Tag: Elliott Wave

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.

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.

The Easiest Money in History


If raising money doesn’t get any easier than this, what’s next?

By Murray Gunn

The latest data from Refinitiv shows that companies have raised a record $140 billion in the U.S. dollar junk bond market during the first quarter of this year. That beats the previous record set during the second quarter last year when companies scrambled to issue debt in a bid to raise cash during the pandemic. The three biggest issuance quarters in history have been set in the past year. With investors falling over themselves to lend money to any venture offering a U.S. dollar yield above 4%, companies are now not only finding that they can raise money easily in order to roll over existing debt, but some are using the proceeds to pay dividends to owners. It’s beyond absurd.

When a mania is in full force, though, the vast majority of participants are blind to the absurdity. Investors, for instance, think that they must lend because 4% or higher is such a juicy yield when compared with anything else. And the central banks will not let companies fail, so it’s a free lunch.

Right.

This era of central bank-induced gushing liquidity, combined with a manic social mood, has created statistics that, when looked back on in the cold light of day, will be viewed as clearly insane. At this juncture, it is seen as entirely normal, indeed clever, to give your money to someone who will not tell you what they are going to do with it. The SPAC (Special Purpose Acquisition Company) mania is a prime candidate for the financial bubble history books.

And then, when we think we’ve seen it all, along come NFTs. Non-fungible tokens are the new hot, must-have accessory in town. According to Wikipedia, “a non-fungible token is a unit of data on a digital ledger called a blockchain, where each NFT can represent a unique digital item, and thus they are not interchangeable. NFTs can represent digital files such as art, audio, videos, items in video games and other forms of creative work.” Ah, life in the cloud.

But it doesn’t matter if anyone understands them. The crowd is besotted by them and that’s all there is to it. This week, a New York Times columnist sold his column as a non-fungible token for $560,000, writing “Why can’t a journalist join the NFT party, too?”

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The free lunch party is in full swing. We say enjoy it while it lasts because the hangover is going to be biblical. If you need some religion, check out the free report, Money Making Rules for Investors. Get instant access with a free Club EWI membership.

This article was syndicated by Elliott Wave International and was originally published under the headline The Easiest Money in History. 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.

Wicked E-Wave

Why This Wave is Usually a Market Downturn’s Most Wicked
The progression of mass emotions in financial markets “tends to follow a similar path each time around”

By Elliott Wave International

The Wave Principle’s basic pattern includes five waves in the direction of the larger trend, followed by three corrective waves.

In a bull market, the pattern is five up, followed by three down. In a bear market, the pattern unfolds in reverse: the five waves trend downward and the correction trends upward.

Each of these waves sports its own characteristics.

As the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, says:

The personality of each wave in the Elliott sequence is an integral part of the reflection of the mass psychology it embodies. The progression of mass emotions from pessimism to optimism and back again tends to follow a similar path each time around.

For example, strong price advances on high volume typically happen during wave 3 in a bull market. Of course, in a bear market, the strong price action is downward.

Returning to Elliott Wave Principle:

Third waves usually generate the greatest volume and price movement and are most often the extended wave in a series.

Let’s review an instance of a third wave in a downturn from recent financial history.

Here’s a chart and commentary from Elliott Wave International’s Aug. 21, 2015 U.S. Short Term Update:

This week’s sharp decline is clearly a third wave. It sports a steep slope with strong downside breadth and volume.

During the next trading session (August 24, 2015), the Dow fell nearly 1,100 points at the open.

As you might imagine, it would be highly helpful to learn how to anticipate third waves so one can prepare.

Indeed, Elliott Wave International has just made the 1-hour course, The Wave Principle Applied, free through May 15 for free Club EWI members. Club EWI membership allows you to get Elliott wave insights on investing and trading, the economy and social trends that you will not find anywhere else.

The Wave Principle Applied normally sells for $99, so you are encouraged to take advantage of this limited-time offer to access the course for free.

As the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter says:

Without Elliott, there appear 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.

Get started with The Wave Principle Applied.

This article was syndicated by Elliott Wave International and was originally published under the headline Why This Wave is Usually a Market Downturn’s Most Wicked. 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.