Cannabis Stocks: Don't Let Your Opportunity Go Up in Smoke

Here's when society expresses greater acceptance toward marijuana

By Elliott Wave International

In the 1973 song "The Joker," the Steve Miller Band sang:

"I'm a joker. I'm a smoker. I'm a midnight toker."

Of course, "midnight toker" referred to pot smoking. Back then, there were plenty of midnight tokers, but most of them feared getting "busted."
Thirty years later, in 2003, the Elliott Wave Theorist predicted:

"Eventually, possession and sale of recreational drugs will be decriminalized."

Then, in July 2009, The Socionomist (the monthly publication of the Socionomics Institute, a sister organization of Elliott Wave International) published a study titled "The Coming Collapse of Modern Prohibition," which reviewed the repeal of Prohibition during the bear market psychology of the early 1930s.
This study also shed insight as to why the Socionomics Institute's analysts were predicting greater acceptance toward marijuana use. Here's an excerpt:

"Social mood influences people's actions and their social judgments. In times of positive mood, people have the resources to enforce their social desires. They can afford to express the black and white moral issues preferred during bull markets, and drug abuse is a favorite target.

During times of negative mood, on the other hand, society's priorities change. People have other, bigger worries and begin to view recreational drugs as less dangerous, if not innocuous in offering stress relief, pain reduction and the ability to cope with the pressures of negative social mood.

Over the past 100 years, governmental activities have manifested these changing attitudes. During periods of rising mood, policymakers stepped up regulation of cannabis. During periods of falling mood, they eased those same stances.

Keep in mind that when the July 2009 Socionomist published, society had just experienced its worst "falling mood" period since the '30s.
So, analysts at the Socionomics Institute were not at all surprised by what happened in 2012. That was the year that Colorado and Washington became the first states where citizens voted to legalize marijuana for recreational use. Even though pot remains illegal at the federal level, since 2012, other states have also legalized pot for recreational or medical use.
In 2019, the investing public can choose from a number of cannabis stocks.
There are no shortage of stories like this one from U.S. News & World Report (March 1, 2019):

6 Best Cannabis Stocks to Buy on U.S. Exchanges

On the other hand, a March 20 Forbes headline reads:

Cannabis Stocks Are Full Of Hot Air

So, are cannabis stocks a good investment idea or not?
Well, from the Socionomics Institute's perspective, there's not an across the board "yes," or "no" answer. However, according to our analysis, there is opportunity.
Indeed, EWI has just published a special report titled "The Golden Age of Cannabis," which consists of 7 pages and 21 charts.
You will find analysis of the largest marijuana stocks by market capitalization in the United States, Australia, Canada and the UK.
Sign up today and get instant access to an excerpt from this "must read" special report -- 100% FREE.

The 'Silver Lines' of Opportunity

How to turn a simple chart into a near-term road map

By Elliott Wave International

On February 20, Variety Magazine's "Film News Roundup" announced a new thriller coming to theaters near you: "The Silver Bear."
Funny enough, that same day, another kind of thriller was playing out in the theater of finance; its name, the Silver Bull!
The chart below captures the action: Since the start of 2019, silver prices had been on a tear, soaring to $14, $14.50, $15, $15.50 and then $16 per ounce in late February in a white-hot winning streak that has outperformed even gold.

Thanks to a wide array of supportive fundamentals including a softening U.S. dollar, a dovish Federal Reserve, increased economic uncertainty and a subsequent rise in demand for traditional "safe havens" such as gold and silver -- mainstream news outlets captured the Silver Bull sentiment on high:

"Is Silver About to Explode?" (Feb. 21 Seeking Alpha)
"Silver Market Steadily Building Up Momentum" (Feb. 19 Commodity Trade Mantra)
"Silver Experiences A Bullish Development that Points to Higher Prices" (Feb. 20 ETF Daily News)

Yet, off the mainstream screen, we had a very different take on silver's rally. On February 21, our Metals Pro Service identified a classic Elliot wave "impulse" underway from the November 2018 low to the February 20 high above $16 per ounce. And, it was close to being finished.
For newbies, here is an idealized diagram of an impulse wave, defined as a five-wave move labeled 1 through 5 that adheres to three cardinal rules:

• Wave 2 can never retrace more than 100% of wave 1.
• Wave 3 is never the shortest among waves 1, 3 and 5.
• And wave 4 can't end in the price territory of wave 1.

The February 21 Metals Pro Service labeled the impulsive rise on silver's price chart and warned of a pending reversal:

"Silver may have topped...at 16.19 and be correcting the entire rise from 13.98 now."

So, what should you expect after a five-wave impulse is complete?
By their very nature, an impulse move is followed by a correction, often unfolding in three waves (A-B-C) and pushing back into the span of travel of the prior fourth wave. See diagram below:

Wrote our Metals Pro Service on February 21:

"The move should develop in three waves and reach the 15.35 area over the coming days."

The white metal followed in-step, embarking on a powerful, two-week long selloff to below $15 per ounce.
Then, on March 7, our Metals Pro Service turned near-term bullish. Why?
Because now the three-wave, A-B-C correction was complete, too. On March 7, Metals Pro Service silver outlook set the stage for gains:

"On the upside, an impulsive rally above 15.17 will hint that a bottom is in place and that the larger-degree uptrend has re-ignited."

From there, silver regained its shine right into our cited upside target area on March 21 -- before turning back down.

So, where are silver prices likely headed from here?
Our Metals Pro Service analysis reveals that right now. Watch our Metals expert, Tom Denham, discuss his exciting analysis and exactly what he sees next for this precious metal in his March 28 Metals Pro Service subscriber update. Sign up now for instant access.

Falling Trade Deficit is Good for Stocks: True or False?

By Elliott Wave International

A common claim from economic and stock market observers is that a rising trade deficit is injurious to the economy -- hence, bearish for stocks. On the other hand, a falling trade deficit is commonly believed to be bullish for stocks.
Sounds like common sense, but the price action of the main stock indexes often defy reason.
For example, on March 27, CNBC reported, "The U.S. trade deficit fell much more than expected in January to $51.15 billion, from a forecast $57 billion. The decline of 14.6 percent represented the sharpest drop since March 2018... ." Yet on the day the news was released, the main U.S. stock indexes closed lower.
Over the years, countless economists and investors have been baffled when the stock market has risen on bad news and fallen when the news was good. This has happened time and time again with news regarding the expansion or contraction of the trade deficit.
Consider the following news items from the past four decades and contextual comments in brackets (courtesy of Robert Prechter's 2017 book The Socionomic Theory of Finance):

March 28, 1981

The Commerce Department... reported the nation's balance of trade deficit had improved in February. [The second of back-to-back recessions began just five months later.]

March 1, 1984

"... the trade deficit is an economic disaster," said [a] chief economist. [An eight-year boom was just getting going.]

April 12, 1985

The secretary of state said, "We can break the back of the trade deficit only through...a stronger worldwide recovery...." [Precisely the opposite was true; the trade deficit rose during the strong worldwide recovery.]

May 26, 1990

The better-than-expected trade performance sent many economists scurrying to revise their trade forecasts. [A recession started a month later.]

February 22, 2002

The nation's trade deficit narrowed by 11.4 percent in December. [The stock market was peaking and collapsed to new lows in October.]

February 15, 2008

[A chief economist] said that the smaller December trade deficit will help to boost overall economic growth. [The second-worst financial crash and economic contraction in a hundred years were already underway.]

And, on July 14, 2010, USA Today said:

Rising trade deficit could drag down U.S. recovery.

But, as we know, the economic recovery continued.
The below chart and commentary provide even more evidence.
As published in The Socionomic Theory of Finance

The chart reveals that had economists reversed their statements and expressed relief whenever the trade deficit began to expand and concern whenever it began to shrink, they would have quite accurately negotiated the ups and downs of the stock market and the economy over the past 40 years. The relationship, if there is one, is precisely the opposite of the one they believe is there. Over the span of these data, there has been a consistently positive--not negative--correlation among the stock market, the economy and the trade deficit.

The trade deficit’s widely presumed effect is 100% myth.
This is just one misconception in a long list of market myths… Do earnings really drive stock prices? Can the FDIC actually protect you? Is portfolio diversification a smart move? Read our free report "Market Myths Exposed" now and find out whether your portfolio is built on flawed foundations.