What does the risk chart say about the past?
The first thing I notice when looking at this chart is a broadening top or expanding wedge (ABCDEFG) pattern. This is a concerning pattern on the long run view of the stock markets and our economy. Such topping patterns usually prelude significant corrections, and this pattern has been building for years, hence the timing and size of the current sell off. I believe wave E (peak 2000) represents the top of wave 3 of the long Elliott Wave Cycles, and the move down into wave F (2002 low) represents the bottom of wave 4 of the same long cycle. I believe this because if one looks at a monthly chart of the stock markets from the early 1980s through the 2000 peak the MACD lines never fell below zero during that massive up move, which is typical behavior of the largest wave of a cycle, and that wave is usually a wave 3. The stock market price bottom in 2002 experienced the first drop in the monthly MACD lines below ZERO in decades, which I also feel confirms a wave 4 bottom of the same cycle.
