Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is This the "Kiss of Death" for the Stocks Bull Market?

Stock-Markets / Stock Market 2021 Sep 14, 2021 - 10:58 PM GMT

By: EWI

Stock-Markets

Stock market prices usually decline after this occurs

Many market observers believe that the catalyst for the next bear market will be a piece of extraordinarily bad news.

However, Elliott Wave International has shown time and again that the stock market's price action is often "entirely detached from what most people assume are causal conditions."

Examples of stocks rising when the news is bad -- and falling when the news is good -- are so numerous that a library shelf of books would be inadequate to show a fair representation of them. For the most recent vivid example, just think back to March 2020, when the first wave of the pandemic hit and shuttered the entire global economy -- yet, stocks (around the world!) happily found a bottom and haven't looked back since.


No, the stock market is governed by the psychology and behavior of investors themselves.

One of the noteworthy behaviors is investors' use of margin debt.

Indeed, back in 1980, The Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and social trends, said:

[A] failure of margin debt to expand in an advancing market [can be] the 'kiss of death' to a bull trend.

With that in mind, consider this chart and commentary from the recently published September Elliott Wave Financial Forecast, a monthly publication which covers key U.S. financial markets:

The arrows on the chart of the year-over-year change in New York Stock Exchange margin debt show that [The Theorist's] statement has been true at three major market tops over the last 24 years: at the market top in August 1987 ... the S&P's March 2000 top ... and at the October 2007 peak. As the latest arrow shows, a rapid expansion in margin debt has, once again, reversed trend.

Keep in mind that the stock market does not always decline after a year-over-year drop in margin debt. However, if the use of margin debt substantially falls just after reaching a record high, history does show that stock prices usually tumble thereafter.

That said, in June, margin debt reached a record high of $882 billion, which makes the July retreat of $37.7 billion especially significant.

The Elliott wave model pinpoints the patterns of investor psychology even more precisely.

As our September Financial Forecast said, the current unfolding Elliott wave of the Dow Industrials is "one for the ages."

If you'd like to learn how the Wave Principle can help you analyze and forecast financial markets, Elliott Wave Principle: Key to Market Behavior, is the go-to book for doing so. Here's a quote from this Wall Street classic:

Because applying the Wave Principle is an exercise in probability, the ongoing maintenance of alternative wave counts is an essential part of using it correctly. In the event that the market violates the expected scenario, the alternate count puts the unexpected market action into perspective and immediately becomes your new preferred count. If you're thrown by your horse, it's useful to land right atop another.

Always invest with the preferred wave count. Not infrequently, the two or even three best counts comfortably dictate the same investment stance. Sometimes being continuously sensitive to alternatives can allow you to make money even when your preferred count is in error. For instance, after a minor low that you erroneously consider of major importance, you may recognize at a higher level that the market is vulnerable again to new lows. This recognition occurs after a clear-cut three-wave rally follows the minor low rather than the necessary five, since a three-wave rally is the sign of an upward correction. Thus, what happens after the turning point often helps confirm or refute the assumed status of the low or high, well in advance of danger.

You can read the entire online version of the book for free when you become a Club EWI member. Club EWI is the world's largest Elliott wave educational community and is free to join. Members enjoy free access to a wealth of Elliott wave resources on financial markets, investing and trading.

Get started by following this link: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks: Is This the "Kiss of Death" for the Bull Market?. 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