How to Anticipate Stock Market Trend Changes

See one forecasting method that gave ample warning of the recent dramatic volatility

By Elliott Wave International

Every active stock market investor wants to know: Where are prices headed next?
Most will scour the financial headlines, tune into financial television and talk to their broker or financial advisor in hopes of finding the answer. But, alas, this quest for market insight often leaves investors just as uncertain as before.
One market veteran might say "buy the dip." Another strongly advises: "Sell!" Yet another knowingly smiles and comments: "Volatility is normal, just ride it out."
The truth is: no one knows for sure what the market will do next.
However, in EWI's four decades of analyzing the market itself, as opposed to news and events that are usually seen as market drivers, we've observed that recognizable and repetitive price patterns show up in the DJIA's price line at all degrees of trend. That's what makes the stock market predictable.
Frost & Prechter's Elliott Wave Principle: Key to Market Behavior tells you what that means to investors like you:

The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market's general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable.

That's right, an analyst who is familiar with these repetitive price patterns, as well as other technical analysis methods and sentiment indicators, can anticipate stock market trend changes with a high degree of confidence.
Keep in mind: The basic Elliott wave pattern is five waves in the direction of the larger trend, followed by a three-wave correction. In other words, at the start of a bear market trend, expect five waves down followed by three waves up. The reverse is true in a bull market: fives waves up followed by three waves down.
Indeed, the next day after the DJIA's Jan. 26 all-time closing high of 26,616, EWI's Short Term Update signaled to subscribers that the market's advance was toast. How? The Short Term Update editor, Steve Hochberg, labeled the end of the price line with fifth waves at two degrees of trend.
Here's that Jan. 29 Short Term Update chart, which was also accompanied by this commentary (entire wave labeling available to subscribers):

It was just last week that the Daily Sentiment Index (trade-futures.com) on S&P futures jumped to 96% and the 13-day average pushed to 91.2%, an all-time record... At the same time, the 30-day average of the NYSE Trading Index is .88, a seven-year overbought extreme.

Today's market action was internally very weak, with 4.4 more NYSE stocks closing down versus those closing up.... A selloff through 26,233 in the Dow and 2834 in the S&P 500 would be the largest of the year so far, suggesting at least a near-term change of character for the stock market advance

Indeed, on Jan. 30, the next trading day, the DJIA did drop below 26,233.
As you probably know, extreme volatility in the index soon followed, which included 1,000+ point daily declines.
But, here's what's remarkable: Our Short Term Update not only called the sell-off, but also prepared subscribers for the DJIA's sharp rebound that followed.
A new video by EWI's Robert Folsom titled The U.S. Stock Market: From "Zeal" to "Change of Character." shows you how. This highly instructive video is available to you now -- 100% FREE.
Learn how to gain instant, free access by reading below.

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ANTICIPATE Stock Market Turns That Others Miss!
THAT's what the Elliott wave model can do for you.
See the evidence of just how useful the Elliott wave model can be, during extreme stock market volatility. Watch the just-produced, highly instructive video by EWI's Robert Folsom, titled The U.S. Stock Market: From "Zeal" to "Change of Character."

This article was syndicated by Elliott Wave International and was originally published under the headline How to Anticipate Stock Market Trend Changes. 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.

Buy or Sell? This Insight May Help You Decide

It’s a tough decision. We’d like to help by showing you some unconventional market evidence.

By Elliott Wave International

By February of this year, investors had almost forgotten what stock market volatility looked like.
And then something unprecedented happened. On Monday, Feb. 5, the DJIA closed 1,175 points down, the biggest single-day drop in the index's history. Since then, stocks have been going haywire.
Was this spike in volatility unpredictable? Hardly. Our December 2017 Financial Forecast warned:

The CBOE Volatility Index declined to 8.56 intraday on Nov. 24, the lowest level in its 30-year history... As we've noted, the most placid periods of stock market activity are invariably followed by episodes of extreme volatility...

Sentiment measures had also been sounding an alarm. Here's just one chart, from our January 2018 Financial Forecast (Elliott wave-labeled version reserved for subscribers):

The chart of the 13-day CBOE equity put/call ratio shows that it has declined to .55, with the volume of calls nearly double the volume of puts. Options traders have not been this optimistic in 3½ years. So, trader sentiment is consistent with the optimism of fund managers, hedge fund operators and even the "little guys."

History shows that such optimistic extremes are contrarian indicators. Investors who heeded these warnings were not surprised by the volatility eruption -- indeed, they expected it.
OK. So, what now? It this 10% drop in the Dow a buying opportunity -- or the big reversal?
This is the big question, and the mainstream view is clearly leaning towards the bullish view:

• 10 Blue-Chip Stocks to Put on Your "Buy the Dip" List -- (Kiplinger, Feb. 2)
• 3 Stocks to Buy When the Market Crashes -- (The Motley Fool, Feb. 5)
• Now is the time to buy equities... says CIO -- (CNBC, Feb. 5)

Market optimists may turn out to be correct. Maybe it's just a bump in the road.
Then again, maybe sentiment measures continue to tell another story.
EWI's Robert Folsom just posted a special video titled "More Bullish Than Ever."
Watch it.
Then, make up your own mind about the bullish or bearish prospects for the stock market.
The URGENCY of Up-to-Date Stock Market Sentiment
The February 2018 Elliott Wave Financial Forecast Short Term Update said this:

We know from our own experiences how tough a taskmaster Mr. Market is, which is why we constantly point out the importance of sentiment extremes in the context of a progressing Elliott wave structure.

With that in mind -- our just-produced video delivers the sentiment readings that you need to know about NOW.
HINT: Near the video's beginning, you'll learn about a market-related event in January 2018 that is jaw-droppingly similar to a development that unfolded in February 2000 -- yes, around the time of the historic stock market top of that year.
Watch this video now!

This article was syndicated by Elliott Wave International and was originally published under the headline Buy or Sell? This Insight May Help You Decide. 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.

Invest by Watching News? Accept These Pitfalls

Many investors "operate under the assumption that events dictate market movements." They don't.

By Elliott Wave International

Is Your Portfolio Built on False Assumptions?
Download this Free 33-Page Report to Find Out.
Did you know that the vast majority of portfolios are built on false assumptions? These false assumptions -- or Market Myths -- have been passed down across generations. They are so baked into investor psyche that no one ever thinks to challenge them... but we do. Do earnings really drive stock prices? Can the FDIC actually protect you? Is portfolio diversification a smart move? Download Market Myths Exposed now and find out whether your portfolio is built on flawed foundations. We guarantee you'll be shocked to find the truth.
Sign up now and get FREE access to The Market Myths Exposed eBook.

This article was syndicated by Elliott Wave International and was originally published under the headline Invest by Watching News? Accept These Pitfalls. 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.

Urgent Message Two Must See NASDAQ Charts

By Elliott Wave International

[FREE RESOURCE] Investors Go for Broke: 3 Charts, Same Message...

This short video shows you everything you need to know about the position of the stock market today. It's a must-see message for anyone investing in stocks today.
Get free, instant access to this resource now..

This article was syndicated by Elliott Wave International and was originally published under the headline Urgent Message Two Must See NASDAQ Charts. 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.

Bitcoin’s $10,000 "Line in the Sand"

The cryptocurrency's trends continue to be fueled by investor psychology

By Elliott Wave International

On January 23, Bitcoin fell below $10,000. That's the second time in recent days that prices dipped below this psychologically important threshold. The headlines picked up on the drama:

"Bitcoin tumbles below $10,000 and is now down 25% on the year..." (CNBC, Jan 23)

That same article also observed:

"No specific driver was immediately apparent behind Tuesday's decline..."

The driver was investor psychology. That's something Elliott waves analysis is adept at helping you track and forecast, so let's see what the waves had to say about Bitcoin's latest slide.
The day before the drop, our Cryptocurrency Pro Service posted this chart and a bearish forecast (partial Elliott wave labels shown):

Bottom Line: Multiple [Elliott] wave counts warn XBT is headed lower.

(Last Price 10710): The decline below 11,040 signals that the recent correction is likely complete. There are two ways to count it. Wave iv might have ended... or we can count [a still-unfolding wave iv triangle]... Both [wave counts] warn the risk is to the downside...

Early the next day, Bitcoin fell to $9,910. Here's what the price action has looked like since (partial Elliott wave labels shown):

Keep in mind that sideways market moves are almost always corrective. Meaning that, most likely, Bitcoin's "wave iv" our January 22 analysis mentioned above is still developing -- as an Elliott wave pattern called a "contracting triangle."
If you know Elliott, you know exactly what this wave labeling implies.

[FREE REPORT] Bitcoin: The Greatest Bubble of All Time As you read the news that Bitcoin dropped "below $10,000 with $36 billion of value wiped off in a day..." (CNBC, Jan. 17), you're probably asking, "What's next for Bitcoin and other cryptos?" Our new, free report gives you some much-needed answers. Learn how to get free, instant access to this resource.

This article was syndicated by Elliott Wave International and was originally published under the headline Bitcoin’s $10,000 "Line in the Sand". 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.