The government mandats that the following words appear on Stock Market related solicitations, “Past performance is no guarantee of future results.” This wording is designed to warn us that markets are irratic and that no one has a perfect crystal ball. But in so doing they may sub-consciously convince us that the future is unknowable and that it doesn’t even pay to look for indicators. But just as we can know when it is raining the the ground will be wet and the water level in the creek will rise. And we can also know that as we see the creek rising and overflowing its banks, we may need to protect the house on the banks of that creek from flooding. So too, we can look at things that are happening in the stock market and financial markets and get a good idea of what we must do to protect ourselves. ~Tim McMahon, editor
U.S. Stocks On a Collision Course with Market History
The past offers answers about the future; market patterns do repeat themselves
By Elliott Wave International
Next time you look at a clear night sky, keep in mind that what you see is the distant past.
Most stars are so distant that it takes millions of years before the light is visible to us.
Even so, astronomers can learn much about the future of the universe by studying the past.
NASA astronomers announced they can now predict with certainty the next major cosmic event to affect our galaxy, Sun, and solar system: the titanic collision of our Milky Way galaxy with the neighboring Andromeda galaxy.
NASA, May 31, 2012
That collision is expected in some 4 billion years.
The Hubble Space Telescope also recently revealed the farthest-ever view of deep space. NASA noted, “The images allow us to follow the development of the universe.”
And back here on earth, Elliott wave practitioners study the market’s past price patterns to determine the probable development of the present trend.
You see, price patterns repeat themselves at all degrees of trend.
Indeed, Robert Prechter recently discussed how past wave patterns are similar to what’s unfolding now:
The … rallies of 1929-1930 and 1938-1939 are good examples.
The Elliott Wave Theorist, September 2012
Both of those rallies came after steep market declines. Likewise, the present rally of three and a half years commenced after the 2007-2009 market plunge.
Be aware: Both of those past rallies in turn fell back into severe market declines.
The Dow Industrials lost 86% on just the second leg of the 1929-32 bear market, and surrendered 41% during the 1939-42 downtrend.
U.S. markets are likely on a similar collision course with history. The present price pattern is unfolding at a larger degree of trend than those previous two periods.
Position your portfolio for what Prechter calls “History in the Making.”
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See Also:
U.S. Stocks- The Long Ride Nowhere
What Do Stock Exchange Index Numbers Mean?
Moving Averages and the Elliott Wave Principle
An Elliott Wave Pattern that Signals the Start of Opportunity
This article was syndicated by Elliott Wave International and was originally published under the headline U.S. Stocks On a Collision Course with Market 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.
About Tim McMahon
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