Tag: stock market

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.

Corporate Bonds: “The Next Shoe to Drop”

Corporate Bonds: “The Next Shoe to Drop”
“The neckline has been broken over the last few days”

By Elliott Wave International

A “calamity” is likely ahead for corporate bonds, says our head of global research, Murray Gunn.

Some of Murray’s analysis involves the head and shoulders, a classic technical chart pattern. In case you’re unfamiliar with it, here’s an illustration along with an explanation from one of our past publications:

A head-and-shoulders is a reversal pattern that consists of three price extremes. Market technicians refer to [them] as the left shoulder, head, and right shoulder. …it takes a break of the neckline to confirm a reversal… [and it’s] not just a bearish reversal formation. Inverted head-and-shoulders mark bottoms.

With that in mind, here’s a chart and commentary which Murray provided for the April Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets:

The chart … shows the relative performance of corporate bonds, as proxied by the iShares iBoxx $ Investment Grade Corporate Bond ETF (ticker LQD) versus the iShares 7-10 Year Treasury Bond ETF (ticker IEF). A distinct Head and Shoulders pattern exists where the neckline has been broken over the last few days. The corporate bond market has held in reasonably well over the last year, but we fully expect this sector to be the next shoe to drop.

Don’t count on the ratings services to provide timely warnings. In the past, downgraded ratings have sometimes come only after most if not all the damage was done.

Remember Enron? The company still had an “investment grade” rating just four days before it collapsed. Ratings services also missed the 1995 debacle at Barings Bank. Olympia and York of Canada is another historical example: the largest real estate developer in the world at the time had a AA rating on its debt in 1991. Less than a year later, it went bankrupt.

Getting back to the present, Murray Gunn also notes:

When … corporate loans are re-set this year, there are going to be a few deep breaths being taken, and more than a fair share of tightened sphincters!

And, speaking of chart patterns of financial markets, another way to monitor the bond market is to use Elliott wave analysis.

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

If indeed markets are patterned, and if those patterns have a recognizable geometry, then regardless of the variations allowed, certain price and time relationships are likely to recur. In fact, experience shows that they do.

It is our practice to try to determine in advance where the next move will likely take the market. One advantage of setting a target is that it gives a sort of backdrop against which to monitor the market’s actual path. This way, you are alerted quickly when something is wrong and can shift your interpretation to a more appropriate one if the market does not do what you expect. The second advantage of choosing a target well in advance is that it prepares you psychologically for buying when others are selling out in despair, and selling when others are buying confidently in a euphoric environment.

If you’d like to read the entire online version of Elliott Wave Principle: Key to Market Behavior, 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.

Join now 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 Corporate Bonds: “The Next Shoe to Drop”. 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.

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.

Stock Market Recession Indicator

Here’s a More Reliable “Recession Indicator” Versus an Inverted Yield Curve
“The lead time between past inverted curves and economic contractions is widely variable”

By Elliott Wave International

Longer-dated bonds generally yield more than shorter-dated bonds to compensate an investor for assuming the greater risk of tying up money for a longer time.

As examples, 30-year government bonds have historically offered investors a higher yield than 10-year notes, and 10-year notes generally provide a higher yield than 2-year notes.

However, there are times when the yield on a shorter-term bond is higher than a longer-term bond. This is known as an inverted yield curve, and many market observers view this occurrence as a signal that a recession may be just around the corner.

For example, a March 28 CNBC headline said:

5-year and 30-year Treasury yields invert for the first time since 2006, fueling recession fears

The next day, on March 29 and then again on April 1, the yield on 2-year U.S. treasury notes climbed above the yield on 10-year U.S. treasury notes — prompting more potential recession talk. A key reason why is that a yield inversion has preceded every U.S. recession since at least 1955.

However, here are some important insights from our just-published April Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets:

The lead time between past inverted curves and economic contractions is widely variable … and usually does not occur until after the curve un-inverts. Since stock prices lead the economy, it is more reliable to monitor equities to estimate when the onset of an economic contraction may occur.

Indeed, here’s some historical evidence of that from Robert Prechter’s landmark book, The Socionomic Theory of Finance, which says:

It is important to understand that socionomic causality does not predict that each stock market decline will produce an official recession as defined by the National Bureau of Economic Research; it predicts that stock market declines and advances will reliably lead rather than follow whatever official recessions and recoveries do occur.

So, keep an eye on the stock market’s Elliott wave pattern for a clue about what’s ahead for the economy.

If you’re new to Elliott wave analysis, or simply need a refresher on the topic, you are encouraged to read Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior.

Here’s a quote from the book:

In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form but not necessarily in time or amplitude. Elliott isolated five such patterns, or “waves,” that recur in market price data. He named, defined and illustrated these patterns and their variations. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns of the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle.

You may be interested in knowing that you can read the entire online version of Elliott Wave Principle: Key to Market Behavior for free.

You can get that free access by joining Club EWI, the world’s largest Elliott wave educational community.

Club EWI membership is free and allows you complimentary access to a wealth of Elliott wave educational resources on investing and trading without any obligation.

Just follow the link to get started: Elliott Wave Principle: Key to Market Behavior — free and unlimited access.

This article was syndicated by Elliott Wave International and was originally published under the headline Here’s a More Reliable “Recession Indicator” Versus an Inverted Yield Curve. 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.

Everybody’s Getting Rich

“Everybody’s Getting Rich (and Having Fun) Except Me”
The idea of “missing out” on stock market gains “literally generates fear in many people”

By Elliott Wave International

Hardly anyone wants to miss the party — whether on Wall Street or elsewhere.

Thus, the acronym FOMO — which stands for the “fear of missing out” — is in vogue. After a 12-years long bull market, the acronym has appeared in many financial articles.

Yet, the acronym was coined years before the current bull market.

As the March 2019 Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, noted:

The “fear of missing out” and its abbreviation were coined by Dr. Dan Herman. … It was first published in The Journal of Brand Management in 2000, coincident with the front edge of the Great Peaking Process. … After more than 200 years of rising stock prices, not being in the stock market literally generates fear in many people. The underlying cultural dynamic is also appropriate as it coincides perfectly with the long-term peak in social mood.

Social mood also governs attitudes and behaviors in society-at-large, including social life.

As a June 7 New York magazine article says:

The city runs on FOMO, a connoisseurship of opportunities and possibilities; the catechism of “Did you get invited, are you on the list, can you get a table?”; the performance of plans.

So, the “fear of missing” out on rising stock prices goes hand-in-hand with the “fear of missing out” on a fun social life. The desire to “see and be seen” and “live it up” is especially pronounced during times of an exceptionally positive social mood (think the Roaring ’20s).

So, social mood is all encompassing. And, returning to the financial aspects, here’s the latest on that front from Marketwatch (May 25):

[The] FOMO ETF [started] trading on the Cboe Options Exchange on [May 25], providing the market with a new tool for leveraging the retail trading boom by investing in all the buzziest “meme stocks” and funds from special-purpose acquisition corporations … to crypto-adjacent investments.

Right now, hardly anyone appears to be contemplating the total opposite of FOMO — which one of Elliott Wave International’s analysts said is the acronym FOBI. It stands for the “fear of being in.”

In other words, when social mood shifts from positive to negative (ushering in the next bear market), expect the “fear of being in” to replace the “fear of missing out.”

Remember, at the end of the 1920s, the stock market crashed. Social life — which had been characterized by vibrancy — was soon covered by a heavy blanket of gloom. The Wave Principle suggests that the next financial and social shift might be even more dramatic.

If you’d like to learn about the Wave Principle, you can do so by reading the online version of Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior for free.

Here’s a quote from the book:

It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.

The ability to identify such junctures is remarkable enough, but the Wave Principle is the only method of analysis that also provides guidelines for forecasting. Many of these guidelines are specific and can occasionally yield stunningly precise results.

All that’s required for free access to the book is a Club EWI membership — which is also free.

Club EWI is the world’s largest Elliott wave educational community (about 350,000 members and growing rapidly) and offers members free access to a wealth of Elliott wave resources on investing and trading.

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

This article was syndicated by Elliott Wave International and was originally published under the headline “Everybody’s Getting Rich (and Having Fun) Except Me”. 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.

Don’t Buy the Dips .. yet

Stocks: Why “Buying the Dip” is Fraught with Danger
Take a look at “a dip buyer’s nightmare”

By Elliott Wave International

Investors know that the main U.S. stock indexes have tumbled very quickly.

On a historical basis, some may not realize just how quickly.

A March 23 Marketwatch headline referred to a “mind-bending stat”:

The S&P 500 has dropped 30% from peak to trough faster than any other time in history. The next three fastest were all nasty pullbacks during the Great Depression era. Yes, just 22 days for this stock market to get cut by a third.

This historically swift downturn has prompted a “buy the dip” mentality.

On March 23, a prominent founder of a financial firm told CNBC:

“I’m nibbling right now, for what it is worth.”

Other professional investors have also mentioned that they were doing a little nibbling of their own.

The sentiment expressed was that the market may have a little more downside to go, but that’s about it.

These professionals might turn out to be correct in their judgments of the market. Then again, just because stocks have fallen far and fast – doesn’t mean they can’t fall way farther.

As a historical lesson, let’s take you back 19 years, when our April 2001 Elliott Wave Financial Forecast showed this chart and said:

“If there were ever a testament to the importance of market timing, the NASDAQ over the last year is it. Anyone who bought into the euphoria at the all-time high or the bull trap highs of early September and late January, would have taken successive hits of 40%, 47% and 38%. You can bet that many people followed the “buy” advice in the media on every bounce, losing even more than the “hold-only” loss of 65% from top to bottom.”

Bear in mind, the NASDAQ continued to fall into October 2002, handing even deeper losses to investors who continued to buy on the way down.

Returning to 2020, only time will tell when the bear market has bottomed, if it hasn’t already done so.

Yet, one thing’s for sure even now: The Elliott wave model is offering its own clues about what’s next for the main stock indexes.

See for yourself – 100% free.

You see, Elliott Wave International has just made available our entire “Stocks” section of our monthly Elliott Wave Financial Forecast to Club EWI members. Joining Club EWI is also free.

Elliott Wave International has been guiding investors through bull and bear markets since 1979. From that long experience, EWI’s analysts know that at certain market junctures, they can help the most by giving everyone their latest analysis free.

Now is one of those market junctures.

Read the Financial Forecast excerpt now, free.

This will help you understand how the markets got to this juncture — and, more importantly what’s likely next.

Also, please feel free to share this special excerpt with friends and family.

Again, simply follow this link:

Read the Financial Forecast excerpt now, free.

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks: Why “Buying the Dip” is Fraught with Danger. 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.

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks: Why “Buying the Dip” is Fraught with Danger. 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.

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Deflation

Deflation has actually been in place for the past 15-years. (Blue line on graph below)

Slowly but surely, assets are becoming worth less.

Compare the current Market decline due to the Chinese Corona Virus with the recent Financial Market collapse of 2007-2009. We currently still have a ways to go Down if we are to match that collapse. (Red arrow)

My portfolio (including every account I have .. College Fund, Retirement Fund, short-term accounts) is:

  • 1/4 Down positions
    • Put options
    • Bearish Call Credit Option Spreads
    • Inverse Index ETFs
  • 3/4 Cash