Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Here’s Why The Left’s New Economic Policies Are Just Stupid - 19th Feb 19
Should We Declare Emergency for Gold? - 19th Feb 19
Why Stock Traders Must Stay Optimistically Cautious Going Forward - 19th Feb 19
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19
Will Stock Market 2019 be like 1999? - 14th Feb 19
3 Charts That Scream “Don’t Buy Stocks” - 14th Feb 19
Capitalism Isn’t Bad, It’s Just Broken - 14th Feb 19
How To Find High-Yield Dividend Stocks That Are Safe - 14th Feb 19
Strategy Session - How This Stocks Bear Market Fits in With Markets of the Past - 14th Feb 19
Marijuana Stocks Ready for Another Massive Rally? - 14th Feb 19
Wage Day Advance And Why There is No Shame About It - 14th Feb 19
Will 2019 be the Year of the Big Breakout for Gold? - 13th Feb 19
Earth Overshoot Day Illustrates We are the Lemmings - 13th Feb 19
A Stock Market Rally With No Pullbacks. What’s Next for Stocks - 13th Feb 19
Where Is Gold’s Rally in Response to USD Weakness? - 13th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

This Stock Market "Illusion" Can Destroy Once-Vibrant Portfolios

Stock-Markets / Stock Markets 2018 Mar 21, 2018 - 09:15 AM GMT

By: EWI

Stock-Markets


Virtually all stock market forecasting is based on the fallacy of linear extrapolation

Those who've invested solely in the stock market during the past several years have seen the value of their portfolios increase.

As of June 30, 2017, the average 401(k) balance stood at $97,700, according to Fortune magazine. That was a 9.6% increase from a year earlier. Average IRA balances were even higher at $100,200.


This is all well and good.

But, here's a sample of the type of thinking that, ironically, could very well sink many a stock portfolio:

  • 'This bull market is only halfway through' -- CNBC, March 12, 2018
  • [Market Veteran]: Why Stocks Will Keep On Cooking -- Barron's March 8, 2018
  • Bull markets don't die of old age... this one has more room to go, says market watcher -- CNBC, March 7, 2018

This belief in the continuation of the trend is noteworthy, given the fact that the bull market has lasted for nine years, and no bull market in history has lasted longer than 10. Yet, at the same time, those headlines are not at all surprising.

Why not? Well, it boils down to two words: linear forecasting.

On March 7, 2018, EWI founder Robert Prechter elaborated:

Humans possess an ever-present, unconscious illusion that whatever trends and conditions currently in existence will persist. That illusion is the basis of all linear forecasting, which is to say virtually all forecasting. Elliotticians are different. We anticipate change.

The way "we anticipate change" in social actions, including the stock market, is via the Elliott wave model.

A recent example is from our February 2018 Elliott Wave Financial Forecast. As you read the excerpt from the publication, keep in mind that a "throw-over" is a penetration of a trendline, which is confirmed by an immediate reversal back across that line:

Students of Elliott Wave Principle by Frost and Prechter will recall this observation anticipating what could happen at the end of Supercycle wave (V): "If there is a throw-over, the ensuing reaction could be breathtakingly fast." Neither the experts nor the investing public is making any allowance for this potential.

Keep in mind that this statement was made as of the close on February 1. As you can tell on the chart below [wave labels available to subscribers], which is from our March 2018 Financial Forecast, the Dow Jones Industrial Average plunged 11% over the next six trading days. The "throw-over" had indeed been confirmed.

Now is the time to find out what our Elliott wave experts are anticipating next for the stock market.

If you are prepared to take the next step in educating yourself about the basics of the Wave Principle -- access the FREE Online Tutorial from Elliott Wave International.

The Elliott Wave Basic Tutorial is a 10-lesson comprehensive online course with the same content you'd receive in a formal training class -- but you can learn at your own pace and review the material as many times as you like!

Get 10 FREE Lessons on The Elliott Wave Principle that Will Change the Way You Invest Forever.

This article was syndicated by Elliott Wave International and was originally published under the headline This "Illusion" Can Destroy Once-Vibrant Portfolios. 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.


© 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