Category: News

U.S. Economic Slowdown

3 Signs of Developing U.S. Economic Slowdown
“Credit standards are tightening, thereby freezing out borrowers”

By Elliott Wave International

Recent headlines about the U.S. economy are rosy:

  • US economic growth for last quarter is revised up slightly to a healthy 3.4% annual rate (AP News, March 28)
  • US economy continues to shine with help from consumers, labor market (Reuters, March 28)

It’s all well and good to announce positive economic news. Yet, consumers of such news may not be getting the full story.

In other words, there’s plenty of less-than-positive economic developments, and I’ll point out just three which portend a possible economic contraction.

The first one has been well-advertised: the developing commercial real estate crisis. In a nutshell, office building owners face higher interest rates as their loans mature. This could set off a wave of defaults. Indeed, there’s already been a dramatic rise in the number of U.S. commercial property foreclosures in the past four years.

Another sign of a developing economic slowdown has to do with consumers. If you live in the U.S., quite a few of your neighbors — or at least residents of your community — are tapped out.

Here’s a chart from the March Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets:

Credit Card Holders Are Strapped Too

As you can see, credit card delinquencies have been rising since 2022. Indeed, credit card arrears are higher than they’ve been since the wake of the Great Recession in 2007-2009.

And speaking of the Great Recession, sub-prime car loan delinquencies are even higher than they were then.

The March Elliott Wave Financial Forecast elaborates with this chart and commentary:

Subprime Car Loan Delinquency on the Rise

Car loan delinquencies are higher than at any time in the data’s history, which goes back to 1996. … Credit standards are tightening, thereby freezing out borrowers. … Access to auto credit is the lowest in nearly four years.

Also keep in mind that the economy follows the stock market.

If the stock market goes into a correction — or worse — expect the economy to weaken. History shows that there’s usually a few months lag time between the action of the stock market and economy.

Elliott wave analysis can help you get a handle on the stock market’s trend.

If you’re unfamiliar with the Elliott wave method, read Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from the book:

All waves are of a specific degree. Yet it may be impossible to identify precisely the degree of developing waves, particularly subwaves at the start of a new wave. Degree is not based upon specific price or time lengths but upon form, which is a function of both price and time. Fortunately, the precise degree is usually irrelevant to successful forecasting since it is relative degree that matters most. To know a major advance is due is more important than its precise name. Later events always clarify degree.

Get more insights into the Wave Principle by reading the entire online version of the book.

Learn more by following this link: Elliott Wave Principle: Key to Market Behavior — get instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline 3 Signs of Developing U.S. Economic Slowdown. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Stock Market Interest Far Surpasses 1987 & 1929

This Measure of Stock Market Interest Far Surpasses 1987 & 1929
“More than half of U.S. households have been in the market for a generation”

By Elliott Wave International

A lot of people think that it’s perfectly normal to participate in the stock market — you know, like getting a drink of water or — breathing.

We here at Elliott Wave International call this the “equity culture” and it’s been going strong for a good many years now.

It’s difficult for many people to remember that it’s not always been thus.

Yet there’s been significant stretches of time when the populace at large wouldn’t touch stocks with the proverbial ten-foot pole — the years following the historic 1929 crash being a prime example.

Even at the top of the market in 1929, pollster Al Sindlinger estimated that only 20% of U.S. households participated in the stock market — based on interviews conducted in 1939. At the market top in 1987, the percentage of households in the market was 36%.

With this perspective, here’s a chart and commentary from the February Elliott Wave Financial Forecast which you may find interesting (the Elliott Wave Financial Forecast is a monthly publication which offers analysis and forecasts for major U.S. financial markets):

The percentage of stock holdings by U.S. households hit an all-time high of 58% at the end of 2022. The analysis in the Fed’s Survey of Consumer Finances lags by 11 months. Given the market’s recent rally, the 2023 figure is likely to be even higher. … Thanks to the Grand Supercycle degree of the bull market, more than half of U.S. households have been in the market for a generation.

And here in early 2024, the optimistic financial sentiment persists. Indeed, here’s a Jan. 16 Barron’s headline:

Investing In U.S. Stocks Still Makes Sense Despite High Valuations

And, on Jan. 18, the view of the CEO of one of the world’s largest money management firms was reflected in this headline (Seeking Alpha):

“Animal spirits” will stir the markets again in 2024

Only time will tell how the remainder of the year will play out, yet keep in mind that optimistic attitudes toward the stock market are unlikely to go on indefinitely. Another historic shift is all but inevitable.

Our analysis reveals what this shift may very well look like — so you can prepare.

As you might imagine, Elliott Wave International’s primary way of analyzing financial markets is employing the Elliott wave method.

The definitive text on the Elliott wave method is Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from the book:

The Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress. Living in harmony with those trends can make the difference between success and failure in financial affairs.

All that’s required for free access to the online version of the book is a Club EWI membership. Club EWI is the world’s largest Elliott wave educational community (about 500,000 members and growing rapidly) and is free to join.

Just follow this link and you can have the book on your computer screen in moments: Elliott Wave Principle: Key to Market Behavior — get free and unlimited access.

This article was syndicated by Elliott Wave International and was originally published under the headline This Measure of Stock Market Interest Far Surpasses 1987 & 1929. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Stocks: It All Boils Down to This

Stocks: It All Boils Down to This
News and events do not alter the market’s trend

By Elliott Wave International

The trend of the stock market all boils down to investor psychology — which tends to unfold in similar patterns during every market cycle.

An important point to realize is that investor psychology is endogenous, which of course means “having an internal cause or origin.” Another definition in the dictionary is “not attributable to any external or environmental factor.”

This point was driven home when I first became acquainted with the Elliott Wave Principle and read the history of Ralph Nelson Elliott, the accomplished accountant who observed these repetitive stock market patterns while spending time in a hospital with an illness. He noticed, and I’m paraphrasing, that the trend of the stock market was uninterrupted despite World War II! In other words, the endogenous workings of investor psychology persisted even though an external event as significant as a world war had developed.

Besides wars, this applies to other news and events as well — such as terrorist attacks, Federal Reserve announcements, so-called oil “shocks,” “surprising” economic reports, natural disasters, developments in the world of politics and even a presidential assassination. The market may exhibit a relatively brief emotional reaction to dramatic news, but afterwards, the trend picks up where it left off.

In his landmark book, The Socionomic Theory of Finance, Robert Prechter describes a case in point with these charts and commentary:

[The chart] shows the DJIA around the time when President John F. Kennedy was shot. First of all, can you tell by looking at the graph exactly when that event occurred? Maybe before that big drop on the left? Maybe at some other peak, causing a selloff?

The first arrow [on this next chart] shows the timing of the assassination. The market initially fell, but by the close of the next trading day, it was above where it was at the moment of the event, as you can see by the position of the second arrow.

In the latter half of 1962 and 1963, the trend of the stock market — driven by investor psychology — was up — and continued upward despite historically dramatic news.

Know that Elliott waves are a direct reflection of this investor psychology and can help you anticipate what’s next for financial markets around the globe.

If you’d like to delve into the details of Elliott wave analysis, read the definitive text on the subject: Elliott Wave Principle: Key to Market Behavior by Frost & Prechter.

Here’s a quote from the book:

All waves may be categorized by relative size, or degree. The degree of a wave is determined by its size and position relative to component, adjacent and encompassing waves. [R.N.] Elliott named nine degrees of waves, from the smallest discernible on an hourly chart to the largest wave he could assume existed from the data then available. He chose the following terms for these degrees, from largest to smallest: Grand Supercycle, Supercycle, Cycle, Primary, Intermediate, Minor, Minute, Minuette, Subminuette. Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor waves, and so on. The specific terminology is not critical to the identification of degrees, although out of habit, today’s practitioners have become comfortable with Elliott’s nomenclature.

If you’d like to learn more, know that the entire online version of this Wall Street classic is available to you free once you join Club EWI — the world’s largest Elliott wave educational community.

A Club EWI membership is free, and members enjoy complimentary access to a wealth of Elliott wave resources on investing and trading without any obligations.

You can have the book on your screen in moments as you follow this link: Elliott Wave Principle: Key to Market Behavior — get instant and free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks: It All Boils Down to This. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Expect a Once-in-a-Lifetime Debt Crisis

Why You Should Expect a Once-in-a-Lifetime Debt Crisis
U.S. credit card debt surpasses $1 trillion

By Elliott Wave International

On a national level, a debt crisis occurs when a country is unable to pay back its government debt. This might result from government spending exceeding tax revenues for an extended period.

On an individual level, a crisis can result from too little income and too much debt — that simple. This sometimes means defaulting on a car loan, for example, or even declaring bankruptcy.

Part 1 of the June Elliott Wave Theorist, a publication which covers major financial and cultural trends, said:

A debt crisis is brewing, and higher long term interest rates will add to the pressure.

Indeed, as Kiplinger noted on Aug. 18:

Credit Card Use Spikes for Cash-Strapped Consumers
Credit card use amps up as consumers reckon with inflation and higher interest rates; 39% of Americans living paycheck-to-paycheck, study shows.

The August Elliott Wave Theorist had more to say about the looming debt crisis as it showed these side-by-side charts:

Excess savings US households built up during the pandemic are nearly gone. …

At the same time, consumers are borrowing to stay alive, driving indebtedness to yet another milestone: Total credit card debt in the U.S. has just surpassed $1 trillion. Will consumers be able to pay it off?

They had better do it fast, because credit-card interest rates have just soared to a new all-time high above 20%!

And bond yields (and interest rates) continue to climb (Reuters, Sept. 21):

TREASURIES-Two-year yields hit 17-year highs …

Elliott Wave International warned subscribers to prepare back in 2020 when interest rates were near zero.

Of course, a lot of people are wondering if rates are headed even higher.

Remember, it’s the market which determines the direction of interest rates; the Fed merely follows.

A key way to keep tabs on widely traded financial markets is to employ the Elliott wave method.

If you’d like to delve into the details of Elliott wave analysis, read Frost & Prechter’s book, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from this Wall Street classic:

“When you have eliminated the impossible, whatever remains, however improbable, must be the truth.” Thus eloquently spoke Sherlock Holmes to his constant companion, Dr. Watson, in Arthur Conan Doyle’s The Sign of Four. This advice is a capsule summary of what you need to know to be successful with Elliott. The best approach is deductive reasoning. By knowing what Elliott rules will not allow, you can deduce that whatever remains is the proper perspective, no matter how improbable it may seem otherwise. By applying all the rules of extensions, alternation, overlapping, channeling, volume and the rest, you have a much more formidable arsenal than you might imagine at first glance. Unfortunately for many, the approach requires thought and work and rarely provides a mechanical signal. However, this kind of thinking, basically an elimination process, squeezes the best out of what Elliott has to offer and besides, it’s fun! We sincerely urge you to give it a try.

Club EWI members get free access to the entire online version of Elliott Wave Principle: Key to Market Behavior.

Club EWI is the world’s largest Elliott wave educational community and is free to join. Besides the book, members also enjoy complimentary access to a wealth of other Elliott wave resources on investing and trading.

Get started now by following this link: Elliott Wave Principle: Key to Market Behavior — free and instant access for Club EWI members.

This article was syndicated by Elliott Wave International and was originally published under the headline Why You Should Expect a Once-in-a-Lifetime Debt Crisis. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Treasury Bonds

Treasury Bonds: How This Forecast is Playing Out
Here’s what happened with a shelf of support in the chart of the long bond

By Elliott Wave International

The yield on U.S. Treasury bonds trended higher from 1942 to 1981 — that’s 39 years.

Interestingly, yields (or interest rates) then trended lower for 39 years (1981 to 2020).

Thirty-nine years is quite a long time — well long enough for observers to get used to the idea of exceptionally low yields, even the Fed.

Indeed, here’s a Sept. 16, 2020 headline from the Wall Street Journal:

Fed Signals Low Rates Likely to Last Several Years

Elliott Wave International President Robert Prechter had an entirely different perspective. Here’s what he said just a week later in his Sept. 23, 2020 issue of The Elliott Wave Theorist, a monthly publication that provides analysis of major financial and cultural trends:

On September 16, Fed Chairman Powell [said] he expected short-term interest rates to stay near zero as long as inflation stays below 2%, a condition he believes will maintain … through “the end of 2023.” I think there is not a chance in the world of that scenario playing out. … The probability is high that interest rates have begun a process of rising. … [emphasis added]

As we all know, interest rates or yields have risen substantially since 2020.

This chart and commentary from the May 19, 2023 Elliott Wave Theorist provide an update (Keep in mind that Elliott wave labeling is available to subscribers):

Treasury bond futures have been slipping again. As you can see in [the chart], bond prices broke a shelf of support this week and traded today at their lowest level in ten weeks. A debt crisis is brewing, and higher long-term interest rates will add to the pressure.

Yes, servicing public and private debt is getting a lot more expensive. And that debt has been increasing dramatically and rapidly (CNBC, May 18):

The global debt pile grew by $8.3 trillion in the first quarter to a near-record high of $305 trillion … .

Getting back to the price pattern of the U.S. Treasury Long Bond, Elliott wave analysis can help you determine what’s next.

Of course, no method of analyzing financial markets can offer a guarantee, but Elliott Wave International knows of no other method which surpasses the usefulness of the Elliott wave model.

That said, here’s a quote from Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior:

Without Elliott, there appears to be an infinite number of possibilities for market action. What the Wave Principle provides is a means of first limiting the possibilities and then ordering the relative probabilities of possible future market paths. Elliott’s highly specific rules reduce the number of valid alternatives to a minimum. Among those, the best interpretation, sometimes called the “preferred count,” is the one that satisfies the largest number of guidelines. Other interpretations are ordered accordingly. As a result, competent analysts applying the rules and guidelines of the Wave Principle objectively should usually agree on both the list of possibilities and the order of probabilities for various possible outcomes at any particular time. That order can usually be stated with certainty. Do not assume, however, that certainty about the order of probabilities is the same as certainty about one specific outcome. Under only the rarest of circumstances do you ever know exactly what the market is going to do. You must understand and accept that even an approach that can identify high odds for a fairly specific event must be wrong some of the time.

If you’d like to read the entire online version of the book, you may do so for free once you become a member of Club EWI, the world’s largest Elliott wave educational community.

A Club EWI membership is also free.

Get started right away by following this link: Elliott Wave Principle: Key to Market Behavior — get free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Treasury Bonds: How This Forecast is Playing Out. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Ready to Trade Stock Market Volatility for Money

Explosive Rise in Stock Market Volatility! Why It May Be Ahead
There are now S&P options that expire each day of the week. What that may mean.

By Elliott Wave International

Here’s a Wall Street Journal headline from a couple of months ago that some people may have scanned without much contemplation (Jan. 11):

VIX, Wall Street’s Fear Gauge, Extends Longest Lull Since 2021

While some investors may not consider a subdued VIX highly significant, Elliott Wave International does. As we’ve repeatedly stated: prolonged periods of low volatility in the stock market are inevitably followed by jumps in volatility — and often, those jumps can be quite high.

With the “lull” in the VIX so extended, the next surge higher in volatility may be exceptionally high and last for an exceptionally long period of time.

Yet, there’s at least one more strong reason to expect a super surge in the fear gauge.

This chart and commentary are from the March Elliott Wave Financial Forecast, a publication which provides analysis of major U.S. financial markets:

The CBOE Volatility Index (VIX) is purportedly a measure of expected future volatility in 30-day S&P 500 index options, but in fact it’s a real-time reading of complacency vs. fear. The index has been subdued, declining to 17.06 on February 2 in conjunction with [an Elliott wave] rally. This was the lowest VIX since January 5, 2022, the very day of the Dow’s all-time high. So, investors are as complacent now with respect to a stock market decline as they were when the blue chip indexes hit top tick in the great bull market.

Digging deeper, we find a segment of investors who are using the market to make casino-style bets. According to Bloomberg, more than 40% of the S&P 500’s total options volume occurs in what is known as “zero-day-to-expiry” options, or 0DTE, as shown by this graph. These are options that expire within 24 hours, making them highly sensitive to changes in price because of the lack of time premium. In 2022, the CBOE and CME expanded existing options so that there are now S&P options that expire each day of the week, allowing investors to speculate using these ultra-short-term instruments. Options dealers have to hedge against the risks of outsized moves in 0DTE options, which increases the potential for an explosive rise in volatility.

If another major leg down occurs in the stock market, wrong-way bets in highly leveraged 0DTE options will spike volatility.

The question is: What are the chances that the price downtrend which began in January 2022 will intensify?

While Elliott wave analysis offers no guarantees (no market analytical does), the stock market’s current Elliott wave structure is highly revealing.

If you’d like to learn how you can analyze financial markets using the Wave Principle, read Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from the book:

In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4. The two interruptions are apparently a requisite for overall directional movement to occur.

[R.N.] Elliott noted three consistent aspects of the five-wave form. They are: Wave 2 never moves beyond the start of wave 1; wave 3 is never the shortest wave; wave 4 never enters the price territory of wave 1.

… Elliott did not specifically say that there is only one overriding form, the “five-wave” pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.

If you’d like to delve deeper into the Wave Principle, here’s good news: You may read the entire online version of the book free once you become a member of Club EWI, the world’s largest Elliott wave educational community (approximately 500,000 worldwide members).

A Club EWI membership is also free and opens the door to complimentary access to Elliott wave resources on financial markets, investing and trading. Some of these resources (videos and articles) are from Elliott Wave International’s own analysts.

Join Club EWI (free membership) by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Explosive Rise in Stock Market Volatility! Why It May Be Ahead. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Buyers Scoop Up U.S. Shares

Overseas Buyers Scoop Up U.S. Shares (Bullish or Bearish)?
“No crowd buys stocks of other countries intelligently”

By Elliott Wave International

The fact that investors from other countries are feverishly buying U.S. stocks might seem like a bullish sign.

On the other hand, consider what Robert Prechter said in his book, Prechter’s Perspective:

No crowd buys stocks of other countries intelligently. For decades, heavy foreign buying in the U.S. stock market has served as an excellent indicator of major tops.

Some of the heaviest foreign buying — whether it’s in the U.S. or another country — tends to occur when a trend is near or at an end.

Looking at an example: In the late 1980s, after years on the sidelines, foreigners became net buyers of Japanese stocks. This coincided with the ending phase of one of the biggest bull markets in history.

Returning to the U.S. but sticking with roughly that same period of history, here’s what the Sept. 2000 Elliott Wave Financial Forecast, a monthly Elliott Wave International publication which covers 50-plus financial markets, had to say as it showed this chart:

ForeignersBuyHighs

This chart of the Dow and foreigners’ net purchases of U.S. equities illustrates how beautifully the pattern has held through the U.S. bull market of the 1990s. The solid lines show the flood of foreign buyers within a month of each high, and the dotted lines show them rushing back out again on the months of the big lows. Early in the decade, when stocks were a bargain, foreigners were net sellers. They did not sustain net purchases until the Dow crossed 8000 in 1997.

By the way, overseas buyers also zealously bought U.S. shares right before the 2007 top.

As a quick reminder, the reason for mentioning all of this is what I said at the outset about feverish overseas buying of U.S. shares presently. Here are more details via this chart and commentary from our March Financial Forecast:

ForeignBuyersRushIn

Foreigners are surging back into U.S. equities. At $42.9 billion in November, the latest reading of foreign purchases is higher than both the 2000 and 2007 buying extremes. It is shy of the December 2020 record of $78.6 billion, but if foreigners flocked to U.S. stocks the way retail investors did in January, we may find that when the latest readings are released, foreign purchases will be at a new record.

One way to utilize the foreign buying (or, selling) indicator is with the Elliott wave model.

If you’re unfamiliar with Elliott wave analysis, or simply need a refresher on the subject, check out EWI’s FreePass for a Changed World event – thru March 31.

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This article was syndicated by Elliott Wave International and was originally published under the headline Overseas Buyers Scoop Up U.S. Shares (Bullish or Bearish)?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Gold and Inflation Market Myth

Gold and Inflation: Here’s a Market Myth
“If you believe in Gold as a consumer price inflation hedge then…”

By Elliott Wave International

Back in the days of the Roman Empire, an ounce of gold could buy a Roman a well-made toga, belt, and finely crafted sandals.

In modern-day Rome, lo and behold, a businessman can become sharply dressed via the value of that same ounce of gold.

So, yes, gold has maintained its store of value over the centuries.

However, in the relatively short term — which can last years — gold may not be the inflation hedge that gold bugs believe it to be.

In a moment, I’ll show you how this relates to what’s going on with gold and inflation now. However, let’s first get insights from a chart and commentary from our February 2022 Global Market Perspective, which was published when inflation was really getting going (The monthly Global Market Perspective is an Elliott Wave International publication that covers 50-plus global financial markets):

The chart shows the U.S. dollar price of Gold versus the annualized rate of change in the U.S. Consumer Price Index (CPI). If you believe in Gold as a consumer price inflation hedge then, as the CPI is accelerating, the Gold price should be advancing. The green-shaded areas show that there have been five occasions since 1980 when the opposite was true, the last year being a good example. On the other side, the Gold-Inflation myth would allude to the price of Gold declining as CPI was decelerating. The grey-shaded areas show five occasions since 1970 when this was not the case, with 2007 to 2010 being a prime example.

Fast forward to today and we have these headlines:

  • US inflation eases grip on the economy, falling for a 6th month (AP News, Jan. 23)
  • Inflation in the U.S. could turn negative by midyear, says [this] billionaire investor … (MarketWatch, Jan. 28)

What’s happened to the price of gold? It’s steadily climbed in the face of easing inflation. Of course, this is just the opposite of what was occurring around this time last year. In both cases, the price of gold went in the opposite direction from what many would expect.

On Sept. 28, gold was trading at $1613.75 and has been in an overall uptrend since. The precious metal traded as high as $1949.46 on Jan. 26 (as of this writing on Jan. 30).

The bottom-line takeaway is that the widespread expected relationship between gold and inflation is not always there — indeed, there have been several instances in the past several decades where the opposite is the case.

Know that Elliott wave analysis, which is by no means a crystal ball, can nonetheless help you anticipate gold’s next big price move.

If you’re unfamiliar with Elliott wave analysis, read Frost & Prechter’s Elliott Wave Principle: Key to Market Behavior. Here’s a quote from the book:

The Wave Principle is governed by man’s social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

Learn about these “forms” for free as a Club EWI member.

That’s right — you can gain free access to the entire online version of this Wall Street classic by joining Club EWI — the world’s largest Elliott wave educational community. A Club EWI membership is also free, and members enjoy complimentary access to a wealth of Elliott wave resources on investing and trading.

Get started right away by following this link: Elliott Wave Principle: Key to Market Behavior — get free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Gold and Inflation: Here’s a Market Myth. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Stocks and Economy: Why 2022 May Have Just Been the Preview


“Fight the inertia that will keep you from taking action to prepare for the downturn”

By Elliott Wave International

The main show is likely about to begin.

2022 may have just been a preview of what’s ahead for stocks and the economy, which Robert Prechter’s Last Chance to Conquer the Crash warned about nearly a year ago, and our Global Market Perspective discussed at the start of 2022.

Let’s start with that warning from the January 7, 2022, Global Market Perspective, a monthly Elliott Wave International publication that covers 50-plus worldwide financial markets, via these charts and commentary:

The blue-chip Dow Industrials and S&P 500 … managed to eke out new highs in the first two trading days of 2022. There is a good chance that Wednesday’s trend reversal is the start of a long-term decline.

The “Wednesday” referenced was Jan. 5 and indeed, an all-time high for the Dow Industrials occurred on that very date, with the S&P 500 hitting its high on Jan. 4. Mind you, the Global Market Perspective‘s forecast was made in real-time — just two and three days, respectively, after those all-time highs registered.

As you know, the blue-chips have been in a downtrend since, albeit accompanied by some very sharp rallies — which is not unusual during downtrends.

Let’s now turn our attention to Robert Prechter’s Last Chance to Conquer the Crash, which, as a reminder, was published nearly a year ago and warned of a major economic contraction ahead. This is from the book:

Fight the inertia that will keep you from taking action to prepare for the downturn. Start taking steps now. … Think globally, not just domestically.

Yes, when the good times are rolling and stock market indexes are reaching new all-time highs, it can seem unnecessary to prepare for a downturn.

But, as you read these headlines, many people likely wished they had:

  • Household wealth down by $13.5 trillion in 2022, second-worst destruction on record (Marketwatch, Dec. 9)
  • Tech Layoffs in U.S. Send Foreign Workers Scrambling to Find New Jobs (The New York Times, Dec. 9)
  • Economists: A US housing recession has already arrived (The Hill, Dec. 7)
  • Defaults Loom as Poor Countries Face an Economic Storm (The New York Times, Dec. 3)
  • The UK economy is sliding into recession and Europe is set to follow (CNN, Nov. 11)
  • China’s super-rich see fortunes plunge as economy slows (The Guardian, Nov. 7)

There are many more similar headlines.

The stance of Elliott Wave International is that these headlines represent only an inkling of what’s likely ahead.

Keep in mind that the stock market leads and the economy follows. In other words, a downturn in the stock market is generally followed by a downturn in the economy and an upturn in the stock market is generally followed by improving economic conditions.

So, it would be a good idea to keep on top of the Elliott wave pattern of the stock market in which you are interested — whether it’s the U.S., another nation or many nations. Elliott wave analysis will help you to anticipate what’s next for a given stock market index or indexes. Hence, you can also anticipate what’s down the road for the economy. As you might imagine, Elliott wave analysis offers no guarantees, but it’s the best analysis of financial markets of which Elliott Wave International knows.

If you’re unfamiliar with Elliott wave analysis and would like to learn about it, read Frost & Prechter’s Elliott Wave Principle: Key to Market Behavior — the definitive text on the Elliott wave model. Here’s a quote from the book:

The Wave Principle is governed by man’s social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life. The path of prices is not a product of news. Nor is the market the cyclically rhythmic machine that some declare it to be. Its movement reflects a repetition of forms that is independent both of presumed causal events and of periodicity.

The market’s progression unfolds in waves. Waves are patterns of directional movement.

If you’d like to read the entire online version of this Wall Street classic, you may do so for free once you join Club EWI — the world’s largest Elliott wave educational community. A Club EWI membership is also free and allows you complimentary access to a wealth of Elliott wave resources on investing and trading.

Just follow this link: Elliott Wave Principle: Key to Market Behavior — get instant and free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks and Economy: Why 2022 May Have Just Been the Preview. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Green Bonds

Wipeout! New Update on Our “Green Bond” (ESG) Forecast
Excessive euphoria in financial markets is usually a big reason to be “skeptical”

By Elliott Wave International

Environmental, Social and Governance bonds (ESG) — also called “green” bonds — are offered by companies which want to advance the causes of social justice, social inclusion and green technology.

This form of debt had been steadily gaining in popularity — going from sales of less than $100 billion in 2015 to around $800 billion in 2020.

For instance, here’s an Oct. 9, 2020 headline from Pensions & Investments:

University of Toronto’s $7 billion fund makes bet on ESG debt

However, the Elliott wave structure of a global green-bond index was sending a warning signal.

The July Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus worldwide financial markets, shows a chart from the December 2020 Global Market Perspective (on the left) and an updated chart on the right.

Focusing on the left chart first, which had sported a five-wave advance (meaning a trend turn was imminent), the December 2020 Global Market Perspective said:

Experts have loudly proclaimed that so-called social bonds will be the next great innovation. … But the euphoria surrounding this new debt is actually one of the biggest reasons to remain skeptical. … Steer clear of both green bonds and social bonds.

Indeed, as the updated right chart shows, the price began to fall shortly after that warning. Eventually, a countertrend rally ensued and by July 13, 2021, a Bloomberg headline said:

ESG Bond Sales Sprint to $1 Trillion as Investors Force Change

Once again, the Global Market Perspective provided a warning — this one from the August 2021 issue:

The wipeout could be one of the biggest ever.

You can see the big price tumble that occurred thereafter.

Do understand that the Elliott wave model does not guarantee that a financial market will behave in one fashion or another. At the same time, it’s the best analytical method of which Elliott Wave International knows because it’s based on the repetitive patterns of investor psychology.

Indeed, here’s what Frost & Prechter had to say in Elliott Wave Principle: Key to Market Behavior:

The Wave Principle is governed by man’s social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value. [emphasis added]

For a limited time, our friends at Elliott Wave International are offering you 5 quick takes on Elliott wave patterns in several markets — stocks, pot stocks and bonds — all from their new, July 2022 issue of the Global Market Perspective.

The publication provides analysis for 50+ of the world’s key markets.

See what warnings it’s issuing now.

FREE, check out 5 short excerpts from the new, July Global Market Perspective

This article was syndicated by Elliott Wave International and was originally published under the headline Wipeout! New Update on Our “Green Bond” (ESG) Forecast. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.