How to Capitalize on Market Corrections

By Elliott Wave International

90% of traders throw in the towel. One of the main reasons is because they don't have a method. Elliott Wave Principle is one of the most popular investment method books ever published. Now, we're working with Elliott Wave International to celebrate the book's 40th anniversary by giving you free access to Bob Prechter's bestseller. Get this must-have book now.

Want to See What's Next for the Economy? Try This.

By Elliott Wave International

Don't listen to the naysayers -- there IS a way to forecast the general health of the economy. This method has repeatedly proven itself.
Yes, you can anticipate the likelihood of a recession, even a depression -- or, conversely, when major economic measures -- like jobs -- will be robust.
That surefire way is the performance of the stock market.
That's right, despite the widespread belief that the economy drives the stock market, it's the stock market which leads the economy. Why not the other way around? Because the economy is a slow boat.
Think about it: When people are optimistic about the future, many of them buy stocks and can do so almost immediately. But that same optimism takes time to play out in the economy. It might take months to draw up plans to expand a business, hire new employees and so forth. So that's why the economy lags the stock market.
The evidence is supplied by a chart and commentary from Robert Prechter's 2017 book, The Socionomic Theory of Finance:

The stock market leads GDP. As the stock market fell in Q1 1980 and again in 1981-1982, back-to-back recessions developed. As the stock market rose from 1982 to 1987, an economic boom occurred. After stock prices went sideways to down from 1987 to 1990, a recession developed. As stock prices resumed rising, the economy resumed expanding. As the stock market fell in 2000-2001, a recession developed. As the stock market recovered in 2002-2007, an economic expansion occurred. As the stock market fell in 2007-2009, a recession developed, and it was commensurate with the size of the drop: The largest stock market decline since 1929-1932 led to the deepest recession since 1929-1933. As the stock market has recovered since 2009, an economic expansion has developed.

This brings us to the June 2019 jobs report (July 5, The New York Times):

U.S. employers sharply stepped up their hiring in June, adding a robust 224,000 jobs

Given that the stock market's latest push higher has been in place since the December low, this positive jobs report was not a surprise.
Which is to say, if the stock market turns lower, don't anticipate any major consistently negative economic news to follow only weeks later. As Elliott Wave International President Robert Prechter once put it, "The stock market doesn't top on bad news, it tops when the news is good."
So, it's a myth that the stock market follows the economy. The evidence shows that it's the other way around.
Learn about several other market myths in the free report, "Market Myths Exposed."
Begin reading Market Myths Exposed now.

Worried About the Fed? Don't Be -- Here's Why

By Elliott Wave International

Achieving and maintaining success as a stock market investor is a tall order.
You, like many others, probably watch financial TV networks, read analysis and talk to fellow investors, trying to understand what's next for the stock market.
One popular stock market "indicator" is interest rates. Mainstream analysts parse every word from the Fed, hoping they hear a clue about interest rates. They assume that falling rates mean higher stock prices, while rising rates mean lower stock prices.
For example, in July 5, CNBC ran this headline:

Trump's Fed pick Shelton says she doesn't want to 'pull the rug out' from under the stock market

Fed nominee Judy Shelton was suggesting that higher rates would hurt the stock rally.
But does the conventional wisdom about interest rates and stocks square with reality? Let's do a brief historical review.
From October 1974 to December 1976, the stock market rose as the Fed funds rate trended lower. This occurred again from July 1984 to August 1987. Conversely, stock prices faltered as interest rates climbed from January 1973 to October 1974 and again from December 1976 to February 1978. So far, so good: rates up/stocks down, or vice versa.
But stock prices have also fallen as interest rates declined -- more than once. Take a look at the chart below. The commentary is from Robert Prechter's 2017 book, The Socionomic Theory of Finance:

[The chart] shows a history of the four biggest stock market declines of the past hundred years. They display routs of 54% to 89%. In all these cases, interest rates fell, and in two of those cases they went all the way to zero!

The next chart shows you when stocks and interest rates trended higher together. You can see the Dow rise from March 2003 to October 2007 as rates climb from around 1% to over 5%.



Here's the point: There is no consistent relationship between interest rates and the stock market.
That doesn't mean volatility will be absent around the time of a Fed meeting. But, if that ever happens, keep this in mind from a classic Elliott Wave Theorist:

The Fed's decision will not cause any such volatility; it just may (or may not) coincide with it. Whether volatility continues around the Fed's meeting is up to the markets, not the Fed. ... [The] Fed's meeting, therefore, is not crucial, pivotal, historic or momentous. It is mostly irrelevant.

Yes, enjoying consistent success as a stock market investor is a major challenge. But, believing in the myth that interest rates have a big influence on the stock market makes success even harder. And, we have several more popular myths to dispel for you in an Elliott Wave International free report, "Market Myths Exposed."
Learn how you can gain instant access -- just below.
Begin reading Market Myths Exposed now.

This article was syndicated by Elliott Wave International and was originally published under the headline Worried About the Fed? Don't Be -- Here's Why. 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.

Oil Prices and the 2019 Hurricane Season

By Elliott Wave International

In May, the National Oceanic and Atmospheric Administration predicted a near-normal 2019 hurricane season, which runs from June 1 to November 30.
But, the season got off to an early start with the short-lived sub-tropical storm Andrea on May 20.
On May 31, a financial website mentioned this early start as part of a larger warning to commodity traders (Marketwatch):

Storms in the Atlantic Ocean weren't a major worry for the commodities markets in 2018, but this year's hurricane season, which has seen an early start, may rattle traders'; nerves.

Of course, the presumption is that commodity prices, including oil, react to the impact of hurricanes.
However, you might be surprised to learn that this is simply not the case.
Consider Hurricane Katrina, a historic category 5 hurricane which hit the Gulf states in 2005.
Here's a description from the internet 11 years after Katrina made landfall:

Katrina shut down 95% of crude production and 88% of natural gas output in the Gulf of Mexico … thus having a major effect on oil prices.

The conventional wisdom says that such a disruption in "supply" would cause oil prices to skyrocket.
But, this chart and commentary from Robert Prechter's 2017 book, The Socionomic Theory of Finance, reveals what really happened:
 

The chart shows the day this event occurred: August 29, 2005, right at a top and just before a three-month oil-price slide of over 20%. A record-breaking, surprise disruption in the supply of oil failed to make oil prices zoom. On the chart, it even looks as if somehow the event made prices fall. According to Econ 101 the market's reaction makes no sense. … The historians who described Katrina's "major effect on fuel prices" must have figured that a disaster of such magnitude simply had to have a long term impact on oil prices, so they just said it. Their devotion to exogenous-cause logic obscured their perception of actual history.

Hurricanes are not the only reason for disruptions in the supply of oil. Sometimes disruptions are man-made.
For example, on July 2, a financial website mentioned the "extended OPEC-led production cuts." Again, the conventional wisdom says that prices should jump on this news. Yet, crude was down almost 5% on July 2!
The takeaway is that crude oil is not subject to the economic law of supply and demand, but instead is internally regulated and governed by the Wave Principle.
Elliott Wave International's July Global Market Perspective, which regularly covers the oil market, noted:

You [don't] need to know the news in advance to anticipate the move [in oil's price] -- just the insight that Elliott wave analysis offers.

The bottom line: It's a myth that supply and demand regulate oil prices.
There are several more market myths, which you can read about in the free report, Market Myths Exposed.

This article was syndicated by Elliott Wave International and was originally published under the headline Oil Prices and the 2019 Hurricane Season. 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.