Many people are concerned about the return of a recession now that the FED has been actively tightening and the market has begun falling. Other indicators are flashing signs that we are already in a recession i.e. two consecutive quarters of falling GDP. But so far the National Bureau of Economic Research (NBER) hasn’t officially declared a recession to be in progress. Although, it generally takes them a while after the fact to make the official determination of the beginning (or end) of a recession. In addition to falling GDP other factors can trigger a recession as we will see from the following article from Elliott Wave International. ~ Tim McMahon, editor
Stocks Don’t Go Straight Up (or Straight Down)
September 1, 2022 by Leave a Comment
Big stock market trends don’t progress up or down in a straight line. In a bear market, stocks typically rebound after the first leg down. In a bull market, the opposite happens: Stocks again take a big dive, making everyone think the bear market has returned.
But in a bear market, that “first leg down” is wave 1 and the partial “rebound” which follows is wave 2. I say “partial” because the only rule which applies to wave 2 is that it cannot retrace 100% of wave 1. Meaning, the bear market rally cannot go above the previous market top.
How to Prepare for a Hard-Hitting Bear Market (Think 1929-1932)
July 21, 2022 by Leave a Comment
An important step in preparing for a historic bear market is to embrace cash or cash equivalents.
This may seem obvious, but even with the stock market in a downtrend, cash is shunned by many an investor — retail and professional. Many of these investors believe the bull market will resume — sooner rather than later.
The Dow 8 Waves are Incomplete
June 15, 2022 by Leave a Comment
According to Elliott Wave Theory, each cycle is comprised of 8 waves. Each wave is comprised of smaller cycles. Cycles can take days, weeks, months, years, decades, or even centuries to complete. Now is the time to prepare for the completion of the biggest cycle.
Surging Housing Prices Are Entering The Stratosphere- Look Out Below
April 14, 2022 by Leave a Comment
In my Inflation-Adjusted Housing index article, I included a chart that showed recent housing prices skyrocketing not only in nominal terms but in inflation-adjusted terms as well. This means that from a historical perspective houses are more expensive than at any time since 1900! In today’s article, Elliott Wave International editors tell us why we should expect housing prices to decline.
Germany’s DAX: What You Can Learn from the 2007 Top
April 7, 2022 by Leave a Comment
This stock market indicator may be off many investors’ radar but a peak in consumer confidence tends to precede a peak in the stock market. With that in mind, back on Nov. 25, the Telegraph said: Consumer confidence has dropped sharply in Germany. … A few days later, the December Global Market Perspective, a monthly Elliott Wave International publication that offers coverage of 50-plus worldwide financial markets, provided a retrospective of Germany’s DAX and consumer confidence with this chart and commentary:
Historically Investors Become “Long-term Buyers” at Precisely the Wrong Time
February 24, 2022 by Leave a Comment
Typically, unsophisticated investors tend to buy near tops and sell near bottoms… exactly the opposite of what they should be doing. And there is a very good psychological reason for this. They start out cautious and then as others begin making more and more money in the market the Fear of Missing Out (FOMO) takes over and eventually they get in to the market. They may make a little money and decide they are geniuses and commit more and more money. Eventually, everyone with available money has invested and there is no one left to buy so the market crashes. The unsophisticated investor holds on initially knowing the market will rebound as it “always” has. Then he holds on because he has “lost too much to get out now” and finally when he can’t stand it any longer he sells vowing never to invest again. This turns out to be the bottom, as there are no more people left to sell, and the market turns up. But “once burned, twice shy” so the unsophisticated investor once again refuses to buy until the market nears another top and “everyone is making money in the market”.
Why the “60 / 40 Balance” May Be Hazardous to Your Portfolio
February 17, 2022 by Leave a Comment
Financial advisors have long advocated a mix of 60% stocks / 40% bonds to cushion portfolios from downturns in the stock market. The thinking is that stocks go up in the long-term, hence, that’s where investors should allocate the most. At the same time, advisors acknowledge that stock prices can sometimes go down so “less risky” bonds will provide at least some protection. The problem with this investment strategy is that bonds can go into bear markets too. Moreover, they can do so at the same time as stocks. Let’s review what happened during the Great Depression of the early 1930s.
Warning: Mergers And Acquisitions Can Vaporize The Stock Market
February 2, 2022 by Leave a Comment
Historically we’ve seen that when market participants become overly optimistic the market has nowhere to go except down. This is logical because at optimism peaks everyone who has any money to invest, has already invested it, so there is no one left to buy. Conversely, when pessimism reaches extremes, no one is left to sell and so the market has to go up, as brave bargain-hunters re-enter the market.
Euro: Look at This Head & Shoulders Chart Formation
December 23, 2021 by Leave a Comment
You are probably familiar with the classic “head and shoulders” chart pattern. But, in case you need a refresher, here’s a brief description of a head and shoulders top: The high of an initial upward move is the left shoulder. After a decline, another upward move takes prices to a higher high, or the head. A second decline follows the head. A third rally then takes prices to a peak below the high of the head, and becomes the right shoulder. The left and right shoulders are often similar in duration and extent. A trendline connecting the two lows is called the neckline. When prices penetrate the neckline, a change of trend is believed to have occurred. Head and shoulders bottoms also occur and the same description applies except in reverse. This head and shoulders measuring formula — showing a top as an example — provides even more insight. The commentary is from a past issue of Elliott Wave International’s Trader’s Classroom:
