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(12/17/11)
The Yield on the 3 Month TBILL is now back at all time
lows. The last time the yield was this low was back in the 1930's as
it approached 0%. Notice as the yields neared 0% the Dow peaked (point A)
after rallying strongly from the 1932 low. It's certainly possible a similar situation is
now developing as the current yield remains near the 0% level.  Meanwhile if we go back to the
1930's the Dow peaked in early 1937 after rallying strongly from the late
1932 low. This was then followed by a sharp 50% correction over the next
13 months which had a 5 Wave look to it. Furthermore over the next few years
the Dow rallied leading up to World War II which was then followed by more
selling and an eventual
retest of the prior 1938 low (point B).  Finally one could
certainly argue that we are in the beginning stages of a similar type pattern
with two possibilities. The first scenario is that the initial move down
from the April high was the 1st Wave of a larger 5 Wave correction while the
oversold bounce from the early October low is a 2nd Wave. This would
then be followed by Waves 3, 4 and 5 in the future which will eventually lead to
a retest of the low made in March of 2009. 
Meanwhile the
second scenario is that the Dow would undergo a less severe correction the next
few years much like occurred from 1939 through 1942 with support coming in near
the low made in July of 2010 (point B). 
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