Is an Accommodative Fed Bullish for the Stock Market?

"In 2007-2008, the Fed cut rates 10 times, but the S&P 500 still declined 58%"

By Elliott Wave International

Many investors heed every utterance from the Federal Reserve, hoping they hear a clue about interest rates. They assume that a fall in interest rates means higher stock prices, while rising rates will push stocks lower.
First, Elliott Wave International's research shows that the Fed follows the bond market. It doesn't lead it.
Secondly, EWI's research reveals that stock prices have risen during trends of lower and higher rates. Likewise, there have been periods of falling stock prices during trends of lower and higher rates too. In other words, there is no consistent correlation between the trends of stocks and interest rates.
As Elliott Wave International President Robert Prechter has noted:

It is nearly impossible to find a treatise on macroeconomics... that does not assert or assume that the Federal Reserve Board has learned to control the credit supply, interest rates, the rate of inflation and the economy. Many people believe that it also possesses immense power to manipulate the stock market.

The very idea that it can do these things is false.

Yet, the widespread belief that the Fed holds a lot of sway over the stock market persists.
On Dec. 27, for example, no less than The New York Times said:

Three Federal Reserve rate cuts and a rally in huge tech stocks like Apple have helped lift the S&P 500 by 29 percent so far in 2019.

Then, on Jan. 13, a major financial website said (CNBC):

The stock market has been riding high, helped in large part to two critical moves the Fed made in October.

One was a pledge to hold rates steady while inflation remains low, the other an intervention in the repo market.

Yet, here's another perspective from our Jan. 17 U.S. Short Term Update:

The chart is reproduced from [the March 2019 Elliott Wave Financial Forecast] showing the lack of correlation between Fed behavior and the stock market. The Fed cut interest rates 13 times from 2000-2003, yet the S&P 500 still declined 51%. Again in 2007-2008, the Fed cut rates 10 times, but the S&P declined 58% from August 2007 to March 2009. Subsequent to that, 9 Fed rate increases starting in 2015 didn't stop the stock market from rallying. Simply put: The Fed does not control the trend of the stock market.

So, the widespread belief that the Fed controls the stock market is a myth.
There are several other market myths that investors need to know about.
Get our insights in the free report: Market Myths Exposed.

Bitcoin Goes from Danger to "Safe Haven" in January 2020. Can You Keep Up?

The cryptocurrency's 2020 comeback was NOT a matter of politics, but rather the Elliott wave pattern

By Elliott Wave International

At 1:53 AM on January 10, Tesla founder and a frequent social media pot-stirrer, Elon Musk, tweeted, "Bitcoin is 'NOT' my safe word," only to add a wink face emoji five minutes later. What did it all mean?
Best guess, it was Musk's tongue-in-cheek nod to the fact that in the two weeks after the January 2nd U.S. air strike which killed Iran's military leader Qasem Soleimani, bitcoin's value soared 20% like a good ole fashioned safe-haven asset would.
And thus, the idea of bitcoin as "digital gold" (Jan. 15 Forbes) was born. Wrote one January 9 crypto site:

"The conflict between the US and Iran served as an example of how bitcoin has evolved as a safe haven asset in times of global turmoil." (Jan. 9 CryptoBriefing)

The categorization of bitcoin as a haven of safety is a radical revision of recent history. Case in point, at the end of December 2019 -- just days before the Soleimani assassination set off the geopolitical sirens -- mainstream analysts nailed a figurative "DANGER: KEEP OUT" sign to bitcoin's doors.
At the time, bitcoin was circling the drain of a one-year low with prices slashed in half from their June 2019 high. And, as these news items from late December show, the crypto king was supposedly about as safe as a stick of dynamite in a fireworks factory.

• "BTC/USD continues to be firmly locked within the market bears control... The price runs the risk of a potential fast move down towards $5000." (Dec. 16 FX Street)
• "Why Bitcoin's bear market will drive price to $3000." (Dec. 12 Yahoo! Finance)
• "Bitcoin Faces Dangerous Year as Global Market Feel Pinch... As economies around the world begin to stagnate after the growth of the past decade, many believe Bitcoin will face a harrowing future. (Dec. 29 Be In Crypto)

And then came the sudden shift to bitcoin as a "safe haven."
Essentially, there are two options to explain what's going on. First: Bitcoin "evolved" from a danger into a safe haven, overnight. Not likely. Or, the more realistic choice: Mainstream analysts changed their tune only AFTER it had soared 20%, and it was that rally that changed their hearts.
All the while, in our opinion the real reason for bitcoin's upside breakout in early January had nothing to do with the escalation in U.S. and Iran tensions; but rather a bullish Elliott wave pattern.
Here, our hot-off-the-press, free Club EWI resource titled "Crypto Trading Guide: 5 Simple Strategies for Catching the Next Big Opportunity" sets the record straight:

"Market prices unfold in repeating patterns that you can measure with a ruler, a calculator, or basic software. This gives you objective 'sign posts' to your desired destination -- namely, low-risk market opportunities."

You be the judge. On December 31 -- long before the Soleimani "shock" -- our Currency Pro Service analysis of bitcoin identified one of the most powerful Elliott wave patterns underway on the BTC-USD price chart, a "third wave." Our chart, pictured below, shows the bullish implications for a stout move higher:

Then, on January 3, Currency Pro Service confirmed the bitcoin "bulls [now] have an opportunity to take this market higher," a which played out nicely with bitcoin's strongest start to a year since 2012.
Here again, our free "Crypto Trading Guide: 5 Simple Strategies for Catching the Next Big Opportunity" seizes the page to show traders how to "identify likely turning points -- and act! -- by using Elliott wave analysis." The Guide writes:

"Once you've properly ID'd a pattern on a market's price chart, you can then anticipate the direction prices will likely move next."

That's exactly what our Cryptocurrency Pro Service analysis did in anticipation of bitcoin's January comeback.
When it comes to identifying high-confidence setups in the ever-volatile crypto markets, we have one "safe word" for you: our "Crypto Trading Guide: 5 Simple Strategies for Catching the Next Big Opportunity." (Technically, that's 12 words, but you get the point!)
The best part is, every Club EWI member has instant access to the entire Crypto Trading Guide -- FREE. Join our free Club EWI now and dive right in.