Here's Why IPOs Will Likely Dwindle to Near Zero

"The IPO market is fizzling"

By Elliott Wave International

Financial activity is usually abuzz during times of financial optimism, such as the issuance of initial public offerings (IPOs).

An IPO means that a company is transitioning from private to public ownership. The process involves selling shares to the public for the first time.

As recently as 2021, a Dec. 2 Nasdaq.com headline said:

A Record Year for IPOs

The attached article mentioned that close to a thousand companies had gone public last year, handily surpassing the record set in the 1990s.

As you know, the S&P 500 index was still climbing throughout 2021.

However, history shows that when the ebullient psychology which drives stock prices higher wanes, so does the IPO market.

Indeed, at the onset of the worst part of the 2007-2009 bear market, the May 2008 Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, said:

IPOs are being cancelled at a record rate as "concerns about a recession sapped demand for new shares."

Of course, the "Great Recession" of about 15 years ago turned out to be the worst economic downturn since the Great Depression of the early 1930s.

Speaking of which, you may be interested in seeing a chart from Bradstreet's Weekly when the business digest was doing a 1932 year in review (data is through mid-1932). A classic Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and cultural trends, re-published the chart and said:

Wall Street was in manic mode in 1929, giving the public what it wanted: more stock. By late 1931, new issues had reached nearly zero.

Now back to present day: The "manic" psychology of 2021 drove the S&P 500 index to a record high in the first few trading days of 2022. As stock prices tumbled thereafter, the June Elliott Wave Financial Forecast noted:

The IPO market is fizzling. According to Renaissance Capital, of eight IPOs that began trading in May, just one logged a gain: Bright Green Corporation, a cannabis company. From its offering price of $8, the shares jumped 625% to $58 on its second day of trading, which was May 18. After that, however, it fell more than 85% and is now trading at $7.89 as we go to press, below its initial offering.

As of this writing intraday on June 22, Bright Green Corporation was trading at $2.77.

Is the stock market destined to repeat the 2007-2009 bear market, or even worse, the historic financial downturn from 1929 to 1933?

The stock market's Elliott wave pattern offers a big clue.

If you'd like to learn how the Elliott wave model can help you analyze the stock market, you are encouraged to read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4, as shown in Figure 1-1. The two interruptions are apparently a requisite for overall directional movement to occur.

[R.N.] Elliott noted three consistent aspects of the five-wave form. They are: Wave 2 never moves beyond the start of wave 1; wave 3 is never the shortest wave; wave 4 never enters the price territory of wave 1.

Get more insights into the Wave Principle by reading the entire online version of the book for free.

All that's required for free access is a Club EWI membership, which is also free.

Club EWI is the world's largest Elliott wave educational community, and members enjoy complimentary access to a wealth of Elliott wave resources on financial markets, investing and trading.

Just follow the link and you can have the Wall Street classic on your computer screen in moments: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Here's Why IPOs Will Likely Dwindle to Near Zero. 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.

Technical Analysis: Why You Should Expect a Popularity Surge

Here's when a "rebirth of interest" in cycles and waves occurs

By Elliott Wave International

You probably know that the term "technical analysis" refers to analyzing the behavior of financial markets themselves -- such as the stock market -- as opposed to "fundamental" analysis, which is based on news and events outside of financial markets.

Well, in recent years, technical analysis has been out of favor.

A classic Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and cultural trends, explains why:

When bear markets mature, technical analysis is all the rage. When bull markets mature, it is not even on investors' radar.

The stock market had been in a bull market for more than a dozen years so newsletters based on technical analysis have struggled. You might catch a market technician getting interviewed on financial television or for a print article here and there, but most interviewees offered "fundamental" analysis or external reasons for their market forecasts. You see, "fundamental" analysis tends to be popular when the stock market is rising because people feel that the "machine of society" and the market are linked and they're both humming along as they should. In bear markets, people start to feel that "fundamentals" failed them, so they turn to other forecasting tools.

This chart and commentary from Robert Prechter's landmark book, The Socionomic Theory of Finance, reveals how the popularity of financial theories have waxed and waned with the trend of the stock market:

The chart shows that in times of increasingly positive social mood -- such as the 1920s, the 1950s-1960s and the 1980s-1990s -- people in the field of finance tend to believe in human rationality and humans' ability to control social trends. In times of increasingly negative social mood -- such as the 1930s-1940s, the 1970s, and the first decade of the 2000s -- there is a rebirth of interest in non-rational human behavior and the existence of cycles, waves and even extraterrestrial influences such as sunspots.

You probably know that Elliott wave analysis is a form of technical analysis. It tracks the market's pattern, which repeats in predictable ways.

If stock market prices continue to trend lower, expect a jump in the Wave Principle's popularity.

Of course, you don't have to wait to start using Elliott waves. In fact, individuals who were already following the message of the Elliott wave model were prepared before the downtrend started in the Dow Industrials and S&P 500 index in January.

Indeed, part 1 of the January Elliott Wave Theorist (published December 31, 2021) referred to an Elliott wave pattern when the publication said:

Diagonals occur at the end of larger sequences. If this diagonal proves true, the market is poised to roll over directly into a bear market.

Just two trading days later (Jan. 5), the Dow hit an all-time intraday high and then "rolled over." The senior index has been trading lower since.

By contrast, a Jan. 5 article in the mainstream financial press was titled (Marketwatch):

Why the bull market will stay alive in 2022 ...

The article referenced the comments of three market newsletter writers, and those comments largely centered on "fundamental" analysis, such as expectations for economic growth, earnings, pharmaceutical sales, General Motors' development of electric vehicles and so on.

No analytical method is perfect, including the Wave Principle. However, over decades of meticulous market observations, Elliott Wave International has concluded that the Elliott wave model is the most useful analytical method available -- in bull or bear markets.

If you'd like to delve into the details of the Wave Principle, you are encouraged to read Frost & Prechter's book, Elliott Wave Principle: Key to Market Behavior. Here's a quote from this Wall Street classic:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market's position within the behavioral continuum and therefore about its probable ensuing path. 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. Many areas of mass human activity display the Wave Principle, but it is most popularly used in the stock market.

Good news: You can access the entire online version of the book for free once you become a member of Club EWI, the world's largest Elliott wave educational community (approximately 500,000 worldwide members and growing).

A Club EWI membership is also free and unlocks access to a wealth of Elliott wave resources on investing and trading. All the while, you are under zero obligation as a Club EWI member.

Just follow this link to get started right away: Elliott Wave Principle: Key to Market Behavior -- free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Technical Analysis: Why You Should Expect a Popularity Surge. 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.

Who (or What) Is Really in Charge of Bitcoin's Price Swings?

Bitcoin lost three-quarters of its value since November. "Market fundamentals" have lost control of its trend. But something else has been at the wheel the whole time.

By Elliott Wave International

I'm not ashamed to admit I have the technological intelligence of an Eggo waffle. So, when my computer bugged out the other day, I called the IT department at work. The tech wizard on the other end showed me to a webpage where I had to click a box that read: "Consent to Control." From that point, the IT guy was able to hack into my laptop, find the source of the glitch, and remedy the problem.

As I sat there watching my cursor move around the monitor on its own, clicking tab after tab as if by some phantomlike force, I thought,

"Holy moly, this is the virtual screenshare of mainstream financial wisdom."

Summarized as such: External forces known as "market fundamentals" operate prices remotely. Positive fundamentals cause the price "cursor" to rise, while negative news and events trigger selloffs. And investors? They have little choice but to "consent" to this outside control.

At least, that's how it's supposed to work.

In reality, however, this news-driven model of market behavior is far from perfect. Markets regularly ignore their "fundamentals" like a Kardashian to the hired help -- and move completely opposite them.

Take, for instance, a little-known (if you were born yesterday) cryptocurrency called Bitcoin. Last October-early November, Bitcoin had clocked a meteoric rise to record highs. And, according to the popular pundits, the "fundamentals" controlling Bitcoin were pointing up, up and away!

Here, these news items from the time recapture the rose-colored Bitcoin glasses:

Safer than the ultimate safe haven, from Republic World on October 12:

"Investors Preferring Bitcoin Over Gold As Better Hedge Against Inflation: JP Morgan Chase."

"Bitcoin's ability to rally despite China's ban on crypto transactions signifies 'one of the most bullish signals ever'

"Nearly 50% of the computing power (called hash rate) of the bitcoin blockchain, pulled the plug, packed up, and relocated to another country in a few months. And no one noticed! It signals an incredibly resilient system."

From MarketWatch on October 18:

"Everything is about to start breaking out now and we've seen it before. We know the pattern...this October, November, December, January, February, March is going to be the point where it's almost impossible to lose money by owning anything."

And, from CNBC on November 1, one crypto expert lists a bevy of bullish forces -- "a super progressive administration," "regularity clarity," "support from Congress," "Bitcoin mining moving to the U.S.," and "passed fears around the China crackdown" -- set to buoy Bitcoin... indefinitely!

And yet, despite the most bullish fundamental signals in Bitcoin's history and the "impossibility" of loss -- the crypto plummeted 74.5% from its intraday high of 69000 on November 10, to its intraday low of 17,567.45 on June 19.

How come?

Here's the answer: Despite what mainstream experts might say, "fundamentals" did NOT lose control over Bitcoin. They never had that control to begin with.

The Elliott Wave Principle offers this answer for what did: investor psychology, which unfolds as Elliott wave patterns directly on market price charts. And, on October 27, 2021, our Trader's Classroom presented a special video episode on Bitcoin. In it, editor Jeffrey Kennedy was able to label price action as a very mature B wave rally of a larger expanded flat.

Meaning, the stage was set for an imminent crash. From Jeffrey's analysis on October 27:

"Under this scenario, we may push a bit higher here and have one more run up to the $70,000 handle. And at that point, going from near $70, we're ready for a $50,000 a dollar drop all the way back to $20,000 a coin."

"This wave count fits and adheres to all the rules and guidelines of the Wave Principle."

This next chart captures what followed: Bitcoin did push up one more time to its November 10 peak, and then proceeded to collapse below $20K area as Jeffrey's bearish analysis anticipated.

Right now, there is no market sector more volatile than cryptocurrencies. In Jeffrey Kennedy's own words: "You're swimming with sharks here and you need to be able to assume and be okay with massive risk when you play the space."

Join two seasoned instructors on June 28 at 11 AM Eastern/NY time for a hands-on 1-hour lesson on how to spot Elliott wave setups in cryptos -- and how to capitalize on them. After just 1 hour, come away equipped to spot and execute crypto wave setups far better than before. Grab your free seat now.

10-Year U.S. Treasury Yield: Anticipating the Rising Trend

"The tidal wave of risk assumption ... may be turning"

By Elliott Wave International

On June 14, the yield on the 10-year U.S. Treasury note surpassed 3.45% -- its highest level in more than 11 years.

Keep in mind that the lowest intraday reading for the yield on the 10-year note was 0.31% -- and that was as recently as 2020. So the rise has been remarkable.

The Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, was ahead of this trend reversal. Back in March 2020, the publication showed this graph of yields on global bonds, 10-year U.S. Treasury notes and general obligation municipal bonds. Here's the commentary:

According to 150 years' worth of data ... this is the first time that 10-year Treasury note yields have dropped below 1%. Grand Supercycle-degree tops set Grand Supercycle records. Investor ebullience is the only thing that allows for an embrace of no-yield debt. The tidal wave of risk assumption, however, may be turning.

In other words: Expect the downward trend in yields to turn upward.

Shortly after that March 2020 analysis in the Elliott Wave Financial Forecast published, yields began to climb.

As you might imagine, bond portfolios have taken a substantial hit (bond prices sink as yields climb).

Shifting to corporate bond portfolios, Bloomberg had this headline on March 14 of this year:

Corporate Bond Rout Is So Severe History Books Need a Revision

The article goes on to say:

[U.S. corporate bond] losses have piled so high that they now belong in history books. A Bloomberg index of investment-grade returns is down 10.5% so far this year ... There is little precedent for drops of that magnitude.

Mind you, this was back in March and yields have risen since.

As a May 12 headline from the Associated Press said:

Bonds, haven for elderly and cautious, are getting torched

The question is: What does the Wave Principle say about this rising trend in bond yields?

If you need to brush up on your knowledge of the Wave Principle, an ideal book to read is Frost & Prechter's Elliott Wave Principle: Key to Market. Here's a quote from this Wall Street classic:

All waves may be categorized by relative size, or degree. The degree of a wave is determined by its size and position relative to component, adjacent and encompassing waves. Elliott named nine degrees of waves, from the smallest discernible on an hourly chart to the largest wave he could assume existed from the data then available. He chose the following terms for these degrees, from largest to smallest: Grand Supercycle, Supercycle, Cycle, Primary, Intermediate, Minor, Minute, Minuette, Subminuette. Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor waves, and so on. The specific terminology is not critical to the identification of degrees, although out of habit, today's practitioners have become comfortable with Elliott's nomenclature.

When labeling waves on a graph, some scheme is necessary to differentiate the degrees of waves in the market's progression. We have standardized a sequence of labels involving numbers and letters ... .

If you're interested in reading the entire book, know that you can gain free access to the online version once you become a member of Club EWI, the world's largest Elliott wave educational community.

Club EWI is free to join, and members enjoy free access to a wealth of Elliott wave resources on investing and trading.

Get started by following this link: Elliott Wave Principle: Key to Market Behavior -- free, unlimited and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline 10-Year U.S. Treasury Yield: Anticipating the Rising Trend. 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.

Tech Stocks and the Dot-com "Echo"

"Downside surprises should become the norm"

By Elliott Wave International

The Wave Principle's basic pattern includes five waves in the direction of the larger trend, followed by three corrective waves, as illustrated in both bull and bear markets below:

You probably recall the bursting of the dot-com bubble when the tech-heavy Nasdaq 100 plummeted 78% between March 2000 and October 2002.

In recent months, a slew of financial articles compares today's "tech wreck" to that dot-com crash of about 20 years ago.

Here are just a couple of sample headlines:

• 'Tech wreck' looks more like another dotcom bubble bursting (March 9, The Financial Times)
• It's looking a lot like the dot-com crash again. ... (May 22, Fortune)

It's been said that history may not repeat exactly but it does often rhyme. And the current downturn in many tech names does remind of that dot-com bubble.

You may be interested in knowing that our Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus worldwide financial markets, provided this prescient warning as far back as November 2020:

Big tech is transitioning from a bull market to a bear market at a high degree of trend, so downside surprises should become the norm.

Price shocks across the tech sector began almost immediately after that analysis.

Here's the latest from our June 2022 Global Market Perspective:

French IT company Atos dropped 12% on January 7, 2021, and investors have sold the stock relentlessly ever since. Sweden's Spotify, the world's largest music streaming service, peaked in February 2021 and fell 70% to its current level. Switzerland's Logitech (computer peripherals) and Germany's Infineon Technologies (semiconductors) held up a bit longer, but the companies' bear-to-date losses have piled up to 50% and 36%, respectively.

So, yes, the current trend in the tech sector does rhyme with the dot-com bust -- or, call it an "echo." Here's more analysis from the June Global Market Perspective:

It took until November 2021 for the broader technology complex to reverse. The Stoxx 600 Technology Index peaked after failing to surpass its top from the dot-com mania, and, at this point, the "echo bubble" is producing a host of air pockets, flash crashes and general market disturbances.

Here's what you need to know: In addition to the European tech sector, our Global Market Perspective offers insights into U.S. and Asian-Pacific tech names and indexes.

You'll also find Elliott wave analysis of other stock market indexes, cryptocurrencies, forex, bonds, crude oil, gold, silver – all in all, more than 50 worldwide financial markets.

If you’re new to Elliott wave analysis or need a refresher, an ideal book to read is Frost & Prechter’s Elliott Wave Principle: Key to Market Behavior. Here’s a quote from the Wall Street classic:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market’s position within the behavioral continuum and therefore about its probable ensuing path. 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. Many areas of mass human activity display the Wave Principle, but it is most popularly used in the stock market.

Here’s good news: You can read the entire online version of the book for free once you become a member of Club EWI, the world’s largest Elliott wave educational community.

A Club EWI membership is free and opens the door to instant access to a treasure trove of Elliott wave resources on investing and trading – all without obligation and 100% free.

Get started right away by following this link: Elliott Wave Principle: Key to Market Behavior – free and unlimited access.

This article was syndicated by Elliott Wave International and was originally published under the headline Tech Stocks and the Dot-com "Echo". 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.

The Dow Industrials’ Big 8-Wave Cycle is Incomplete

"We finally understand our full Elliott wave position"

By Elliott Wave International

The Wave Principle's basic pattern includes five waves in the direction of the larger trend, followed by three corrective waves, as illustrated in both bull and bear markets below:

Keep in mind that the stock market is a fractal, so this pattern unfolds at all degrees of trend, whether the timeframe is 3 months, 3 years, 3 decades or 3 centuries.

As you might imagine, the size of countertrend corrections are in proportion to the size of the preceding five-wave move. In other words, a five-wave price move that took 3 decades to unfold will sport a much larger correction than a five-wave move that took 3 years to complete.

Here's what you need to know: Elliott Wave International's publications shown subscribers the complete, eight-wave cycle at all relevant degrees of trend, including the Grand Supercycle trend which began in the late 1600s.

For instance, after showing a price chart which began in 1697, the February 2021 Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and cultural trends, said:

[The chart] shows the market at the highest scale for which we have data. It comprises countless individual Elliott waves that have taken many generations to play out.

At this scale, we finally understand our full Elliott wave position.

Less than a year after that commentary, the Dow Industrials and S&P 500 index topped in January 2022.

As implied, that top may be far more significant than marking the end of the bull market which began in March 2009 and far more significant than many market observers believe.

Indeed, the sentiment expressed by two recent headlines from major mainstream publications is "buy the dip":

• Stocks Have Been Falling. I’m Still Buying Steadily. (The New York Times, May 20)
• Don’t Panic. It’s Time to Be Bold and Buy Stocks. (Barron’s, May 13)

However, Elliott Wave International is emphasizing financial protection and safety.

The main reason for that stance is that the Dow’s centuries-long eight-wave bull market cycle (which, as you’ll recall from the illustration, includes three corrective waves) is incomplete, according to our analysts’ best interpretation of the wave structure.

Get more insights into Elliott waves by reading Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here’s a quote: 

[R.N.] Elliott himself never speculated on why the market’s essential form is five waves to progress and three waves to regress. He simply noted that that was what was happening. Does the essential form have to be five waves and three waves? Think about it and you will realize that this is the minimum requirement for, and therefore the most efficient method of, achieving both fluctuation and progress in linear movement. One wave does not allow fluctuation. The fewest subdivisions to create fluctuation is three waves. Three waves (of unqualified size) in both directions would not allow progress. To progress in one direction despite periods of regress, movements in that direction must be at least five waves, simply to cover more ground than the intervening three waves. While there could be more waves than that, the most efficient form of punctuated progress is 5-3, and nature typically follows the most efficient path.

If you’d like to read the entire online version of the book, you may do so for free once you join Club EWI, which is the world’s largest Elliott wave educational community (500,000 worldwide members and growing).

Club EWI members enjoy free access to a wealth of Elliott wave resources on financial markets, investing and trading. A Club EWI membership is also free.

Just follow this link to get started:Elliott Wave Principle: Key to Market Behavior – free and unlimited access.

This article was syndicated by Elliott Wave International and was originally published under the headline The Dow Industrials’ Big 8-Wave Cycle is Incomplete. 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.

Top Technical Tool: Japanese Candlesticks

How to spot trade setups using this tool

By Elliott Wave International

You may be familiar with an Open-High-Low-Close (OHLC) chart: comprised of vertical lines with small horizontal lines on each side. The top of each vertical line is the high and the bottom is the low. The small horizontal lines on either side represent the open and close for that period.

A Japanese Candlestick chart is similar. It allows you to zoom in and analyze a single period’s worth of price action.

Here's an example of a Japanese Candlestick chart:

Japanese Candlestick charts employ the same data that OHLC price charts do except that the data is expressed differently. The real body is the range between the open and close, and appears as a small block. Shadows are the lines that extend upward and downward from this block, and represent the highs and lows.

Candlestick analysis can help alert you to reversals. Two bearish candlestick reversal patterns that Elliott Wave International’s (EWI) analysts find highly reliable are Bearish Engulfing patterns and Evening Star patterns. A Bearish Engulfing pattern means that the close is below the open, and the real body encompasses the real body of the prior candle. On a daily chart, it portends further decline for the next three to five days. An Evening Star pattern consists of three candles – a large bullish candlestick, a small-bodied candle and a red candle. It signals that the uptrend is nearing its end.

,p>You can combine Japanese Candlesticks with other tools in order to get a high-confidence view. This weekly continuation chart for the Canadian dollar combines a 20-period moving average to show that the trend is down -- allowing you to focus on bearish reversal candlestick patterns to spot trading opportunities.

EWI’s senior instructor Jeffrey Kennedy notes that "combining these reversal patterns with moving averages makes them even more dynamic because they focus your attention in the direction of the larger trend."

One of the best ways to get an edge in trading is to hand-pick a few select tools for your arsenal. Japanese Candlesticks are one such tool. In skilled hands, they can really show you the trend and alert you to trend reversals.

Free for a limited time, you can get full access to EWI’s premium course on candlesticks to help you add another arrow in your quiver. This course, "Japanese Candlesticks Made Simple and Effective" normally sells for $99.

You need to simply enter the Partner Referral Code CANDLES once you click on the link below and join free Club EWI to gain access to this free course.

Learn how to use candlesticks as a simple, effective trading and risk-management tool now (Partner Referral Code: CANDLES).

This article was syndicated by Elliott Wave International and was originally published under the headline . 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.

Economic "Hurricane": Here's a Take on a Bank CEO's Warning

Here's what reached a nadir as the war in Ukraine broke out

By Elliott Wave International

On June 1, a CNBC headline said:

[Major bank CEO] says 'brace yourself' for an economic hurricane caused by the Fed and Ukraine war

Yes, the U.S. central bank is engaging in so-called "quantitative tightening" and the war persists in Ukraine.

Yet, those cited "causes" of a possible economic "hurricane," like a severe recession or even a depression, are results themselves. For instance, the war in Ukraine resulted from a shift in social mood -- going from positive to negative.

The April Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and cultural trends, drives the point home regarding the war in Ukraine with this chart and commentary:

The outbreak of the war coincided not with the start of a decline in U.S. stock prices, as so many investors feared it would, but the exact low prior to a rally that persisted throughout the fighting. The rally is not due to the bizarre formulation that war is bullish; it is due to natural waves of social mood that had reached a nadir when the war broke out.

Regarding Fed tightening as a contributor to a possible economic crisis, realize that the Fed merely follows the market, it doesn't lead. In other words, investor psychology is the true cause of the rise in rates.

Interest rates (or bond yields) began to rise well before the Fed started to raise its fed funds rate this year.

Fed officials voted to start lifting rates on March 16. Yet, the yield on the 10-year Treasury note bottomed back in 2020 and has been climbing since.

Of course, rising bond yields mean lower bond prices.

Getting back to the economy, the 1.4% decline in U.S. GDP in Q1 was recently revised downward to 1.5%, so an economic contraction may already be underway.

Returning to that mention of "natural waves of social mood" in the April Elliott Wave Theorist quote, you can get insights into these "waves" by reading Frost & Prechter's book, Elliott Wave Principle: Key to Market Behavior.

Here's a quote from the book:

The Wave Principle is governed by man's social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

If you'd like to read the entire online version of the book, you may do so for free once you become a member of Club EWI, which is the world's largest Elliott wave educational community (approximately 500,000 members worldwide and growing).

A major benefit of a Club EWI membership is complimentary access to a wealth of Elliott wave educational resources on financial markets, investing and trading.

There's no cost involved in joining Club EWI and no obligations.

Get started right away by following this link: Elliott Wave Principle: Key to Market Behavior -- free, unlimited and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Economic "Hurricane": Here's a Take on a Bank CEO's Warning. 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.

Food and Gas Prices: Is the Rising Trend (Finally) Ending?

Food and Gas Prices: Is the Rising Trend (Finally) Ending?
The Elliott wave structure of a key commodity ETF provides a clue

By Elliott Wave International

Consumers around the globe are wondering when they will finally see some relief from rising prices at the gas pump and grocery store.

It's difficult for these consumers to get a handle on what to expect from reading recent headlines because some are conflicting.

For example, this April 27 headline says (Nasdaq.com):

Commodities Prices to Remain Sky High Throughout 2024

On the other hand, a May 27 Washington Post column is titled:

Commodities Will Be the Next Market to Succumb

Of course, that headline references the drop in prices for stocks, bonds and other financial markets and says commodity prices are the next in line for a reversal.

Elliott Wave International suggests that you look to the Elliott wave model for insights into commodity prices. It has served our subscribers well.

Here's what I mean: Back in October 2020, commodity prices had already completed their initial leg up and had slipped into a relatively shallow pullback.

Here's what the October 2020 Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus worldwide financial markets, said as this chart was shown:

The [Invesco DB Commodity Index Tracking Fund] has recently begun [a] second-wave correction.

Students of Elliott wave analysis know that a "second-wave correction" means that the next wave will be the strongest part of the price advance, i.e., the third wave.

Indeed, the January 2021 Global Market Perspective stated:

The Invesco DB Commodity Index tracking fund (NYSE: DBC) has probably begun [another wave] up, having ended its correction in December.

As you know, in the months that followed, food and fuel costs skyrocketed.

By June 4, 2021, there's this headline (BBC):

UN: Cost of food rises at fastest pace in over a decade

And, on Oct. 6, 2021, a CNBC headline said:

Americans are paying the most for gas in seven years

In 2022, the Global Market Perspective has continued to update subscribers on the Elliott wave structure of the Invesco DB Commodity Index Tracking Fund, as it has moved closer and closer to the pattern's completion.

Keep in mind that the Elliott wave method does not guarantee an exact path for future prices of a given financial market, yet Elliott Wave International knows of no other method which surpasses its usefulness.

As Frost & Prechter's Elliott Wave Principle: Key to Market Behavior says:

Without Elliott, there appear to be an infinite number of possibilities for market action. What the Wave Principle provides is a means of first limiting the possibilities and then ordering the relative probabilities of possible future market paths. Elliott's highly specific rules reduce the number of valid alternatives to a minimum. Among those, the best interpretation, sometimes called the "preferred count," is the one that satisfies the largest number of guidelines. Other interpretations are ordered accordingly.

If you'd like to read the entire online version of this Wall Street classic, you may do so for free once you join Club EWI, the world's largest Elliott wave educational community.

A Club EWI membership is free and opens the door to free access to a wealth of Elliott wave resources on investing and trading.

Get started by following this link: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Food and Gas Prices: Is the Rising Trend (Finally) Ending?. 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.

What to Make of the Stock Market’s Bounce

What to Make of the Stock Market’s Bounce
"“For certain, there will be countertrend rallies"

By Elliott Wave International

The stock market selloff from March into the May low was comprised of eight straight weeks of decline in the Dow Industrials.

This was historic. The Dow Industrials have been around for 126 years and this was only the second time that the senior index suffered a decline for eight consecutive weeks. The other time was in 1923 -- also March into May.

But, getting back to 2022, on Friday May 20, which was the last day of the eighth week of decline, our U.S. Short Term Update, a thrice weekly Elliott Wave International publication which provides near-term forecasts for major U.S. financial markets, said:

For certain, there will be countertrend rallies as the stock market decline progresses, and some that will be very sharp.

Interestingly, after the market close on the last trading day of the following week, a May 27 CNBC article noted:

S&P 500, Dow snap losing streaks for best week since November 2020

The Dow had climbed 6.2% from May 23 through May 27, so a significant bounce in a relatively short period of time.

Countertrend rallies near the start of a decline (or countertrend drops after the first leg of a bull market) usually result in many investors believing that the old trend (in this case, an uptrend) has returned.

For instance, a senior portfolio manager quoted in that May 27 CNBC article said:

"We have come a long way down pretty fast and if we can stabilize here then the declines we've seen might be all that's needed, or something close to that."

In other words, the attitude expressed is that the selloff may have removed the froth from the market so the uptrend can return. Yet, this can be a financially dangerous mindset, as stock market history indicates.

Here are three charts side-by-side from a classic Elliott Wave Financial Forecast, a monthly publication which analyzes key U.S. financial markets:

On the left, notice that even the then president of the United States commented that "we have now passed the worst" after the first big bounce during the 1929-1932 bear market. Of course, much more decline was yet to follow. In the middle and on the right, you'll also notice positive comments following a bounce in the Nikkei's bear market of the early 1990s and during the NASDAQ's drop about 20 years ago.

The lesson is that the same patterns of investor psychology tend to repeat over and over.

The Elliott wave model reflects these repetitive patterns.

Indeed, here’s a quote from Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior:

The Wave Principle is governed by man’s social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life. The path of prices is not a product of news. Nor is the market the cyclically rhythmic machine that some declare it to be. Its movement reflects a repetition of forms that is independent both of presumed causal events and of periodicity.

The market’s progression unfolds in waves. Waves are patterns of directional movement.

If you’d like to read the entire online version of the book, you may access it for free once you become a member of Club EWI, which is the world’s largest Elliott wave educational community.

You can join Club EWI for free and just to let you know, members are under no obligations. Yet, members do enjoy free access to a wealth of Elliott wave resources on investing and trading.

Get started right away by following this link: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline What to Make of the Stock Market’s Bounce. 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.