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
S&P Stock Market Detailed Trend Forecast Into End 2024 - 25th Apr 24
US Presidential Election Year Equity Performance in the Presence of an Inverted Yield Curve- 25th Apr 24
Stock Market "Bullish Buzz" Reaches Highest Level in 53 Years - 25th Apr 24
Managing Your Public Image When Accused Of Allegations - 25th Apr 24
Friday Stock Market CRASH Following Israel Attack on Iranian Nuclear Facilities - 19th Apr 24
All Measures to Combat Global Warming Are Smoke and Mirrors! - 18th Apr 24
Cisco Then vs. Nvidia Now - 18th Apr 24
Is the Biden Administration Trying To Destroy the Dollar? - 18th Apr 24
S&P Stock Market Trend Forecast to Dec 2024 - 16th Apr 24
No Deposit Bonuses: Boost Your Finances - 16th Apr 24
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
S&P SEASONAL ANALYSIS - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Possible Replay of an Ominous Stock Market Price Pattern

Stock-Markets / Stock Market Crash Jun 18, 2023 - 08:54 PM GMT

By: EWI

Stock-Markets

"I became panicky and covered at a considerable loss..."

The reason price patterns tend to repeat in the stock market is that investor psychology never changes.

The Elliott wave model directly reflects these largely predictable swings in investor psychology. That's what the Elliott wave principle is all about.

One of those price moves which has historically fooled investors is the first big rally in a bear market.


These rallies are characterized by an "aggressive euphoria," as Frost & Prechter's Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, states.

Why? Because many investors are convinced that the bull market is back.

In Robert Rhea's 1934 book, The Story of the Averages, he described what was going on regarding the rally in the early months of 1930:

I became panicky and covered [my short position] at a considerable loss. ... Nearly everyone was proclaiming a new bull market. Services were extremely bullish.

As you know, the 1929-1932 bear market turned out to be brutal.

A more recent example is what took place during the 2007-2009 bear market. This chart is from a past Elliott Wave Theorist, a monthly publication which covers major financial and cultural trends:

The black arrow indicates the October 2007 top. After the initial leg down, notice that sizeable rally around March 2008. A lot of investors plowed a lot of money into the market at precisely the wrong time. As you can see, the worst of the 2007-2009 bear market was ahead.

These two historic examples of bear market rallies do not mean that we're on the verge of an exact replica.

But we do see striking similarities between those periods of price history and how the market is behaving here in 2023.

Those similarities include the stock market's Elliott wave pattern. Frost & Prechter's Elliott Wave Principle: Key to Market Behavior was referenced earlier. Here's another quote from this definitive text on the Wave Principle:

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 a minimum. Among those, the best interpretation, sometimes called the "preferred count," is the one that satisfies the largest number of guidelines. Other interpretations are ordered accordingly.

If you'd like to read the entire online version of the book, you may do so for free once you become a member of Club EWI, the world's largest Elliott wave educational community.

A Club EWI membership is also free and allows for free access to a wealth of Elliott wave resources on investing and trading.

Join Club EWI now by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks: Possible Replay of an Ominous Price Pattern. 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