Tag: Elliott Wave International (EWI)

The Two Faces Of Stock Market Volatility

Posted on by The INO.com Team

By Elliott Wave International

Volatility, volatility, volatility. It's all the financial world can talk about lately... and, well, for good reason. In the past few months, the world's stock markets have endured some of the most gut-wrenching price swings since the 2007-2009 financial crisis.

But for many investors, it's still not clear what this volatility means for the status of the bull market in U.S. stocks.

The reason why said status remains unclear is in large part because the mainstream pundits haven't exactly been consistent with their punditing. (Note: NOT a real word!)

Take, for example, this summer. Before U.S. stocks fell off the cliff this August, the market was about as volatile as a yoga retreat. The trend was a slow, calm, and steady ascension to a higher self. In fact, the ultimate "fear gauge" known as the CBOE Volatility Index (VIX) had dipped below 12 for the first time since 2014.

Now, according to the usual experts, this extended period of market calm was a bullish sign, as these news items from the time explain: Continue reading "The Two Faces Of Stock Market Volatility" →

"Interest Rates Drive Stocks"? See 4 Charts That Tell You the Truth

Posted on by The INO.com Team

By: Elliott Wave International

Robert Prechter's monthly Elliott Wave Theorist once published a ten-part study explaining why traditional financial models failed to foresee the 2007-2009 financial crisis -- and, more importantly, why they are doomed to fail again (and again).

On Thursday (Sept. 17), the Fed decided to keep interest rates unchanged. On Friday, stocks opened down big. But before you join those who blame it on the Fed, please read this excerpt from Prechter's eye-opening study.

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Economic theory holds that bonds compete with stocks for investment funds. The higher the income that investors can get from safe bonds, the less attractive is a set rate of dividend payout from stocks; conversely, the less income that investors can get from safe bonds, the more attractive is a set rate of dividend payout from stocks. A statement of this construction appears to be sensible.

And it would be, if it were made in the field of economics. For example, "Rising prices for beef make chicken a more attractive purchase." This statement is simple and true. But in the field of finance such statements fly directly in the face of the evidence.

Figure 3 shows a history of the four biggest stock market declines of the past hundred years. They display routs of 54% to 89%. Continue reading ""Interest Rates Drive Stocks"? See 4 Charts That Tell You the Truth" →

Investors Bet On Housing Again (Just In Time For Another Implosion?)

Posted on by The INO.com Team

By Elliott Wave International

The U.S. housing market may be about to implode -- again.

Before I get into the "why," know that the residential real estate market never fully recovered.

Annualized new home sales this past July stood at 507,000, vs. the July 2005 peak of 1.39 million. The chart and commentary from the August Elliott Wave Theorist offer:

The percentage of Americans who own a home is still plummeting despite the partial recovery in real estate prices. Today, the percentage of families owning homes in America has plunged to its lowest level in 48 years, nearly half a century. ... By saddling home-buyers with massive debts, the government has done the opposite of what it promised; it has ruined the American Dream for tens of millions of families. Now it's doing the same thing to education ... .

Yes, U.S. student loans amount to some $1.2 trillion. Yet the new on-campus trend is luxury student housing. Continue reading "Investors Bet On Housing Again (Just In Time For Another Implosion?)" →

Amid Stock Market Turmoil, Investors Cling to Hope. Why?

Posted on by The INO.com Team

By: Elliott Wave International

I was watching financial television as the Dow Industrials fell 400-plus points on Sept. 1.

Two market professionals were interviewed: Both said the big decline in recent weeks represented a buying opportunity.

Optimism is so entrenched that even the worst month (August) for the Dow in five years didn't faze them.

Other market observers have also shrugged off the volatility. Here are just a few headlines:

  • 10 oversold stocks ready to pop (CNBC, August 26)
  • Why I'm throwing money at the stock market (Marketwatch, August 26)
  • Why this bull market is not dead (CNBC, August 25)
  • Buy the Dip Becomes Buy the Correction ... (Bloomberg, August 25)
  • Is Stock Market's 'Black Monday' Time to Buy? Some Analysts Think So (NBC News, August 25)
  • Relax, we're about to hit the bottom in stocks (CNBC, August 21)

This is an amazing display of optimism. Yet there is an explanation for this persistent hope in higher stock prices, namely: Continue reading "Amid Stock Market Turmoil, Investors Cling to Hope. Why?" →

Elliott Waves Point To Market Probabilities

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The "personality" of a third wave shows itself in recent market action

By Elliott Wave International

A classic issue of The Elliott Wave Theorist published this exchange:

Q. Do you believe that the Wave Principle provides for an objective form of analysis? ... There are market watchers who say that applying wave theory is very subjective.

Prechter: I always ask, "compared to what?" There is no group more subjective than conventional analysts who look at the same "fundamental" news event ... and come up with countless opposing conclusions. ... The Wave Principle is an excellent basis for assessing probabilities regarding future market movement. Probabilities are by nature different from certainties. Some people misinterpret this aspect of analysis as subjectivity, but all probabilities may be put in order objectively according to the rules and guidelines of wave formation.

So: While no one can "see" the future, you can use the Wave Principle to assess probabilities.

The Wave Principle's basic pattern includes five waves in the direction of the larger trend, followed by three corrective waves. This illustrates the pattern in a bull market: Continue reading "Elliott Waves Point To Market Probabilities" →