Offbeat: Opinion: Elliott Wave theory suggests an unsettling event will occur in the stock market - - PressFrom - US
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OffbeatOpinion: Elliott Wave theory suggests an unsettling event will occur in the stock market

08:55  04 december  2018
08:55  04 december  2018 Source:   marketwatch.com

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I often read articles, along with the comments, to gauge the stock market ’s sentiment from an anecdotal perspective. I recently noticed a quote by investor Sir John Templeton: “For 100 years optimists have carried the day in U.S. stocks .

I often read articles, along with the comments, to gauge the stock market ’s sentiment from an anecdotal perspective. I recently noticed a quote by But what happens if we are now approaching an event that we only experience once in a hundred years? I have written bullish stock market articles

Opinion: Elliott Wave theory suggests an unsettling event will occur in the stock market© Lucas Jackson/Reuters

The opinions in this article are the author's, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

I often read articles, along with the comments, to gauge the stock market’s sentiment from an anecdotal perspective. I recently noticed a quote by investor Sir John Templeton:

“For 100 years optimists have carried the day in U.S. stocks. Even in the dark ’70s, many professional money managers, and many individual investors too, made money in stocks, especially those of smaller companies.

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Elliott Wave theory understands that public sentiment and mass psychology moves in 5 waves within a primary trend, and 3 waves in a counter-trend. Rather, the stock market is “driven by human psychology” and “ waves of optimism and pessimism.” This concept is inherent in the aggregate.

Opinion : Elliott Wave theory suggests an unsettling event will occur in the stock market . via marketwatch: We’re due for a prolonged bear market I often read articles, along with the comments, to gauge the stock market ’s sentiment from an anecdotal perspective.

“There will, of course, be corrections, perhaps even crashes. But, over time, our studies indicate stocks do go up. As national economies become more integrated and interdependent, as communication becomes easier and cheaper, business is likely to boom. Trade and travel will grow. Wealth will increase. And stock prices should rise accordingly.”

This is certainly an appropriate assessment of the past 100 years. But what happens if we are now approaching an event that we only experience once in a hundred years?

I have written bullish stock market articles for many years. And I still think we have a number of good years ahead of us. However, the same patterns that profitably guided us on the long side of the market are showing a different future.

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The Elliott Wave Theory was originally derived from the observation of the stock market (i.e. Dow Theory ), but certain markets such as forex • Extensions are elongated impulses with exaggerated subdivisions. • Extensions frequently occur in the third wave in the stock market and forex market .

The Elliott wave principle is a form of technical analysis that finance traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective factors.

Past calls

Those who have followed me for a number of years have read calls that did not make sense at the time but often came to fruition. Some include the top of metals in 2011 (when most of the market was certain of $2,000-plus an ounce for gold), the rally in the dollar from 73 to 103 (when most were certain that quantitative easing would cause the dollar to crash), the bottom in gold in 2015 (when most were certain of sub-$1,000 gold), and the S&P 500 Index’s

(SPX) rally to 3,000 points (yes, I was off by a few points on this one), just to name a few.

I have outlined the methodology I use to identify major turning points, yet many still assume I use voodoo or analysis of goat entrails.

But as you can see from the attached chart, I am looking for wave 3 off the 2009 lows to top out, and to then begin a 30% correction. However, once that correction runs its course, I think we will see several more years of a rally before this bull market, which began in 2009, will come to an end. And, worse yet, I think we can enter a bear market that can last as long as 20 years, rivaling the depths of the market during the Great Depression.

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Elliott wave theory on WN Network delivers the latest Videos and Editable pages for News & Events , including Entertainment, Music, Sports, Science and Elliott published his theory of market behavior in the book The Wave Principle in 1938, summarized it in a series of articles in Financial World

When we use Elliott Wave analysis to track the market , we do so based on probabilities. And, from my perspective, the probabilities suggest that we Avi Gilburt is a widely followed Elliott Wave technical analyst and founder of ElliottWaveTrader.net, a live trading room featuring intraday market analysis

Opinion: Elliott Wave theory suggests an unsettling event will occur in the stock market

You see, when we top out in wave V of (III) on my monthly chart, the ensuing wave (IV) is of the same degree as the Great Depression, as that was the wave (II) within this very long term 5-wave Elliott Wave structure. And while we know that history does repeat itself (maybe not exactly, but it certainly does rhyme), I think the probabilities of seeing a similar environment to that of the Great Depression will be quite elevated, especially as we approach the bottom of the c-wave of wave (IV).

What is most interesting is that while Sir John Templeton’s statement is true for the past 80 years, it is only viewing the markets in a long-term uptrend. That is especially true if you view it after the Great Depression. However, financial markets are not linear. So, assuming markets will continue in the same manner as they have for the past 80 years is not really the correct way to view our financial markets.

Prediction in 1940

Back in 1940, Ralph Nelson Elliott, the founder of Elliott Wave theory, provided many with what is likely the best market call of all time:

“[1941] should mark the final correction of the 13-year pattern of defeatism. This termination will also mark the beginning of a new Supercylce wave (V), comparable in many respects with the long [advance] from 1857 to 1929. Supercycle (V) is not expected to culminate until about 2012.”

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With the U.S. stock market now moving violently between upper support and the target region we have had for this b- wave , it seems as if the market is feeling out a topping process. For some time, our target region for this b- wave has been narrowed to the 2,867-2,884-point region on the S&P 500 Index SPX

Should the market break back over the market pivot as we lower it, that would suggest that the So, in the coming week, the market has a micro setup pointing to at least the 2,855/60 region, with the Avi Gilburt is a widely followed Elliott Wave technical analyst and founder of ElliottWaveTrader.net, a

While I think Elliott was off a bit on the timing, as I think we may not be completing this rally just yet, consider that his prediction for a massive multi-decade bull market was made when World War II was raging around him. Personally, I view this as the best market call of all time.

So, while standing on the shoulders of giants such as Ralph Nelson Elliott, my view is that the next major top we see in a few years from now may usher in a period to rival that of the Great Depression, but potentially over a more protracted period.

The main reason I think it will potentially last for more than 10 years is because the 4th wave of one lesser degree (outlined by the a-b-c structure in blue IV between 2000-2009) is a 4th wave of one lesser degree, and that lasted for nine years. A 4th wave of a greater degree will likely take much longer than one of a lesser degree.

Now, we all know that we cannot clearly see the future. As Yogi Berra once said, “It’s tough to make predictions, especially about the future.” So we deal with markets from a probabilistic perspective. Therefore, I will also note my alternative perspective, presented in dark green on the attached monthly chart, which still would see a four- to eight-year bear market (alt (2)), but can project this bull run off the 2009 lows to continue for much longer.

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Opinions never hurt when it comes to the markets until there is money at stake. If the market goes against the trader, unquestioning loyalty to an Those with a phobia for learning or with little interest in probing the nuances of Elliott Wave theory are advised to look elsewhere. But in the final analysis

Elliott ’s Theory was developed by Ralph Nelson Elliott and published in 1938 in the book The Wave Principle. The Theory states that collective In Elliott ’s Theory , market prices alternate between an impulsive, or motive phase, and a corrective phase on all time scales of trend, as the illustration shows.

Unfortunately, we will not be able to make any assessments about this more bullish potential for probably at least 10 years from now. And for those who have followed us over the long term, you know that we always view the market as it presents itself to us, and not as we assume it to be. But I think it to be quite prudent to prepare for the worst, and hope for the best.

As we get closer to the major top I see in the markets, I will likely write an article that will address my longer-term expectations on the markets. While I have discussed some of them with the members of my services, and have alluded to some of the issues I see in my public writing, I think we have strong potential to enter an environment unlike one we have experienced in 100 years. However, we have seen glimpses and warnings of it during the past decade.

View Avi’s long-term SPX chart in an expandable format.

Avi Gilburt is a widely followed Elliott Wave technical analyst and founder of ElliottWaveTrader.net, a live trading room featuring his intraday market analysis (including e-mini S&P 500, metals, oil, USD and VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.

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