"NAB, wave 4 - let's take the scenic route ..."

Back on our last NAB post for Friday June 25th, it looked as if we had some excellent confirming signals that NAB had peaked and was ready to retrace into a Wave 4 downward.

"... Not a failed Wave 5 but an extended Wave 4 ..."

Comparing the chart on the left to the earlier chart we can see that NAB hit the ellipse target on the 22nd of July and began to retrace back up.

By shifting from the normal Elliott 5,35 oscillator to a 5,17 we can see the inner wave structure and although the 5,35 oscillator did not exceed 90%-140%, the retracement of the intermediate wave 4 count did not pull back to less than 90% and as such was an early warning that the downward trend was most likely not going to continue.

In fact NAB did retrace back up into the $25.50 region and because this was a new high the Elliott Wave 4 recounted and shifted from the previous high in the 24th June to the new Wave 4 high on the 3rd August.
At this point we waited for the new Wave 4 to break out of the regression channel and cross the 6,4 displaced moving average to give us the signal to enter the short protective puts for the Collar position. Note also that the 5,17 Oscillator has pulled back to the zero line and is trending in the right direction.

As of close on Friday 13th August, we had Nab trending sideways for the day as it hit a support line at $23.41. However our downside inotial target projection is at $23.26 where we will tih=ghten our stops and wait to see if this support level is broken. If this is the case I would expect Nab to trend lower to around $22.50 in order to reach a low below the previous wave 3 and in doing so, finally manage to get the bearish Wave 5 completed.

"trading a failed wave 5 is a snap"

Cheers

" last man standing & fiscal rotation ....."

The US Federal Reserve has left the federal funds target between zero and 0.25 per cent but it has elected to further support a slowing economy. The Fed will reinvest "principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature." The Fed voted 9-1 in favour of the decision with Thomas Hoenig opposing the decision to keep the federal funds low "for an extended period."

For some time now Hoenig has been the sole dissenter in lowering rates and providing further stimulus, and at a vote of 9:1 yesterday I wonder if Hoenig has begun to lock himself into a situation where he feels it is too late to reverse his stance without losing "face"
The interesting thing about the Fed's proposed stimulus round #2 is that it is not creating new money which leads to inflation but rather is recycling the Treasury instruments which are also a key lever for the Government to manage Fiscal & Monetary policy.

The other thought that occurs to me is that what we all want is a more active economy and indeed an activity level that further stimulates other sectors to become self sustaining. Too this end I seem to remember from my Macro Economics lectures that the formula around the money supply and economic activity is MV=PT which essentially means that taking the same money and reinvesting it has the effect of speeding up the economic activity a little faster each time the money supply is rotated through the economy.

Now given that the Fed is rotating the money via reinvestment of the maturing Treasuries etc this seems a reasonable plan to me and I am at a loss as to why Hoenig may have objected. In addition the funding is also targeted into the weakest sectors of the economy and not a blanket reinvestment.

Cheers