Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Do These Explanations Make Sense for This Intraday Stock Market Turn?

InvestorEducation / Elliott Wave Theory Oct 30, 2020 - 05:25 PM GMT

By: EWI

InvestorEducation

The market "is not propelled by ... external causality"

On Oct. 19, the DJIA had been trading higher for much of the morning, but by the last hour of trading, the index was more than 400 points in the red.

During that last hour of trading, a major financial website offered this explanation (CNBC):

Dow drops more than 400 points as stimulus uncertainty grows and coronavirus cases rise


Also toward the end of that day's trading, the Wall Street Journal said:

U.S. Stocks Fall on Stimulus Worries

Well, these explanations seem to make sense. However, one must also consider that the lack of progress on another stimulus package and an increase in coronavirus cases are nothing new.

Moreover, the stock market has seen advances when bad news on either or both fronts were grabbing headlines.

For example, on August 12, Barron's said:

The S&P 500 Closed Just Below a New High

U.S. stocks gained on Tuesday, despite the lack of progress in efforts to negotiate another stimulus package ...

And, on Sept. 25, Barron's said:

The Dow Rises Despite Virus ...

Note that word, despite. Even in cases when the news clearly doesn't fit the market action, news outlets still try to tie one to the other. You see it all the time. It's hard to blame them, because almost everyone is conditioned to expect the news to drive the market.

But getting back to our example, it seems questionable that stimulus uncertainty or COVID-19 developments caused the DJIA's slide on Oct. 19. Indeed, it didn't; a change in market sentiment did.

As the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, says:

Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life. The path of prices is not a product of news.

So, what does determine the path of market prices?

The answer is, market psychology, which unfolds according to the paths described by the Elliott Wave Principle. This illustration shows the basic design in both bull and bear markets:

As Elliott Wave Principle: Key to Market Behavior says:

One complete cycle consisting of eight waves ... is made up of two distinct phases, the five-wave motive phase ... and the three-wave corrective phase. ... When an initial eight-wave cycle ends, a similar cycle ensues, which is then followed by another five-wave movement.

When you look at the news to gauge what's next for the market, you are by definition putting yourself one step behind. First, something must happen, then the market is supposed to react -- and only then you can act.

By contrast, when you track wave patterns in market charts, you can see what pattern is underway now, so you can predict what pattern is next -- news or no news. Now you are one step ahead!

So, look to Elliott wave analysis rather than the news for insights into the market's next big move.

Once again, let's return to Elliott Wave Principle: Key to Market Behavior:

It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.

The ability to identify such junctures is remarkable enough, but the Wave Principle is the only method of analysis that also provides guidelines for forecasting.

Learn more about how the Elliott wave model can help you navigate widely traded financial markets by reading the online version of Elliott Wave Principle: Key to Market Behavior for free.

Follow this link to get started: Elliott Wave Principle: Key to Market Behavior -- unlimited, free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Do These Explanations Make Sense for This Intraday Stock Market Turn?. 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.


© 2005-2022 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