Social mood is another term for the shared inclination of a society. The conflict between Russia and Ukraine is a dramatic example of social mood in action.
By Elliott Wave International
Editor's note: You'll find a text version of this article below the video.
For 3 years, Russia's stock market has been drifting lower. Here is why that's important.
The stock market shows the mood of society.
And social mood drives social actions -- like public protests and even war.
That means that if you follow the stock market, you'll know what kinds of events are likely to happen in any country.
Social mood is another term for the shared inclination of a society. The conflict between Russia and Ukraine is a dramatic example of social mood in action.
Take a look at this chart. The Russian stock market topped in April 2011. But three months earlier, in January 2011, our European Financial Forecast gave subscribers a warning about the coming reversal.
In fact, as this chart shows, we warned about TWO tops -- one in 2008, and then the most recent one in 2011.
Look closer. As you can see, the Russian stock market dropped sharply during the 2007-2009 financial crisis. Then the RTS rebounded, but only in three waves -- A, B, C, which is a counter-trend move. That's why, in 2011, it was clear that Russia's stock market was about to decline.
But stocks weren't the only things set to turn negative. At the time, our European service also made a forecast that an unstable new social climate that would soon follow. One of our specific forecasts was that U.S.-Russia relations would sour, and that the economies of eastern Europe would unravel.
Over the past three years, we did see economies of numerous central and eastern European countries crash. In Ukraine too, where the stock market is down some 75 percent, negative mood is now driving the country's politics, putting it on the brink of civil war.
On Monday, March 3rd, Russian shares fell another 12%, in one day. That brings the total decline since the April 2011 peak to about 50%, in-line with our 2011 forecast. Here is a zoomed in look at the latest crash.
Recently, the European Union vice president Vivian Reding told CNBC that she hopes that "common sense comes back and the two sides manage to come together to create a common country in the interest of all Ukrainian people."
We hope for the same thing. But it is important to realize that as long as social mood is trending negatively, the opposite is most likely to occur.
We'll be following social mood as it unfolds in this potential center of a new Cold War.
Learn more about our European Financial Forecast here >>
This article was syndicated by Elliott Wave International and was originally published under the headline The Crisis in Ukraine: What's Next?. 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.
While I admire the fractal principle and Fibonacci measures underlying market behaviors of Elliot Wave Theory and acknowledge the occasional successes of its interpretation as practiced by Prechter & company, I personally would have suffered major lost opportunity in timing precious metals trading had I not also had broad market fundamentals perspective.
The most objectionable feature of Elliot Wave International in my view, is its self serving fervor in righteous interpretation of prospective market movements. In my experience of over a decade's observation, it more often fails than not to deliver successful actionable trade recommendations within the narrow market spectrum in which I participate.
Insofar as Russian markets are concerned I have no expertise. But my sense of global markets in general relies heavily on the certain reality of endemic economic distortions not having as yet expressed their irrational consequence in full manic display. As certain as that is to occur irrespective of influence resulting the path of current political conflicts, the tensions within both politics and markets is palpably and ominously approaching extremes.
It should also be noted that certain macro political strategies are fully engaged from the Anglo-American sphere as long expressed within elements of the Council on Foreign Relations. Scrutiny and awareness of these objectives is essential to any prospect of discerning what's theater and what's not in brinksmanship. Make no mistake of Russian resolve in the face of existential challenge.
I get that about "Macro/Micro" economic Models and the rationale behind their creation. After all, who doesn't want to be right all the time? In my humble opinion, the Russian Markets are (have been) on a free fall for the simple reason they trade in an environment that is not correlated at all with the economies of the rest of the world. The Russian government is the main employer and, therefore, it controls the means of production, natural resources, banking, energy, etc., etc.. As an investor, the only investment I would (MAYBE) make in Russia would be to purchase their "Debt" if the "rate ever reaches 10% or better which, I think, given whats going on with Ukraine, its not too far fetched.
Dear Sirs,
Both sides have a total lack of understanding of each other's perception of what is going on. They need to bring Henry Kissinger to help navigate all three sides ( or more ) to relax tensions and move forward in a give and take resolution. The odds will be slim in any case.
Karl