a 26-year low.
See, while the usual pundits were gearing up for Japan's new, rising economic sun -- EWI's analysts foresaw a long-term cold and cloudy front coming in. Just weeks ahead of the Nikkei's seven-year peak, the July 2007 Global Market Perspective presented the following bearish close-up of the index (some Elliott Wave labels have been removed for this publication) and wrote:
"A drastic decline is expected to unfold toward the March low. Near-term, residual strength in the first two weeks of July could take place. Downward cyclical pressure should mount from 7/12 on."
In the months that followed, cyclical and structural evidence mounted in favor of a more sustained decline than previously anticipated. Here, the November 2007 Global Market Perspective revised its long-term analysis and wrote:
"Looming ominously larger in the weekly chart is the silhouette of a massive head-and-shoulders top formation hovering above a neckline. The mid-June 2006 low is a significant last bastion of support, as no previous yearly low has been broken since the start of the rally from the 2003 bottom. Hence, taking out 14,045 would be a nefarious event further establishing that a major top is in place."
Soon after, said "nefarious event" took place. The Nikkei plummeted another 50%-plus before catching its breath in late October.