Crude Oil: Will "Banking Crisis Send Prices Even Lower"? Ha!

SVB failed in March. Oil was destined to fall as early as February – here’s why;

By Elliott Wave International

The failures of Silicon Valley Bank, Silvergate Bank and Signature Bank have prompted a lot of discussion about the potential of a domino effect. People are wondering "what's next?"

The financial press is linking just about every downward price move in just about every financial market to the woes in the banking sector.

As a March 15 headline noted (CNBC):

Oil tumbles to lowest level since December 2021 as banking crisis routs markets

At the time that headline published, West Texas Intermediate had fallen around 5% during that trading session.

But, first of all, if you're failing to see an immediate connection between bank failures and crude oil prices, you're not alone. I see no connection, either. What's more, Elliott Wave International was forecasting the price of crude oil to decline well before the bank failures hit the news.

On Feb. 3, the February Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets, published with this chart and commentary (Elliott wave labels are shown to subscribers):

Crude Oil's trend still looks down... [a strong Elliott wave] decline still seems like the likely path.

During the next month, oil largely traded sideways. Sometimes, Elliott wave analysis requires patience. On March 3, our March Global Market Perspective updated its crude oil analysis with this chart and commentary:

Crude Oil still looks lower. Crude has yet to step into the meat of the [strong Elliott wave decline] we're anticipating, but it still seems like the likely path.

As you probably know, the price of crude oil has moved lower since our March Global Market Perspective published.

As with all financial markets, countertrend moves will inevitably occur. Yet, Elliott wave analysis provides context and a basis for forecasting before the news; without any news.

If you’d like to learn the details of the Elliott wave model, read Frost & Prechter’s Elliott Wave Principle: Key to Market Behavior. Here’s a quote from this Wall Street classic:

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.

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This article was syndicated by Elliott Wave International and was originally published under the headline Crude Oil: Will "Banking Crisis Send Prices Even Lower"? Ha!. 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.

Overseas Buyers Scoop Up U.S. Shares (Bullish or Bearish)?

"No crowd buys stocks of other countries intelligently"

By Elliott Wave International

The fact that investors from other countries are feverishly buying U.S. stocks might seem like a bullish sign.

On the other hand, consider what Robert Prechter said in his book, Prechter's Perspective:

No crowd buys stocks of other countries intelligently. For decades, heavy foreign buying in the U.S. stock market has served as an excellent indicator of major tops.

Some of the heaviest foreign buying -- whether it's in the U.S. or another country -- tends to occur when a trend is near or at an end.

Looking at an example: In the late 1980s, after years on the sidelines, foreigners became net buyers of Japanese stocks. This coincided with the ending phase of one of the biggest bull markets in history.

Returning to the U.S. but sticking with roughly that same period of history, here’s what the Sept. 2000 Elliott Wave Financial Forecast, a monthly Elliott Wave International publication which covers 50-plus financial markets, had to say as it showed this chart:

This chart of the Dow and foreigners' net purchases of U.S. equities illustrates how beautifully the pattern has held through the U.S. bull market of the 1990s. The solid lines show the flood of foreign buyers within a month of each high, and the dotted lines show them rushing back out again on the months of the big lows. Early in the decade, when stocks were a bargain, foreigners were net sellers. They did not sustain net purchases until the Dow crossed 8000 in 1997.

By the way, overseas buyers also zealously bought U.S. shares right before the 2007 top.

As a quick reminder, the reason for mentioning all of this is what I said at the outset about feverish overseas buying of U.S. shares presently. Here are more details via this chart and commentary from our March Financial Forecast:

Foreigners are surging back into U.S. equities. At $42.9 billion in November, the latest reading of foreign purchases is higher than both the 2000 and 2007 buying extremes. It is shy of the December 2020 record of $78.6 billion, but if foreigners flocked to U.S. stocks the way retail investors did in January, we may find that when the latest readings are released, foreign purchases will be at a new record.

One way to utilize the foreign buying (or, selling) indicator is with the Elliott wave model.

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This article was syndicated by Elliott Wave International and was originally published under the headline Overseas Buyers Scoop Up U.S. Shares (Bullish or Bearish)?. 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.

U.S. Money Supply Deflates 2% Annually (What That Means)

The debt bomb implodes: Expect recession and deflation;

By Elliott Wave International

Many pundits have expressed worry about the ramifications of global debt -- and rightly so. As the Wall Street Journal noted toward the end of 2022:

The world has amassed $290 trillion of debt and it's getting more expensive to pay for it.

In the U.S. alone, the cost of servicing the national debt is expected to skyrocket over the next decade (Fox News, Feb. 27):

Interest payments on the national debt to reach $1.4 trillion annually in 2033: CBO

There's also the issue of household debt in the U.S. That debt bomb is already in the process of imploding. Here's a chart and commentary from our March Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets:

A rare shift in the mindset of consumers started in March 2020, when Real Total Consumer Credit began to decline. Since August 1982 … the growth in U.S. consumer debt has been almost straight up. But there were two prior episodes in which American consumers' otherwise insatiable appetite for debt dissipated: from December 1989 to October 1992 and from December 2008 to November 2011. Both periods encompassed economic recessions. It happened again starting in March 2020, but this time, real consumer debt failed to recover to new highs with the economy.

Another important point to make is that the balance sheets of the European Central Bank, the Bank of England and the Federal Reserve have been deflating -- and so has another key measure.

This chart and commentary are also from our March Global Market Perspective:

More deflation evidence comes in the form of overall money supply in the U.S. ... The chart shows the annualized percentage change in M2 since 1981. Apart from a very brief (one week!) foray into negative territory in 1995, money supply in the U.S. has been inflating for at least 40 years. Now, though, money supply is deflating at a current annualized clip of over 2%. This historic and now twelve-week-long contraction in money on this basis looks like it is becoming embedded.

It’s also a good idea to keep an eye on major worldwide stock indexes. History shows that global economies tend to follow global stock indexes. In other words, when stock markets tank, economies generally follow and vice versa.

You can get a handle on the main trends of global stock indexes by using the Elliott wave method.

If you’re unfamiliar with Elliott wave analysis, 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. 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.

[Elliott] did not specifically say that there is only one overriding form, the “five-wave” pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.

If you’d like to read the entire online version of the book for free, you may do so by joining Club EWI, the world’s largest Elliott wave educational community.

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

Join Club EWI now by following this link: Elliott Wave Principle: Key to Market Behavior -- get free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline U.S. Money Supply Deflates 2% Annually (What That Means). 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.

Silicon Valley Bank, Silvergate and "The Everything Bust"

"The pressure on banks will rise"

By Elliott Wave International

The phrase "Everything Bust" means a bust in just about every financial risk-asset of which you can think, as well as the economy and, I dare say, the financial system itself.

Indeed, in a section titled "The Everything Bust Is on The Way," the December Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets, noted:

The pressure on banks will rise as the economy heads south.

And, now, we have these headlines:

• Silicon Valley Bank Fails After Run on Deposits (The New York Times, March 10)
• Crypto-focused bank Silvergate is shutting operations and liquidating after market meltdown (CNBC, March 8)

Silicon Valley's collapse was the biggest bank failure since Washington Mutual in 2008 and the second largest bank failure in U.S. history.

Many of those on Wall Street blamed the bank failures for triple-digit declines in the Dow Industrials on the day the news came out. However, the real "bust" in the Dow Industrials and S&P 500 began a year earlier, in January 2022. It reflected a downturn in a social mood; today's bank failures have the same roots that stretch back months and months. And since social mood is showing no signs of improvement, it's likely not over.

The "Everything Bust" is on -- in stocks, real estate, bonds, the world of crypto, SPACs (a.k.a. special purpose acquisition companies) and elsewhere in the world of finance, including the subprime auto market.

This chart and commentary are from the March Global Market Perspective:

The percentage of subprime auto borrowers who are at least 60 days late on payments surged to 6.05% in December, more than double the seven-year low of 2.58% recorded in April 2021, and eclipsing the peak reading of 5.7% during the Great Recession of December 2007 to June 2009.

As a March 10 New York Post headline said:

Silicon Valley Bank meltdown sparks contagion fears: 'We found our Enron'

Whether you want to call it "contagion fears" or the manifestation of an increasingly fearful mood, don't be surprised if more bank failures appear on the horizon sooner rather than later.

Also, don't be surprised if more triple-digit declines occur with the Dow Industrials.

The Elliott wave pattern of this senior U.S. index is revealing what very well may be next for U.S. stocks.

If you're unfamiliar with Elliott wave analysis, or simply need a refresher, read Frost and Prechter's Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

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.

If you'd like to read the entire online version of this Wall Street classic, you may do so for free once you become a member of Club EWI, the world's largest Elliott wave educational community (around 500,000 worldwide members).

A Club EWI membership is also free and members enjoy complimentary access to a range of Elliott wave resources on investing and trading.

Join Club EWI now by following this link: Elliott Wave Principle: Key to Market Behavior -- get free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Silicon Valley Bank, Silvergate and "The Everything Bust". 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 Shocking Truth About the FDIC and Your Bank Deposits

Why you can't rely on the FDIC if your bank goes under

By Elliott Wave International

Editor's note: The failures of Silicon Valley Bank and Silvergate Bank have many observers of the banking system discussing the possibility of contagion. Even so, many depositors feel safe because their deposits are covered up to $250,000 by the F.D.I.C. (Federal Deposit Insurance Corporation). However, this feeling of safety may very well be misplaced.

Here are some important insights about the F.D.I.C. and the safety of your bank deposits.

---

Millions of U.S. bank depositors feel safe in the knowledge that the Federal Deposit Insurance Corporation will protect their accounts, even if their bank goes under.

Yes, it's true that the FDIC says it will do so. As their website states:

The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

But, the question is: Does the FDIC have the wherewithal to fulfill its promise?

In the event of a major financial crisis, the answer is an emphatic "no." Not even close.

Here's what the Elliott Wave Theorist said in August 2008, near the middle of the 2007-2009 financial crisis:

The FDIC is not funded well enough to bail out even a handful of the biggest banks in America. It has enough money to pay depositors of about three big banks. After that, it's broke.

No doubt, most bank depositors would be shocked to learn this.

But think about it: No single entity could possibly insure all of the nation's bank deposits.

Yet, that FDIC sticker on the front of your bank is very reassuring. The discussions with your banker about your deposit "insurance" might be reassuring.

But, something that is not quite so reassuring is from none other than a former vice-chairman of the FDIC itself. Here's what Thomas Hoenig wrote for the Los Angeles Times in a Dec. 18, 2014 article titled, "FDIC couldn't cover a big bank bailout without taxpayer support":

As a reminder, when the financial industry imploded in 2008, Congress had to pass a special law to fund a $700-billion bailout... . The Federal Deposit Insurance Corp. had nowhere near enough resources to fund their resolution.

Today, with assets of nearly $11 trillion and derivatives worth $4 trillion, the eight largest U.S. banks are far bigger and hold more derivatives than in 2008. Compare those numbers with the FDIC insurance fund of $54 billion. [Emphasis added]

These are eye-opening statistics.

The best way to protect your deposits is to adequately research the banks in your community, and pick one where the banks' officers handle their customers' deposits prudently.

Indeed, the Theorist once remarked:

Relatively safe banks may become even safer. If they have the sense to inform the public of their relative safety aspect, depositors in a developing financial crisis will move funds out of weak banks into stronger ones, making the weak ones weaker and the relatively strong ones stronger.

But, as you've seen, it's a myth that the FDIC can always protect your bank deposits, and it's not the only myth. We have more.

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This article was syndicated by Elliott Wave International and was originally published under the headline The Shocking Truth About the FDIC and Your Bank Deposits. 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.

Insights into This "Old Faithful" Indicator of Financial Peaks

Here's when "supposedly informed corporate officers take the bait"

By Elliott Wave International

Some stock market indicators have proven themselves market cycle after market cycle.

For example, one indicator which has stood the test of time is a jump in the level of foreign buying near or at a stock market top -- and that can be in any country. Right now, we're talking about the U.S., but looking back a few decades, it also occurred in Japan at the end of the 1980s.

Another Old Faithful indicator of financial peaks is an extreme in the zeal with which corporations buy back their own shares.

The April 2022 Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, noted:

Companies usually buy back their own shares at a record pace near major market peaks.

As historical examples, new extremes in quarterly S&P buybacks occurred around the time of the stock market peaks in the first quarter of 2000 and the third quarter of 2007. Another extreme accompanied the Dow and S&P tops in the first quarter of 2022.

The just-published March Elliott Wave Financial Forecast provides an update with this chart and commentary:

[Here's an] Old Faithful indicator ... a new monthly record of $131.5 billion of announced buybacks in January. This total is even higher than that of January 2021 and January 2022. It was also close to half of the record three-month total in the first quarter of 2022. As the Elliott Wave Financial Forecast said in April, "At the end of the greatest stock market advances, supposedly informed corporate officers take the bait."

Financial optimism is running so high that even a new tax has not slowed corporate officers from buying back shares. Here's a March 2 news item from the Wall Street Journal:

Executives largely shrugged off a new 1% tax on stock buybacks as the cost of doing business.

Keep in mind that the level of corporate buybacks is not a short-term timing tool for the stock market.

It's best to consult the market's Elliott wave pattern for insights into specific and important price junctures.

Now through March 31, you can see those insights FREE inside EWI's FreePass for a Changed World event.

FreePass for a Changed World will give you an in-depth look at the analysis you can use to anticipate changes in inflation, interest rates and every other major category of investment concern.

Subscribers gladly pay $97 per month to get the market forecasts you'll get for free in FreePass for a Changed World. But for FreePass, there's no credit card required and zero strings attached.

Risks have changed. Opportunities have changed. The world has changed, in very real ways.

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This article was syndicated by Elliott Wave International and was originally published under the headline Insights into This "Old Faithful" Indicator of Financial Peaks. 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.

U.S. Stocks: Why Acting Independently Has Never Been More Important

"Individual investors have been snapping up stocks at the fastest pace on record"

By Elliott Wave International

More than 20 years ago, when I was working for another company, I remember hearing a colleague say that he doesn't look at his monthly 401k statements.

The implication was clear: He couldn't bear to see the losses. At the time, the stock market was in a big downtrend after the dot.com bust.

I was reminded of what my former colleague said when I saw this Feb. 23 CNBC headline:

Retirees lost 23% of their 401(k) savings in 2022, Fidelity says

The S&P 500 index surrendered nearly 20% in 2022. As for bonds, another CNBC headline noted (Jan. 7):

2022 was the worst-ever year for U.S. bonds.

So, no doubt, there's been a lot of pained looks on the faces of 401k participants as they've reviewed their statements during the past some months.

Even so, read this from Yahoo! News (Feb. 16):

Individual investors have been snapping up stocks at the fastest pace on record as U.S. equity markets have charged higher to start the year. Over the past month, retail investors funneled an average of $1.51 billion each day into U.S. stocks, the highest amount ever recorded.

This chart and commentary are from the February Elliott Wave Theorist, a monthly publication since 1979 which provides analysis of major financial and social trends:

Observe in the chart that it has taken massive retail commitment just to get the S&P to tack on a small upward leg in the opening weeks of 2023

The point is clear: Even after a substantial hit to their portfolios in 2022, Main Street investors are still optimistic about the prospects for the stock market.

Elliott Wave International believes that this is just one of many signals that investors should act independently from the crowd.

Let me conclude with this statement from a past Elliott Wave Financial Forecast, a monthly publication which provides Elliott wave analysis of major U.S. financial markets:

The market fools most of the people most of the time, but the Wave Principle alerts us to the point in the middle of a major trend when the reality of the new direction is unmistakable to reasonably observant investors.

This applies now: The reality of the new direction which began in January 2022 has yet to sink in with many investors. It may not be long before it does. That's the message of the Elliott Wave Principle.

If you're unfamiliar with the Elliott Wave Principle, 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. 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.

[Elliott] did not specifically say that there is only one overriding form, the "five-wave" pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.

Learn more by reading the entire online version of Elliott Wave Principle: Key to Market Behavior for free!

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

Club EWI is the world's largest Elliott wave educational community and is free to join. More than that, members enjoy complimentary access to a wealth of Elliott wave resources on investing and trading without any obligations.

Get your Club EWI membership now by following this link: Elliott Wave Principle: Key to Market Behavior -- get free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline U.S. Stocks: Why Acting Independently Has Never Been More Important. 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.