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
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Here's Why Blind Contrarianism Investing Failed in 2020

Stock-Markets / Investing 2020 Jan 14, 2021 - 05:32 PM GMT

By: EWI

Stock-Markets


There is only one instance when the investing crowd is right

Yes, there are many times when the market's Elliott wave structure suggests that an investor should take a position "against the crowd," or put another way, be a contrarian.

Prime examples are at market bottoms and tops.


However, keep this in mind from a classic Global Market Perspective, a monthly Elliott Wave International publication which provides analysis of 50-plus worldwide markets:

[S]trict adherence to the wave model habitually puts wave analysts where they should be: against the market crowd. But not always. At specific points in the market's wave structure, wave analysts run with the herd.

A prime example of when Elliott wave practitioners have a lot of company is during the most severe part of a bear market. At such times, the Elliott wave model suggests that more downside is likely ahead and the crowd is likewise fully aware that the market is in the grip of a ferocious bear. The same applies to the strongest part of a bull market.

So, following the Elliott wave model and consistent contrarianism are not the same.

Indeed, read this quote from our just-published January Global Market Perspective:

Blind contrarianism failed in 2020, because some of the world's most influential benchmarks -- the DJIA in the United States, the DAX in Europe, and the Shenzhen Composite in China -- spent much of the year rallying in small-degree third waves.

That issue of the Global Market Perspective went on to show this chart and said:

Turns out that 2020 was not just a bad year for contrary investing, it was the strategy's worst year on record.

The contrary strategy's best years are also illustrative. The technique returned 80% as the first technology bubble burst in 2000, and it made 60% in 2009, as equities rallied following the 2008-09 financial crisis. The year 2016 was also a good year for contrarians who wagered that cyclical stocks would benefit most from an economic expansion.

What about major global markets in 2021? Will contrarian investing be successful for the market or markets in which you are interested? In other words, should you be selling when others are buying, and vice versa?

Elliott wave analysis can help you answer those questions.

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

Without Elliott, there appear to be an infinite number of possibilities for market action. What the Wave Principle provides is a means of first limiting the possibilities and then ordering the relative probabilities of possible future market paths. Elliott's highly specific rules reduce the number of valid alternatives to minimum.

If you'd like to find out about "Elliott's highly specific rules," you can do so by reading the online version of Elliott Wave Principle: Key to Market Behavior for free.

That's right -- Elliott Wave International has made this Wall Street classic available to Club EWI members for free. Don't worry -- membership is also free. Moreover, Club EWI members enjoy free access to a wealth of Elliott wave educational resources.

Join the approximately 350,000 Club EWI members who are already gaining insights into trading and investing from an Elliott wave perspective by following this link: Elliott Wave Principle: Key to Market Behavior (free access now).

This article was syndicated by Elliott Wave International and was originally published under the headline Here's Why Blind Contrarianism Failed in 2020. 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