Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Stocks Bear Market Formation Revealed

Stock-Markets / Stocks Bear Market Jul 30, 2014 - 10:49 AM GMT

By: EWI

Stock-Markets

The Stock Market with Elliott Wave Labels from 1693 to Present Day Reveals a Bear Market Formation Since 2000

The following article was adapted from Robert Prechter's June 2014 issue of The Elliott Wave Theorist, one of the longest-running investment letters in the business, continuously published monthly since 1979.

Figure 1 shows the stock market's waves from 1693 to the present. The circled Roman numerals denote waves of Grand Supercycle degree, the largest complete waves for which stock market data exist.


Wave I (circled) ended in 1720 at the peak of the South Sea Bubble in England. Wave II (circled) took the form of a zigzag, labeled (a)-(b)-(c); it ended in 1784. Third waves are usually extended, meaning they are longer than wave one and have clear subdivisions. This is exactly how wave III (circled) developed. It ended in 2000.

Wave III (circled) subdivides into five waves. Wave (I) ended in 1835, wave (II) in 1859, wave (III) in 1929, wave (IV) in 1932 and wave (V) in 2000.

Wave (V) subdivides into five waves, as illustrated in Figure 2. Wave I ended in 1937, wave II in 1942, wave III in 1966, wave IV in 1974 or 1982, and wave V in 2000.

The guideline of alternation indicates a high probability that wave IV will be a form other than a zigzag, i.e. a flat or a triangle. Triangles are more common than flats, so our working hypothesis is that wave IV will be a triangle.

"B" waves within flats and triangles often carry beyond the end of the preceding impulse wave. For instance, the S&P Composite index made new highs in 1968 and 1973, but both of those highs occurred within the triangle of 1966-1974 (wave IV), which alternated with the zigzag of 1937-1942 (wave II).

It might seem tempting to believe that wave (V) is still in progress. But there are five reasons to mark its termination in the year 2000.

1) As established in my book Beautiful Pictures, the low of wave four often occurs at a time that subdivides the duration of an entire impulse wave into a Fibonacci section. As shown in Figure 2, waves I through IV lasted 42 years, and wave V at the peak in 2000 lasted 26 years, producing a Fibonacci time ratio of 21/13. Those two durations in turn are related to the total duration of wave (V) by the Fibonacci ratios 21/34 and 13/34.

2) Wave V is best labeled as a completed five waves from 1974 to 2000, as shown in Figure 3. It adheres to a normal channel and peaks at the upper end. Labeling the high in 2000 as the "orthodox top" of wave V -- i.e. the end of the five-wave pattern regardless of ensuing higher highs -- is not just semantics. Elliott wave forms tell you which stock market advances are part of a true bull market and which are bear market rallies.

3) In the past, orthodox peaks of Elliott waves have been registered at extremes in the real value of stocks, not just their nominal value. The insets in Figure 3 show that wave b has not carried to a new high in real terms. In other words, the Dow today buys fewer producer materials, commodities and real money (gold) than it did in 2000, even though its nominal price is much higher. The Dow priced in real money -- gold -- topped in 1999 and has collapsed 84% since then, as shown in the bottom inset in Figure 3.

Had the U.S. maintained honest money, the Dow would be priced at 266 today, not 17,000. Much of the nominal Dow's progress after 1966 -- and all of its net progress since 2000 -- is due not to an increase in corporate values but to a decrease in value for the Federal Reserve's accounting unit (the "dollar"), both by deliberate central-bank policy and by the pyramiding of credit throughout the financial system, much of which has been made possible by the use of force, aka government policy.

4) The year 2000 was the end of the one-way good times. That is when the all-time high was recorded in the major averages' valuation as measured by annual dividend yield, price to book value, and the corporate bond/stock yield spread. Indicators such as Gallup's poll of Economic Confidence peaked then, too, by a wide margin. That year, economists were proclaiming a "New Economy" that would never falter. All of these events support the case that wave V, and therefore wave (V), and therefore wave III, ended in 2000.

5) Finally, even the market top of 2007 was more important than what's happening now.

The year 2007 came on the heels of the all-time high in real estate values in 2006, a time that marked both the seemingly realized American Dream of universal home ownership and its turn toward its dissolution. It was a time of major change in American finances.

The year 2014 has none of these attributes. Real estate, commodities and precious metals are in bear markets, and the economy has stalled. The only thing rising is stocks.

We can therefore make a case that even 2007 was the more important market top for the average American. But we can't credit the year 2014 with anything nearly as grand as what was happening at the tops of 2000 and 2007. This lack of importance fits the b-wave label.

A Bear Market Formation Since 2000

The rest of this report is available only to Robert Prechter's free email subscribers at Elliott Wave International. You will see Prechter's analysis of an epic stock market pattern tracing out right now that has never occurred in recorded stock market history, going back 300 years -- plus its imminent and dangerous implications for investors. Read the report now to be certain your portfolio is ready. Click here.

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules