Parts 1 and 2 laid the foundation for the argument expecting a decline in equity markets, employment, GDP, Housing and just about everything else that has seen the world's 4th economy prosper so much since the last recession back in '91.

This foundation was laid upon a combination of technical analysis, socionomic evidence and a splash of fundamentals - so how are we doing?

1. We continue to see inversion of the yield curve. Back in part 1 I examined the evidence supporting this as a most accurate forecasting tool. What does it forecast? A significant slowing in economic activity. Well-done yield curve. It is clearly evident that the UK economy is slowing quite dramatically. Manufacturing industry is in a funk and deteriorating quite rapidly, and retailers (by far largest contributor to GDP) are having "a long hot summer" - standing around waiting for someone to buy something from the myriad "sale" racks.

2. Unemployment / employment statistics continue to show a changing trend. Last 6 months figures have seen an increase (albeit quite modest) in the number of people looking for work in the UK - That is an increase in people who cannot continue "maxing on the plastic" and must now confront the need to "pay down debt" - Look for an increase in adverts encouraging such action in the weeks and months ahead. Christmas 2005 should be a disaster for retailers who must now be pinning their hopes for'05 sales figures on the October - December season

3. Housing markets across the UK remain at subdued levels with static / falling prices. Anecdotally I think there has been a slight up tick in activity and even final sale price over the last 3 months. The housing market has employed thousands of people over the last five or so years and so we can expect that industry players will remain bullish as long as there remains a hint of recovery. This hint will fade with passing of Summer and a sudden jolt of reality is likely to see large scale lay offs in the housing industry by this time next year

4. Equity markets. The FTSE 100 is certainly higher than expected, however we did say there was a chance of reaching 5500 in part 1. Looking at the charts we now stand at a truly critical juncture. FTSE 100 at around 5300-5400 puts it at the level of the wave (4) of 3 down dating back to early 2002. An ABC rally (which is what we have in the FTSE since March '03 low) up to a previous wave 4 (of lower degree) is quite common. Additionally the up trend line from March '03 low to date converges with the resistance seen in early 02 (as detailed above) at the beginning of September. I fully expect this to mark the top of the FTSE rally and expect large declines through Q3 this year. As this is a wave 3 the slide will likely be accompanied by increasingly bad economic news and a slip into recession by early '06.

The charts of the FTSE banking sector is also looking weak, having started to breakdown again after failing to take out previous highs. A number of the constituents are themselves looking weak. Support lines for the last 3 years have become resistance and prices are falling. This fits well with the increases seen in what used to be called bad debt provisions and ratcheting up of lending criteria - More bad news for the consumer and retailer.

The largest listed Fund Manager - Man Group (EMG) looks particularly weak after completing a large flat correction at 1716p and starting the long wave 3 decline that shouts - Global Hedge fund debacle - just ahead.

It has been a long time coming but the rally off the March '03 lows is all but over.

In part 2 we commented on the change in high street fashions from bold and daring to dull and prudish. The back to school season saw girls trousers outselling skirts - as hemlines drop and flesh is hidden the economy, markets and are sure to follow.

The football season has started with a very low-key transfer market. The standout deal involves Chelsea spending £24m on Essien. Interesting indeed that the club spending the most is built on money from the one market still reaching new highs - Crude oil. As oil and commodities tumble over the next few years look for a similar drop in the fortunes (on and off the field) of the boys from Stamford Bridge.

Our Manchester United indicator will receive a big test this season. If the markets do what I expect then Alex Ferguson, Family Glazer and one of the most expensive teams in sport will fail utterly and see many resignations / sackings by May next year.

Live 8 was a shadow of Live Aid but nevertheless caught the attention of the World. The obsession with money that the Great Asset Mania has engendered was reflected in the reasons for the concerts, also the subtle rejection of debt as the G8 were lobbied to write off African debt mountains. This of course involves the destruction of financial assets and that is what a bear market is all about.

The standout act of the London gig was undoubtedly Pink Floyd. First time Roger Waters played with the remaining members since 1982 (bottom of social mood in US). As Robert Prechter of Elliottwave.com says "Pink Floyd are the quintessential bear market band".

Think about this - The best band of Live Aid 1985(strong bull market) was Queen, admittedly they had their origins in the bear of the early seventies but the music they played at Wembley was very upbeat. Nothing too depressing about We will Rock You, We are the Champions, Radio Gaga - This upbeat Queen was evidence of the transition from the depression of the seventies to the euphoria that would build during the great bull of the eighties and nineties.

They followed Live Aid with their biggest ever tour - "The magic tour" a title that captured the essence of wave 3 up in the markets and epitomised their conversion to light weight pop rock which maintained their popularity all through the bull of the eighties and nineties.

Contrast that with the Floyd, they play Hyde Park and sing exclusively sombre music that reflected the depression of the seventies. Yet they were universally recognised as the best band of the day - Has social mood turned to the Dark side (of the moon) you bet!! A full scale Pink Floyd tour in 2006? A full scale bear market?

Historically Pink Floyd show up at key points in the social mood swing and hence key inflection points for financial markets. They began after the mini mania of the sixties, during the change in mood from optimism to pessimism, reached a peak during the bear market of the seventies and played their last gig at the bottom of social mood and constant dollar Dow in 1982. During the rise of social mood through the eighties they vanished, only to turn up with a telling comment ofn the investment strategies of the day - "A Momentary Lapse of Reason" in - guess what year - 1987 - That lapse of reason tour lasted through 1990 and the last UK recession. 1994 saw the release of "The Division Bell". Anything of note happen in 1994? Well that year saw the last bear market in UK stocks marking "The Division (bell) between rising and falling markets and the surge into mania that began in 1995.

Live 8 appearance of the Floyd was followed by the worst one day performance in the FTSE since the rally off '03 lows began.

Could we call this "The Pink Floyd" indicator?

So how are we doing?

Progress is slow but the Division Bell is ringing!!