Mini-Manias: Beware Short-Term Trading Frenzies – Like This One

This company reached a market value four times higher than that of GM

By Elliott Wave International

Most investors know the meaning of a "mania," i.e., the "Tulip Mania" of the 1600s and more recently, the mania surrounding technology stocks in the late 1990s, etc.

As you might imagine, these manias usually occur during rip-roaring bull markets.

Yet, some "manias" may unfold even during bear-market rallies, and when these "mini-manias" end, they can burn investors just as much as those full blown bull market manias.

For example, consider VinFast, an electric car maker based in Vietnam. The company debuted on the NASDAQ on Aug. 15. Just a week later, we had this headline (Reuters, Aug. 22):

VinFast shares more than double to highest since market debut

The price of the shares went on to much more than "double" in a very short period of time.

Our September Elliott Wave Theorist, a publication which has provided analysis of major financial and cultural trends since 1979 offered this perspective:

The [Elliott wave] rallies peaking in 2023 have had their own mini manias...

As you can see in the chart, a money-losing electrical vehicle company operating out of Vietnam became the sudden focus of an impulsive buying spree lasting only two weeks. But what a spree it was!... VinFast reached a total market value higher than that of McDonald's and four times higher [than] that of GM. The stock topped... on August 30.

Investors who believe in the future of electric cars went out on a limb pricing VinFast where they did. None of the bidders did any research. They just pressed buy buttons because others were doing it.

Indeed, as a Sept. 9 Bloomberg headline noted:

VinFast's 504% Rally Burns Traders Playing Greater Fool Theory

Also, since the September Theorist published, VinFast's share price has continued to plummet.

But what about the broader stock market?

Well, as history shows, dramatic price moves can happen with the main indexes too.

Elliott wave analysis can help you anticipate these price moves.

If you’re unfamiliar with the Elliott wave model, read Frost & Prechter’s book, Elliott Wave Principle: Key to Market Behavior. Here’s a quote:

The practical goal of any analytical method is to identify market lows suitable for buying (or covering shorts) and market highs suitable for selling (or selling short). When developing a system of trading or investing, you should adopt certain patterns of thought that will help you remain both flexible and decisive, both defensive and aggressive, depending upon the demands of the situation. The Elliott Wave Principle is not such a system, but is unparalleled as a basis for creating one.

When investors and traders first discover the Elliott Wave Principle, they're often most impressed by its ability to predict where a market will head next.

And it is impressive!

But its real power doesn't end there; the Wave Principle helps you identify when a market is most likely to turn. And that gives you guidance as to where you might enter and exit positions for the highest probability of success.

Dig in and learn these basics of the Elliott Wave Principle with this informative FREE 11-page report. It will introduce you to the Elliott wave basics, how to identify key trends and turns in your markets, plus much more.

Get free access to the illuminating report, Discovering How To Use The Elliott Wave Principle, now!

This article was syndicated by Elliott Wave International and was originally published under the headline Mini-Manias: Beware Short-Term Trading Frenzies – Like This One. 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.

As Geopolitical Fires Obscure Commodities' Path, This FREE Report Illuminates It!

Crisis, crisis everywhere. But objective, free from the noise of the news, forecasting of commodity prices starts here, with our free Special Report ($155 value).

By Elliott Wave International

The geopolitical landscape is wracked. War in Ukraine, humanitarian crisis in Syria, and now, what Vox Media on October 15 called the "worst conflict in decades" between Israel and Hamas. For mainstream analysts who use news as the main predictor of price trends, the escalating tensions have "cast a shadow of uncertainty over global financial markets." (Oct. 11 Moneycontrol)

But for Elliott wave analysts, times of heightened external conflict often produce the clearest Elliott wave patterns of market psychology on price charts, especially for the most volatile of markets -- commodities. It is the subject of EWI's newest educational resource, "Think Like an Elliottician: 5 Insights to Help You Manage Risk & Maximize Opportunity in Commodities," offered for a limited time to all Club EWI members free.

Risk management amidst global unrest? YES!

In this report, you'll discover several real-world examples of Elliott wave analysis catching major market turns during the fraught economic and political backdrop of the Covid pandemic. Yes, even when that analysis ran counter to the "fundamental" models espoused by Wall Street!

From the "5 insights to Help You Manage Risk & Maximize Opportunities" report:

"The paradox is these 'fundamentals' are supposed to illuminate the trajectory of market trends, especially commodities. But today, there are millions of investors in hundreds of exchanges with events moving a-mile-a-digital-microsecond. Trying to identify a single catalyzing event among the sea of news is like trying to catch a flea with a butterfly net."

One example featured in the report is the 2020 comeback in cotton prices, excerpted here:

"In March and April of 2020, cotton prices circled the drain of a decade low, having experienced one of the largest year-to-date decreases since 'the beginning of the century.' (March 24, 2020, themds.com)

"But in our May 2020 Monthly Commodity Junctures, we focused instead on the Elliott wave picture and saw the multi-year sell-off from the 2011 peak as nearly complete. From Commodity Junctures:

The downside is limited; we're probably 90-95% complete so I'm not looking for significantly lower levels.

At that point, we're going to be looking at potentially a very nice opportunity to the upside as we see cotton prices begin to double over the next few months if not years."

From there, the "5 Insights to Help You Manage Risk" report shows you how cotton defied the bearish "fundamental" script at the start of the pandemic on its way to becoming one of the best-performing commodities over the next two years.

From a "fundamental" perspective, the pandemic was widely expected to set a global, commodity bear market in motion. Our "5 Insights to Help You Manage Risk" report shows how commodities had a different agenda: You'll see how (and why) several markets including cotton and the bellwether Bloomberg Commodity Index embarked on a powerful bull run -- while others, like lumber, came crashing down.

Today, political unrest has stepped into the pandemic's place as the "fundamental" du jour responsible for determining the fate of commodities. This is a dead end, as these recent news items regarding the Israel-Hamas conflict and crude oil show:

"Oil Will Rise to $150 on Escalation of Conflict, Energy Analyst Says" -- Oct. 16 Bloomberg

-- VERSUS --

"Oil falls over 2% after Saudi pledge; investors keep wary eye on Israel" -- Oct. 16 Reuters

In times of extreme uncertainty, Elliott wave analysis casts not a shadow, but a light into the future of commodities.

And right now, all free Club EWI members have instant access to that light with the complete, "5 Insights to Help You Manage Risk & Maximize Opportunity in Commodities" report -- a $155 value, yours FREE with a Club EWI password.

Not a free Club EWI member yet? Get your free password now to join the international community of fellow Elliott wave fans -- and have the full Special Report on your screen in seconds.

Why You Should Expect a Once-in-a-Lifetime Debt Crisis

U.S. credit card debt surpasses $1 trillion

By Elliott Wave International

On a national level, a debt crisis occurs when a country is unable to pay back its government debt. This might result from government spending exceeding tax revenues for an extended period.

On an individual level, a crisis can result from too little income and too much debt -- that simple. This sometimes means defaulting on a car loan, for example, or even declaring bankruptcy.

Part 1 of the June Elliott Wave Theorist, a publication which covers major financial and cultural trends, said:

A debt crisis is brewing, and higher long term interest rates will add to the pressure.

Indeed, as Kiplinger noted on Aug. 18:

Credit Card Use Spikes for Cash-Strapped Consumers
Credit card use amps up as consumers reckon with inflation and higher interest rates; 39% of Americans living paycheck-to-paycheck, study shows.

The August Elliott Wave Theorist had more to say about the looming debt crisis as it showed these side-by-side charts:

Excess savings US households built up during the pandemic are nearly gone. ...

At the same time, consumers are borrowing to stay alive, driving indebtedness to yet another milestone: Total credit card debt in the U.S. has just surpassed $1 trillion. Will consumers be able to pay it off?

They had better do it fast, because credit-card interest rates have just soared to a new all-time high above 20%!

And bond yields (and interest rates) continue to climb (Reuters, Sept. 21):

TREASURIES-Two-year yields hit 17-year highs ...

Elliott Wave International warned subscribers to prepare back in 2020 when interest rates were near zero.

Of course, a lot of people are wondering if rates are headed even higher.

Remember, it's the market which determines the direction of interest rates; the Fed merely follows.

A key way to keep tabs on widely traded financial markets is to employ the Elliott wave method.

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

"When you have eliminated the impossible, whatever remains, however improbable, must be the truth." Thus eloquently spoke Sherlock Holmes to his constant companion, Dr. Watson, in Arthur Conan Doyle's The Sign of Four. This advice is a capsule summary of what you need to know to be successful with Elliott. The best approach is deductive reasoning. By knowing what Elliott rules will not allow, you can deduce that whatever remains is the proper perspective, no matter how improbable it may seem otherwise. By applying all the rules of extensions, alternation, overlapping, channeling, volume and the rest, you have a much more formidable arsenal than you might imagine at first glance. Unfortunately for many, the approach requires thought and work and rarely provides a mechanical signal. However, this kind of thinking, basically an elimination process, squeezes the best out of what Elliott has to offer and besides, it's fun! We sincerely urge you to give it a try.

Club EWI members get free access to the entire online version of Elliott Wave Principle: Key to Market Behavior.

Club EWI is the world's largest Elliott wave educational community and is free to join. Besides the book, members also enjoy complimentary access to a wealth of other Elliott wave resources on investing and trading.

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

This article was syndicated by Elliott Wave International and was originally published under the headline Why You Should Expect a Once-in-a-Lifetime Debt Crisis. 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.

Investing: What You Can Learn from Mom and Pop

"The highest commitment to stocks since the record levels of early 2000"

By Elliott Wave International

We all love Mom and Pop and cherish the valuable lessons about life they've given us along the way.

Yet, when it comes to investing, Mom and Pop may need to learn some lessons of their own.

Keep in mind that the American Association of Individual Investors' (AAII) weekly survey is said to be representative of "Mom and Pop" investors, well-known for being quite cautious.

The August 2021 Elliott Wave Financial Forecast, a publication which provides analysis of major U.S. financial markets, discussed their behavior as the stock market was staging a significant rally:

In July [2021], the five-month average AAII stock allocation increased to 70.6%, a high level for this normally skittish cohort of investors. ... This is the highest commitment to stocks since the record levels of early 2000.

This sentiment indicator is not meant for precision market timing, and, indeed, it seemed like these normally cautious investors had made the right decision. The rally persisted for the remainder of 2021. But, by early January 2022, the Dow Industrials and S&P 500 hit their all-time highs and have traded lower since.

What does this have to do with today?

Here's an interesting chart and commentary from the August 2023 Elliott Wave Financial Forecast:

This chart shows a jump in the AAII bullish percentage to 59.5% on July 21. ... These mom-and-pop investors are traditionally cautious, so big moves and extreme readings generally reflect important capitulations.

Let me emphasize again that sentiment indicators are important yet you may not want to use them for market timing.

That said, when you combine time-tested sentiment indicators with Elliott wave analysis, you get a much clearer picture.

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:

When after a while the apparent jumble gels into a clear picture, the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%. It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.

Our friends at Elliott Wave International are sharing with you a special free report ($80 value).

Using 5 must-see charts, "Are Bulls Headed for a Rude Awakening? 5 Market Warning Signs -- Revealed" focuses your readers' attention on 5 key sentiment areas:

1. Foreign stock buyers' behavior: a red flag
2. See what the crowd's attitude towards tech stocks shows
3. Tech stocks vs broad equities: What's the message here?
4. Corporate insiders -- are they buying or selling?
5. Artificial intelligence: See what previous technology fevers signaled

Read "5 Market Warning Signs -- Revealed" now, FREE ($80 value) >>

P.S. From the inverted U.S. Treasury yield curve to the second-largest U.S. bank failure in history (care of the March Silicon Valley bank collapse) -- 2023 has been a year of eerie callbacks to the 2008 financial crisis. See what the rest of the year is likely to bring via our special report >>

This article was syndicated by Elliott Wave International and was originally published under the headline Investing: What You Can Learn from Mom and Pop. 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.