Why We Tip Our Hat to Warren Buffett

One would think that investors would be emulating their #1 hero. One would be wrong.

By Elliott Wave International

Warren Buffett recently acknowledged that he's playing in overtime in this thing we call life. At 93, the acclaimed investor is still very much in the game and making his moves.

Our August Elliott Wave Theorist elaborates:

We Are in Good Company

We have been steadfastly recommending complete safety in the form of Treasury bills, 2-year Floating Rate Notes, a safe bank and gold stored offshore. We have felt quite alone in this opinion. So, we were pleasantly surprised to see this headline, from CNBC on August 7:

Warren Buffett now owns more T-bills than the Federal Reserve

It's true: Buffett's investment firm, Berkshire Hathaway, owns $235 billion worth of T-bills; the Fed owns $195 billion worth. Of course, most of the Fed's money is in other government-guaranteed debt. Buffett's is mostly in stocks. Still, his current cash holdings are about twice the average for the previous five years. How did he accumulate so much cash? By selling stocks in this heady environment. As CNBC reported,

"Buffett, 93, pulled off a surprising and yet prescient move by selling big chunks in stock holdings including Apple last quarter, ahead of a drastic global sell-off this week. Berkshire has been a seller of stocks for seven quarters straight, but that selling accelerated in the last period with Buffett shedding more than $75 billion in equities in the second quarter."

One would think that investors would be emulating their #1 hero. One would be wrong.

The August Elliott Wave Theorist goes on to explain how many investors are behaving in the opposite manner as the Oracle of Omaha.

More than that, you'll learn why the Quarterly Report on Bank Trading and Derivatives Activities is one of the scariest reports you'll ever read.

Robert Prechter's Elliott Wave Theorist has published since 1979 and is still going strong.

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This article was syndicated by Elliott Wave International and was originally published under the headline Why We Tip Our Hat to Warren Buffett. 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.

Why Stock-Market Success Is Usually Only Temporary

Here's a sample of record sentiment readings for stocks

By Elliott Wave International

Recession coming or not, people are still EXTREMELY bullish.

Read this excerpt from the May 17, 2024 Elliott Wave Theorist:

Record Sentiment Readings for Stocks

Investors are enamored with stocks that pay little or nothing in the way of dividends. The extent of that bias has now reached an all-time extreme. The chart below shows the history of investors' preferences for low vs. high-dividend stocks, on a 20-year return basis. ... Here in 2024, the preference for low-payout stocks over high-payout stocks just established a new record.

On May 15, Goldman Sachs published a chart showing record equity allocation among a broad spectrum of investors.

[And,] on May 4 and 14, respectively, the Financial Times of London showed that retail investors' gorging on equity ETFs leveraged by two to three times has approached the 2021 extreme, while the total flow of retail money into the stock market has exceeded that of 2021.

[Finally,] here is the title of an opinion piece, published by Bloomberg on May 9:

It's Dangerous to Stay Out of Stocks
Research from Barclays provides fresh evidence that you should almost always have
some money in equities

No one expressed this attitude in 1974, 1988 or early 2009. Today it is gospel.

The consensus is always to be in cash at major bottoms and fully invested at tops. The reason for this inevitability is that pessimism makes market bottoms, and optimism makes tops. In both environments, few can see the inevitable turn. Success among the crowd is always temporary.

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This article was syndicated by Elliott Wave International and was originally published under the headline Why Stock-Market Success Is Usually Only Temporary. 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.

Gold Prices: The calm before a record run

By Elliott Wave International

The basis for analysis and forecasting at Elliott Wave International is fundamentally different from everyone else’s.

Here's a prime example in gold.

This excerpt is from the March Elliott Wave Financial Forecast, when gold was trading below $2,050/oz.

Gold’s three-month implied volatility has declined to its lowest level in over four years. While low volatility is not a short term timing tool, low volatility eventually precedes high volatility. At the same time, total open interest in gold futures has declined to its lowest level since December 2018, as traders are either closing futures contracts or abstaining from opening new ones. The low level of open interest means that investors’ attention is turning away from gold, and the low implied volatility indicates that investors do not expect gold to move much over the course of the next three months. Both are preludes to what we see as a major move forming in gold prices.

Gold rallied to $2,500/oz in five months following our forecast.

Has the rally stalled or is there more to go?

There are two ways you can benefit from our precious metals coverage now. See your subscription options.

Not ready to subscribe? Read our must-read Highlights Issue on gold and silver for free now..

This article was syndicated by Elliott Wave International and was originally published under the headline Gold Prices: The calm before a record run. 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.

This Trend Will Likely Soon Rock the U.S. Financial System

Why monetary inflation has been shrinking

By Elliott Wave International

Nearly everyone who buys groceries, fills their car tank with gas, pays rent, buys car insurance and so on is talking about the high cost of living. And it’s true that consumer price inflation is higher today than before the pandemic – although, it’s nowhere near as high as it was two years ago, when the annual inflation rate spiked to a 40-year peak of 9.1%.

Since then, the pace of inflation has slowed way down. In fact, the latest reading of the Consumer Price Index, or CPI, came in at 3%, close to the Federal Reserve’s “ideal” target of 2% a year.

But that’s price inflation. There is another measure of inflation that has to do with money supply. It’s the so-called monetary inflation, or the supply of printed money. It has also declined over the past two years and is likely set to decrease even more. And while it sounds like a good trend, it’s actually the opposite.

Here’s insight from our just-published July Elliott Wave Theorist:

Monetary inflation … is unlikely to continue. Why? because since early 2022 the Fed’s clear aim has been to reduce the size of its balance sheet. Over the past two years, the value of the Fed’s assets, representing “printed” money, has gone from $8.94 trillion to $7.22 trillion, a decline of nearly 20 percent.

The July Elliott Wave Theorist continues:

This shrinkage of base money, moreover, has taken place even as total debt has expanded. This situation cannot maintain. The dichotomy will soon rock the financial system. It’s just a matter of when.

Indeed, U.S. household debt – which is part of that “total debt” The Theorist is referring to -- grew by $800 million from 2022 to 2023, including a 16.6% growth in credit card debt, according to Marketwatch.

The financial website had this headline on June 20:

Americans Are Carrying Record Household Debt into 2024

Interestingly, Washington D.C. has the highest per capita credit card debt in the country.

And speaking of the nation’s capital, out of control spending has led to a national debt of nearly $35 trillion.

As CBS News noted earlier this year (March 1):

U.S. interest payments on its debt are set to exceed defense spending.

The Congressional Budget Office projects the annual interest on the debt will hit $1.4 trillion by 2033.

And this does not even consider the huge amount of debt at the state and local levels – as well as the debt of corporations.

U.S. household debt is growing and will only get bigger. In turn, so will the scale of the news coverage about "the importance of the household debt to economic activity." Regardless of where in the world you live or invest, staying ahead of the trends in the U.S. stock market and economy is worth your while. Elliott Wave International has a free must-read issue on U.S stocks that I suggest you check out, on www.elliottwave.com.

This article was syndicated by Elliott Wave International and was originally published under the headline This Trend Will Likely Soon Rock the U.S. Financial System. 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.

Want to Learn How to "Read" a Price Chart? Start Here.

See how Elliott wave patterns "subsume" other technical analysis chart patterns

By Elliott Wave International

Some investors who are fans of technical analysis may not realize that another way to look at many classic chart patterns -- for example, Head and Shoulders -- is to describe them in terms of Elliott waves.

What this means is that once you've learned Elliott wave analysis, by proxy you've learned most other technical analysis chart patterns that simply go by different names!

It's a huge time saver.

In August and October 2005, as well as February 2006, Robert Prechter's Elliott Wave Theorist discussed several chart patterns and showed two examples (with an introductory quote from the August 2005 Elliott Wave Theorist):

The acknowledged "bible" of traditional chart interpretation is Technical Analysis of Stock Trends (1948) by Robert Edwards and MIT alumnus John Magee. ... The discussion here utilizes the fifth edition (1966).

Edwards and Magee collected others' observations about chart patterns and added their own, producing a comprehensive list of forms against which we may compare related aspects of the Wave Principle. It may not be necessary that we undergo this exercise, as these authors observed and displayed these patterns exclusively in charts of individual stocks, not in the averages where the Wave Principle is deemed best to apply. Nevertheless, because many chartists use the same forms for general market interpretation and since the Wave Principle has some applicability to individual stocks, this exercise is important in order to determine if there are any valid market patterns outside the forms of the Wave Principle.

Head and Shoulders Top

Figure 8a shows Edwards and Magee's depiction of a head and shoulders top, and Figure 8b is Figure 7-4 from Elliott Wave Principle. In a normal wave development, wave five of 3 and wave 4 form the "left shoulder" of the pattern, wave 5 and wave A form the "head," and wave B and wave one of C form the "right shoulder." Wave two of C creates the return to the neckline that is typical of the pattern.

Symmetrical Triangle

The Wave Principle covers the chartist's "symmetrical triangle." As you can see in Figures 11a and 11b, Edwards and Magee's example is a perfect rendition of Elliott's description, right down to the five subwaves.

Edwards and Magee claim, "Prices may move out of a Symmetrical Triangle either up or down. There is seldom if ever...any clue as to the direction...." Elliott's form is more specifically defined, and its position in the market structure and therefore its implications are more definite.

Even though just two examples were shown here, hopefully, you get a flavor of what was presented in 2005 and 2006 -- and an idea of the quality of analysis which our Financial Forecast Service regularly offers.

Realize that a chart pattern -- even though it's "classic" -- offers no guarantees -- and the same with the Wave Principle.

Yet, keep in mind this adaptation of a Q&A with Robert Prechter from an issue of The Elliott Wave Theorist:

Q: Do you believe that the Wave Principle provides for an objective form of analysis? Two different people can look at the same chart and derive very different wave counts. There are market watchers who say that applying wave theory is very subjective.

A: I always ask, "compared to what?" There is no group more subjective than conventional analysts who look at the same "fundamental" news event [like] a war, the level of interest rates, the P/E ratio, GDP reports, the President's economic policy, the Fed's monetary policy, you name it and come up with countless opposing conclusions. They generally don't even bother to study the data. The Wave Principle is an excellent basis for assessing probabilities regarding future market movement. Probabilities are by nature different from certainties. Some people misinterpret this aspect of analysis as subjectivity, but all probabilities may be put in order objectively according to the rules and guidelines of wave formation.

If you're unfamiliar with Elliott wave analysis, read Frost & Prechter's Elliott Wave Principle: Key to Market Behavior, which is the definitive text on the subject. Here's a quote from the book:

[Ralph N.] Elliott recognized that not news, but something else forms the patterns evident in the market. Generally speaking, the important analytical question is not the news per se, but the importance the market places or appears to place on the news. In periods of increasing optimism, the market's apparent reaction to an item of news is often different from what it would have been if the market were in a downtrend. It is easy to label the progression of Elliott waves on a historical price chart, but it is impossible to pick out, say, the occurrences of war, the most dramatic of human activities, on the basis of recorded stock market action. The psychology of the market in relation to the news, then, is sometimes useful, especially when the market acts contrarily to what one would "normally" expect.

If you'd like to read the entire online version of Elliott Wave Principle: Key to Market Behavior, you can get complimentary access by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Want to Learn How to "Read" a Price Chart? Start Here.. 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 You Can Learn from Europe's "Dow Theory"-esque Non-confirmation

By Brian Whitmer | European Financial Forecast editor

Charles Dow (yes, the one with the averages named after him) developed a foundational concept in technical analysis that requires that price movement in industrial stocks and transportation shares confirm one another.

The main condition for a Dow Theory non-confirmation occurs when one sector makes a new extreme absent the other. Its classic application is observing the position of the Dow Jones Industrial Average, an index of 30 "industrial" stocks, versus the position of the Dow Jones Transportation Average, an index of 20 "transportation" stocks. In essence, whenever one index fails to keep up with the other, in either direction, it suggests an impending reversal.

These concepts can be applied universally.

For example, right now over in Britain, the FTSE 100's divergence with the FTSE 350 Transportation Index just pushed to 29 months.

This is a far more prolonged Dow Theory non-confirmation than that seen in July 2007 (seven months) or December 1999 (17 months). In 1999, the FTSE 100 eventually collapsed 53%, while the FTSE 350 Transports fell 66%. In 2007, the resulting declines were 49% and 77%, respectively.

In our view, Britain's prolonged non-confirmation makes sense given a host of investor psychology and other extremes we've been tracking, not just in Europe but around the globe. If you want to stay up-to-date on our findings regarding the position of stocks and bond markets, currencies and the broad economic trends, check out some of our free must-read issues on www.elliottwave.com.

Are You a "Betting Man"? Then Take a Look -- and Make Your Bet.

By Murray Gunn | Global Rates & Money Flows editor

I have spent much of my career among professional traders. By nature, traders are a betting crowd; if they can't bet on the markets, they'll bet on something else.

A monthly highlight on trading floors was always the 'NFP Sweepstake,' where everyone would pay some money to guess what the U.S. Non-Farm Payroll (NFP) number would be. The winner, who would take the whole pot, was the guess that came closest to the actual number. A good strategy, therefore, would be to try and be either the highest or lowest number because, sometimes, NFPs do surprise.

That was the case last month when NFPs came in showing that 272,000 jobs were added in May compared with a consensus forecast of 185,000. Momentum in the U.S. labor market is waning, though. From January 2021 to December 2022 the average NFP number was 490,000 jobs added each month. From January 2023, the monthly average has halved to 241,000. The unemployment rate has increased from 3.4% in April 2023 to 4.1% now and jobless claims are rising.

The chart above shows annualized percentage change in those in the U.S. engaged in full-time employment. Full-time employment has been shrinking on an annualized basis since February this year, and you can see that every one of the eight recessions (the shaded areas on the chart) since 1970 has been accompanied by a negative reading. On three occasions, this metric has dipped into negative territory without a recession occurring.

I'm no expert bookie, but it seems to me that those odds tilt towards favoring a recession. What do you think?

The U.S. jobs market remains the most important economic variable on the planet given the importance of the U.S. consumer to economic activity. Regardless of where in the world you live or invest, staying ahead of the trends in the U.S. stock market and economy is worth your while. Elliott Wave International has a free must-read issue on U.S stocks that I suggest you check out, on www.elliottwave.com.

Is a China-Taiwan Conflict Likely? Watch the Region's Stock Market Indexes

By Mark Galasiewski | Elliott Wave International

The U.S. government in early May sanctioned 300 Chinese entities for supplying machine tools and parts to Russia for its war against Ukraine, while in mid-May Russian president Vladimir Putin made a two-day visit to China. In turn I found myself thinking about how tensions between China and the United States could lead to open conflict, specifically over Taiwan.

The likelihood of conflict depends in part on the region's social mood, as reflected in Asia's stock market indexes. When social mood is negative, countries are more likely to behave aggressively.

Tensions in the region have been high. On May 23, China conducted a military drill that sent 111 warplanes plus several navy destroyers and frigates close to Taiwan and its outer islands. China said the drill meant to punish Taiwan for an offense committed by its new head of state, Lai Ching-te, who used his May 20 inauguration speech to suggest that Taiwan is not part of China.

Yet China appeared to end the provocative move after just two days, much like Iran quickly ended its reprisal drone attack on Israel in April. Both examples reflect the desire to limit the scope of new conflicts, consistent with the improving social mood and burgeoning rally in emerging markets.

As our "Bull versus Bear" chart shows, the mood in Taiwan remains positive amid the global tech boom: The Taiwan Index rose right through the military drill. In contrast, the mood in China remains severely negative, as reflected in the Shanghai Composite's long-term pattern. That does raise the risk of Chinese aggression -- or at the least increases the risk of accidents and miscalculations. As Singapore's deputy prime minister Gan Kim Yong recently said at the Nikkei Forum in Tokyo, bad outcomes tend to follow during periods "when each side views the other as an adversary."

Some geopolitical observers frame the Russia-Ukraine conflict as a proxy battle in a new cold war between the United States and its democratic allies, versus the China-dominated axis of autocratic states that includes Russia, North Korea and Iran.

Long-term charts offer perspective.

In 2020, the MSCI Asia-Pacific Ex-Japan Index ended a 26-year sideways pattern, while the MSCI World Ex-U.S. Index ended its own, similar 20-year-long sideways trend. This two-decade period is comparable to the 1929-1949 corrective period in the U.S. stock market. The Covid pandemic erupted toward the end of the triangless much like the 1948-1955 polio epidemic spread across the globe and killed half a million people a year at its peak.

The first proxy battle in the current cold war -- Russia-Ukraine -- erupted two years post-Covid during the correction in the index, much like the first proxy battle -- the Korean War -- in the earlier Cold War erupted in 1950 and lasted until 1953. The Russia-Ukraine war could follow that precedent by ending in a stalemate sooner than most observers imagine, even as the developing bull market in world ex-U.S. stocks contributes to years of relative peace. Then, once China becomes much stronger militarily, the next proxy battle in the cold war rivalry -- perhaps over Taiwan -- would be analogous to the Vietnam War when the U.S. dramatically escalated the fighting in 1965 and pulled out eight years later, as the communist government of North Vietnam in turn took over South Vietnam to reunite the country.

We're watching the region's stock market indexes closely.

If you'd like to learn more about Elliott wave price patterns, including the triangles mentioned above, EWI has made available the entire online version of the book Elliott Wave Principle: Key to Market Behavior.

FX, Stocks, Commodities, Cryptos... Learn How to Know When This Key Price Pattern is Over (Video)

By Elliott Wave International

"12345-ABC." That's a basic Elliott wave pattern in a nutshell. That "12345" is a so-called impulse, and it's a key price pattern to know, because impulses point in the direction of the larger trend. In this clip from a recent Trader's Classroom lesson, host Favio Poci shows you step-by-step how to spot an impulse and know when it's likely over. (Market in focus: EUR/CHF, but you can apply this to any liquid market.)

Continue Your Education on Impulse Waves with this FREE Online Course!

For a very limited time, you can get free access to our online course, "How to Spot and Capitalize on Impulse Waves." ($99 value)

In about 1 hour, you'll learn:

1. "What do I look for?" -- just what, exactly, should you look for on a price chart? See an easy way to spot an impulse wave.
2. "What does it tell me?" -- Impulse waves are great at showing you the direction of the larger trend (which, as you know, is "your friend"!)
3. "Are there variations?" -- Most impulse waves are simple, but some are... well, different. You'll see how to quickly distinguish one from another.

Start Watching Now

This article was syndicated by Elliott Wave International and was originally published under the headline FX, Stocks, Commodities, Cryptos... Learn How to Know When This Key Price Pattern is Over (Video). 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.

Trouble Lies Ahead. Are You Ready For It?

By Steven Hochberg | Elliott Wave International

Conversations about whether or not the Fed will cut interest rates any time soon continue to dominate the airwaves. But we are looking elsewhere for signs about where markets and the economy are headed.

Having observed market behavior for 45 years, we've got a lot of historical precedents to lean on. The emerging picture suggests that investors not paying attention may be caught unprepared for an impending change.

The chart below is stunning in its implications.

It shows the spread between the yield on U.S. corporate junk bonds and the yield on 3-month U.S. Treasury bills going back to the 1990s.

Junk bonds, IOUs of companies with the weakest financial structures, currently yield just 2.7% more than the risk-free rate on 3-month U.S. T-bills, which is 5.4%.

This is one of the narrowest spreads in history, revealing a hunger for risk-taking so fervent that investors cannot comprehend a financial environment that will be different from today's.

Back in February 2007, the junk-yield-to-T-bill-yield spread narrowed to just 2.2%. That extreme coincided with a peak in the S&P 500 Financials Index, which occurred at the forefront of the worst economic and monetary crisis since the Great Depression. Near the end of the crisis, the spread had skyrocketed by a full ten times, to 22.9%, as corporate defaults shot higher and investors panicked into any asset that was perceived to offer safety.

When another widening of this spread starts, investors' historic complacency toward risk will be replaced by anxiety and eventually panic as financial asset values contract.

If you want to learn how you can prepare for difficult times, Elliott Wave International has a free report that not only explains the problems, but also offers solutions, such as how to bank safely and store your precious metals: Preparing for Difficult Times.

The Fed Leads and the Market Follows? It's a Big Fat MYTH

By Murray Gunn | Head of Global Research, Elliott Wave International

We help investors by analyzing what really drives the markets. Along the way, we often uncover a market myth, something most investors believe moves the markets, but really doesn't.

I want to show you one of the biggest market myths in existence. It will help you understand what the Fed can and cannot do.

The one thing the Federal Reserve can do is control the money supply. The physical printing of dollars, or the digital creation of reserves, is in its gift. The natural state of affairs is for the money supply to grow at a rate of around 5% per annum.

Make no mistake: This is actual inflation, and is used by the Fed in an attempt to grease the wheels of economic growth.

All it really does though is devalue the purchasing power of the dollar over time. Now, after historic inflation of money in 2020 and 2021, the money supply is being purposefully deflated by the Fed.

When it comes to interest rates though, the Fed is NOT in control. The Fed does not lead; it follows the market.

This chart shows the Federal Funds Rate alongside the U.S. Treasury 2-Year Yield. You can see that at major turning points, it's the 2-Year Yield that moves first, and then after awhile, the Fed changes its benchmark interest rate. This was profoundly the case in 2019 when the Fed cut rates well after the 2-Year Yield had declined. And of course in 2022, the Fed had lagged the move higher in 2-Year Yields by many, many months before it started hiking.

Conventional analysts and the financial media are obsessed with how the Fed will change interest rates, thinking that it will influence the financial markets. But to find out how the Fed will act, all they need to do is look at the short end of the bond market.

The idea that the Fed leads the market is just one of many myths that investors believe. Other myths include that corporate earnings drive stocks and that OPEC decisions determine oil prices. If you want to learn about these market fallacies and others, EWI has a free report that uncovers 13 market myths that deceive most investors.

This article was syndicated by Elliott Wave International and was originally published under the headline The Fed Leads and the Market Follows? It's a Big Fat MYTH. 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 New York City's Art Auctions Tell You About the Stock Market -- and Social Mood

By Peter Kendall | Chief Analyst for U.S. Markets and Cultural Trends

The fall and spring auctions in New York City are the art market's bellwether sales events. And according to The New York Times, the results from the City's spring art auction season "tell a story of a masterpiece market come down to earth." The article notes that the spring sales at Christie's, Sotheby's and Phillips delivered $1.4 billion -- a 22 percent decrease from total earnings of $1.8 billion in 2023.

While auction experts called it a "respectable finish," the general art market nervousness is a bad sign for the next major auction season in November. It's "a momentum-based market," said one expert about the art industry. "There can be a little bit of a herd mentality."

We agree wholeheartedly, save for the "a little bit" part. The art scene, like any speculative, freely-traded market, is very much driven by herd mentality. And as such, it often closely tracks the stock market, because both are driven -- higher or lower -- by waves of social mood. Positive social mood impels demand for fine art and stocks, whereas negative social mood decreases demand.

Signs of weakness in the art market were apparent before this spring auction season. The message of last November's bidding was decidedly mixed. "While the figures from the fortnight of sales looked impressive, there were still several significant indicators of an art market in flux," reported Artsy.com. "Each auction house held a sale that cumulatively fell beneath their low estimates," and there were lots of withdrawals. Sotheby's modern evening sale, for instance, was reduced to 33 lots from an original 40.

"A notable clutch of works by blue chip artists failed to achieve their low estimates. Works by Jeff Koons, Andy Warhol, Pablo Picasso, and Salvador Dali all hammered below their low targets."

"Despite a Sagging Art Market," The New York Times reported that this Picasso from August 1932 did bring a winning bid of $139.4 million, the highest price paid for a work of art in 2023.

"The sale of 'Femme a' la montre' not only cements its status as a masterpiece, but also underscores the enduring fascination and value of Picasso's work."

Interestingly, Picasso started the painting at the bottom of a massive decline in the Dow Jones Industrial Average and the start of a multi-decade rally.

With the painting's record price aligning closely with what we believe is the end of a long upward wave in the stock market, we suspect that the sale will mark a peak for Picasso and many other artists and artworks of "enduring fascination." The fascination should yield to bafflement at the artistry as well as the prices that were paid for it.

Follow along via our free EWI newsletter and I'll send you occasional updates like this.

This article was syndicated by Elliott Wave International and was originally published under the headline What New York City's Art Auctions Tell You About the Stock Market -- and Social Mood. 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.

Another Bank Failure: How to Tell if Your Bank is At Risk

By Elliott Wave International

Another bank failure, another underperforming share price.

Philadelphia-based Republic First Bank was closed down on Friday, April 26, and the assets were sold to Fulton Bank. Republic First becomes the first bank failure of 2024. Given our outlook for the stock market and the economy, it will probably not be the last.

We track the probability of bank failures within the KBW Bank Index by looking at the relative performance of share prices. If the share price is in an underperforming trend, it tells us that something is not right and, therefore, the chance of an underlying weakness emerging is high. We're working on expanding our coverage to the hundreds of banks in the U.S. but, in the meantime, we would strongly urge you to check the relative performance of your own bank's share price.

The chart below shows that the share price of Republic First was underperforming the iShares US Regional Banks ETF (ticker IAT) since 2022, with that trend accelerating lower in the summer of 2023. It was a warning that something was up at the bank and, sure enough, existential problems have now emerged. The Republic First Bank failure should not be a surprise to anyone who was tracking the share price.

Is the collapse a harbinger of things to come? We have been raising a red flag about major issues in the banking system for years. Investors got a first whiff of the burgeoning debacles in March and May of last year, which saw three of the seven largest bank failures in U.S. history. We remain concerned that these are early warnings of a much deeper malady. Stay prudent.

Discover 5 Solid Alternatives to Banks

In light of recent bank failures and concerns about the vulnerability of the global banking system, many people are (or, in our researched opinion, should be) looking for alternatives to traditional banks.

Our special report "Your 5 Top Alternatives to Banks" gives you actionable ideas to help you protect the bulk of your liquid wealth -- and in some of the cases, earn you a nice, healthier-than-banks return along the way. You can get the report when you join Club EWI for just $2/month.

Read the report now. Or, follow along for updates via our free newsletter.

This article was syndicated by Elliott Wave International and was originally published under the headline Another Bank Failure: How to Tell if Your Bank is At Risk. 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.

Stoxx Europe 600: What Signs of Investor Exuberance Keep Telling Us

By Elliott Wave International

Every day, you read news stories about the state of the economy and the stock market affecting consumer and investor behavior. The story goes something like this: When the economy and financial markets show signs of improvement, consumers start to spend more, and investors buy stocks.

But if you're a student of Elliott waves, you understand that this type of thinking is precisely backwards. It's consumer optimism and the resulting consumer spending that elevates the economic markets; and it's the investors' bullish mood that translates into a rising stock market as investors buy stocks.

Social mood, in other words, comes first. Consumer and investor behavior -- bullish or bearish -- follows.

That's why social trends can give you clues as to where the financial markets are likely heading next. For example, exuberant investor optimism often appears near major stock market tops, while deep pessimism accompanies major lows.

Let's look at a key European market as an example. Back in March, the pan-European Stoxx Europe 600 index extended its rally to seven consecutive weeks. Most investors probably saw the strength as a reason to load up on European stocks. Readers of our European Financial Forecast, on the other hand, saw warning signs of exuberance flashing throughout society.

First, Lamborghini's 2023 sales results showed an all-time record 10,112 cars sold last year. Lamborghini's electric V12 Revuelto is sold out until late 2026 -- a three-year wait! Luxury goods tend to be popular at extremes in positive social mood, as the stock market and economic prosperity approach major peaks. They tend to go out of favor when these trends reverse.

Second, a March 10 Bloomberg headline said, "One of the Most Infamous Trades on Wall Street Is Roaring Back." The trade in question was the so-called short volatility trade, where traders sell products that track stock volatility. "Investors are sinking vast sums into strategies whose performance hinges on enduring equity calm." According to data from Global X ETFs, short volatility bets nearly quadrupled in two years.

"Enduring equity calm" attitude among investors rang a bell. We had been here before. An earlier iteration of the same trade famously blew up on February 5, 2018, when the CBOE Volatility Index (VIX) suddenly spiked 20 points and destroyed vast numbers of professional and retail portfolios. The spike coincided with a global stock market sell-off and a two-and-a-half-year period of volatility that left the S&P 500 where it started. In Europe, the Stoxx 600 had peaked three years before the S&P, so the stretch of zero returns lasted nearly six years. This chart of Europe's VIX equivalent, the VStoxx Implied Volatility Index, illustrates a few of the infamous volatility spikes over the past quarter century.

In our view, the re-emergence of the short-volatility casino is a much larger version of 2018. Five years ago, traders were gambling with a little more than $2 billion within a small handful of funds. Today, a mind-blowing $64 billion is being bet using "ETFs that sell options on stocks or indexes in order to juice returns" (Bloomberg, 3/10/24). Whether they know it or not, these traders are relying on smoothly functioning markets that behave the same way today and tomorrow as they did yesterday or the day before.

The warning signs we see in investor and consumer behavior are worth heeding.

To predict the next move in European markets, I'll continue to monitor social trends for clues. But more importantly, I'll compare the Elliott wave price structures in stock market indexes to previous major junctures in those indexes. Tune in to The European Financial Forecast for my ongoing analysis, or sign up for our free newsletter, and I'll send you occasional updates like this.

This article was syndicated by Elliott Wave International and was originally published under the headline Stoxx Europe 600: What Signs of Investor Exuberance Keep Telling Us. 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.

Why You Should Pay Attention to This Time-Tested Indicator Now

"How High Can Markets Go?" -- asks this magazine cover

By Elliott Wave International

Paul Montgomery's Magazine Cover Indicator postulates that by the time a financial asset makes it to the cover of a well-known news weekly, the existing trend has been going on for so long that it's getting close to a reversal.

A classic case in point is this Time magazine cover from June 13, 2005:

As you can see, it says, "Home $weet Home," followed by "Why we're going gaga over real estate."

Interestingly, this was published around the time that the S&P Supercomposite Homebuilding index was peaking. The housing bubble of that time was on the verge of bursting, and you'll likely remember that major crash.

Fast forward and here's what was shown on the March 2 -- 8, 2024 Economist cover:

As a large cluster of balloons carries a bull upward, it asks, "How High Can Markets Go?"

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

It is a bearish signal for stocks. ... In the context of the multitude of other sentiment extremes ..., as well as a fully mature wave pattern, we think this cover is meaningful.

Just a few weeks after that was published, the Dow Industrials hit a high of 39,889 on March 21. The NASDAQ indexes also topped on that date.

As you probably know, the stock market has trended lower since. Only time will tell if the downward turn morphs into a major bear market.

Also know, from a technical analysis point of view, that the price pattern of the Dow Industrials is also sending a major message.

If you're unfamiliar with Elliott wave price patterns, read Frost & Prechter's Wall Street classic, 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.

Here's the good news: If you'd like to read the entire online version of Elliott Wave Principle: Key to Market Behavior," you can get complimentary access by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Why You Should Pay Attention to This Time-Tested Indicator Now. 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.

This "Bullish Buzz" Reaches Highest Level in 53 Years

Learn what the AIM Index reveals

By Elliott Wave International

Yes, there's been a recent pickup in stock market volatility, but overall, bullish sentiment remains very much alive and well.

Indeed, here's a Feb. 18 Yahoo! Finance headline:

A Bull Market is Here.

On April 9, a Fox Business headline reflects the views of a well-known investment manager:

Fed doesn't matter in this bull market

An extreme in bullish sentiment also shows up in the Advisor and Investor Model, which is a very broad measure of market sentiment compiled by SentimenTrader.com. The model is also known as the AIM Index.

This chart and commentary from the April Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets, provide insight:

The AIM Index constantly fluctuates between extremes; what's unparalleled about it now is how long it's been pinned to the top of its range. After hitting its highest possible reading of 1.0 on December 19, it stayed above .90 for the entirety of the first quarter for all but one week. This relentless bullish buzz is represented here by the index's 20-week average. At 0.93, the April 2 reading is the highest in 53 years.

Yes, it's possible that this dogged bullish sentiment could persist even longer. Yet, as you might imagine, Elliott Wave International considers extremes in market sentiment to be major red flags.

The April Elliott Wave Theorist, a monthly publication which analyzes major financial and cultural trends, reveals another cautionary sign via this chart and commentary:

As many pundits are saying, the market is not beyond the valuation of 2021, so what's the problem? But that was the year of the most overvalued U.S. stock market of all time, from which broad indexes such as the Russell 2000 have not recovered. That optimism has returned to an equivalent level is a big deal. ...

This is an especially critical time to keep on top of the stock market's Elliott wave pattern.

If you're unfamiliar with Elliott wave analysis, read Frost & Prechter's Elliott Wave Principle: Key to Market Behavior, which is the definitive text on the subject. Here's a quote from the book:

[Ralph N.] Elliott recognized that not news, but something else forms the patterns evident in the market. Generally speaking, the important analytical question is not the news per se, but the importance the market places or appears to place on the news. In periods of increasing optimism, the market's apparent reaction to an item of news is often different from what it would have been if the market were in a downtrend. It is easy to label the progression of Elliott waves on a historical price chart, but it is impossible to pick out, say, the occurrences of war, the most dramatic of human activities, on the basis of recorded stock market action. The psychology of the market in relation to the news, then, is sometimes useful, especially when the market acts contrarily to what one would "normally" expect.

If you'd like to read the entire online version of Elliott Wave Principle: Key to Market Behavior, you can get complimentary access by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline This "Bullish Buzz" Reaches Highest Level in 53 Years. 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.

3 Signs of Developing U.S. Economic Slowdown

"Credit standards are tightening, thereby freezing out borrowers"

By Elliott Wave International

Recent headlines about the U.S. economy are rosy:

• US economic growth for last quarter is revised up slightly to a healthy 3.4% annual rate (AP News, March 28)
• US economy continues to shine with help from consumers, labor market (Reuters, March 28)

It's all well and good to announce positive economic news. Yet, consumers of such news may not be getting the full story.

In other words, there's plenty of less-than-positive economic developments, and I'll point out just three which portend a possible economic contraction.

The first one has been well-advertised: the developing commercial real estate crisis. In a nutshell, office building owners face higher interest rates as their loans mature. This could set off a wave of defaults. Indeed, there's already been a dramatic rise in the number of U.S. commercial property foreclosures in the past four years.

Another sign of a developing economic slowdown has to do with consumers. If you live in the U.S., quite a few of your neighbors -- or at least residents of your community -- are tapped out.

Here's a chart from the March Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets:

As you can see, credit card delinquencies have been rising since 2022. Indeed, credit card arrears are higher than they've been since the wake of the Great Recession in 2007-2009.

And speaking of the Great Recession, sub-prime car loan delinquencies are even higher than they were then.

The March Elliott Wave Financial Forecast elaborates with this chart and commentary:

Car loan delinquencies are higher than at any time in the data's history, which goes back to 1996. ... Credit standards are tightening, thereby freezing out borrowers. ... Access to auto credit is the lowest in nearly four years.

Also keep in mind that the economy follows the stock market.

If the stock market goes into a correction -- or worse -- expect the economy to weaken. History shows that there's usually a few months lag time between the action of the stock market and economy.

Elliott wave analysis can help you get a handle on the stock market's trend.

If you're unfamiliar with the Elliott wave method, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

All waves are of a specific degree. Yet it may be impossible to identify precisely the degree of developing waves, particularly subwaves at the start of a new wave. Degree is not based upon specific price or time lengths but upon form, which is a function of both price and time. Fortunately, the precise degree is usually irrelevant to successful forecasting since it is relative degree that matters most. To know a major advance is due is more important than its precise name. Later events always clarify degree.

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

Learn more by following this link: Elliott Wave Principle: Key to Market Behavior -- get instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline 3 Signs of Developing U.S. Economic Slowdown. 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.

Gold: Setting Near-Term Price Targets

This was our "initial upside target" -- which has now been exceeded. What's next?

By Elliott Wave International

Around the first week of the year, the outlook for gold was not looking promising, at least according to this Jan. 5 headline (Reuters):

Gold set for weekly decline as dollar, yields climb

The rally in gold which started in early October continued to struggle for much of the rest of January.

Even though the mainstream media was looking to so-called fundamentals -- such as the action of the dollar or bond yields -- Elliott Wave International focused on the patterns of investor psychology -- as reflected by Elliott waves.

Indeed, on Jan. 24, the U.S. Short Term Update, a thrice weekly Elliott Wave International publication which focuses on major U.S. financial markets, said:

Spot [Gold] made its lowest close since January 17 today. Still, prices remain above $1972.89, which keeps the short-term bullish potential dominant. The [unfolding Elliott wave] should carry gold well above $2250 as the rally's pattern progresses.

Keep in mind that when this analysis was offered more than two months ago, the price of gold was trading around $2013 -- a far cry from our price target above $2250.

Now, fast forward to April 1 and this headline (CNBC):

Treasury yields jump to start second quarter

As you'll recall, rising bond yields were mentioned in the media as a negative for gold back in January.

But what did gold do on April 1? Correct -- it hit another all-time high.

Not only that, April 1 was the day that our price target was reached.

Here's a quote from the April 1 U.S. Short Term Update:

The initial upside target for [Gold] was "above $2250," which we first stated in the January 24 Short Term Update and reaffirmed throughout February and March. Gold hit this target today when spot prices pushed to $2263.64 intraday.

On April 2, gold traded even higher.

Remember, Elliott Wave International doesn't make forecasts for financial markets -- like gold -- based on common beliefs about "fundamentals" which investors cannot count on.

Instead, we arrive at price targets based on Elliott wave analysis.

If you'd like to learn more about Elliott wave analysis, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from this "must read" 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.

If you'd like to learn about the Wave Principle, know that you can gain complimentary access to the entire online version of Elliott Wave Principle: Key to Market Behavior for free.

Just follow the link and you can have the Wall Street bestseller on your computer in moments: 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 Gold: Setting Near-Term Price Targets. 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.

AI Revolution and NVDA: Why Tough Going May Be Ahead

"These things could get more intelligent than us"

By Elliott Wave International

The topic with all the buzz these days is Artificial Intelligence (AI) and its future.

The potential benefits include automating repetitive tasks, enhancing productivity, data analysis, assisting in medical applications -- and more.

Then there's the possible downside. Some of the major worries include the elimination of jobs, privacy violations, unclear legal regulations and the potential for AIs to go rogue as the goals of AI become misaligned with the goals of humans.

In an interview with NPR in 2023, computer scientist Geoffrey Hinton, who is known as the godfather of AI, said:

These things could get more intelligent than us and could decide to take over, and we need to worry now about how we prevent that happening.

However, right now, the mood surrounding AI is way more optimistic than pessimistic.

Just think about how investors have bid up the price of AI-related stock Nvidia Corp., which has a market capitalization of around $2 trillion. That's more than the GDP of Australia or South Korea. Indeed, if Nvidia was a country, it would rank just outside the top ten largest economies on Earth.

Yet -- a word of caution: Trends generally don't go up or down in straight lines without significant interruptions.

Indeed, the March Global Rates & Money Flows, one of Elliott Wave International's newest services, which covers global fixed income markets, stocks, currencies and more, shows this chart of an AI exchange-traded fund and says:

BOTZ, the ticker for the Global X Robotics & Artificial Intelligence ETF, sports a clear five-wave decline from 2021 to 2022. Since then, a corrective rally appears to be in operation with wave C advancing now. ... [The] evidence suggests that the AI revolution may be off to a false start.

But what about the price pattern of Nvidia? -- you may ask.

Know that our Senior Global Strategist, Murray Gunn, also provides Elliott wave analysis of Nvidia in the March Global Rates & Money Flows.

If you're unfamiliar with Elliott wave analysis, read Frost & Prechter's definitive text on the topic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from this Wall Street classic:

Despite the fact that many analysts do not treat it as such, the Wave Principle is by all means an objective study, or as [Charles] Collins put it, "a disciplined form of technical analysis." [Hamilton] Bolton used to say that one of the hardest things he had to learn was to believe what he saw. If you do not believe what you see, you are likely to read into your analysis what you think should be there for some other reason. At this point, your count becomes subjective and worthless.

How can you remain objective in a world of uncertainty? It is not difficult once you understand the proper goal of your analysis.

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.

If you'd like to learn about the "highly specific rules" of the Wave Principle, know that you can gain complimentary access to the entire online version of Elliott Wave Principle: Key to Market Behavior for free.

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

Stocks: What to Make of All This Insider Selling

Here are details of "The Great Cash-Out"

By Elliott Wave International

Corporate insiders may sell the shares of their company for any number of reasons but one of them is not because they think the price is going up.

In other words, insider selling can serve as a warning.

For example, the January 2022 Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets, noted:

Only one group is selling. ... Corporate insiders sold a record $64.5 billion of their firms' shares through November [2021]. As the December [2021] Theorist noted, insiders "know what their companies are worth," and "they've been selling their heads off."

This commentary was published within days of the January 2022 highs in the Dow Industrials and S&P 500.

What does all this have to do with today?

You guessed it, insiders are in a selling mood again.

Here are just a few prominent examples:

In the last two months of 2023, Mark Zuckerberg, the executive chairman of Meta Platforms (Facebook), sold $400 million worth of Meta stock. He then sold another $661 million between January 31 and February 21.

Around this time, on Jan. 20, Bloomberg noted:

... a total of 1,000 insiders sold their own stock and 128 bought shares, leaving the sell-to-buy ratio poised for the highest monthly reading in data going back to 1988.

Then, on Feb. 27, we had this headline from Fortune:

The Great Cash-Out: Jeff Bezos, Leon Black, Jamie Dimon, and the Walton family have now sold a combined $11 billion in company stock this month ...

JPMorgan CEO Jamie Dimon and Apollo Global Management co-founder Leon Black sold shares in their companies for the first time ever.

The Walton family unloaded $1.5 billion of Walmart shares and Jeff Bezos sold $8.5 billion of Amazon stock.

Also of note are the stock market activities of another very rich person -- or shall I say the lack of activities.

Warren Buffet of Berkshire Hathaway is holding onto a record high stockpile of cash: $167.7 billion. The Oracle of Omaha says he sees "no candidates for capital deployment."

Of course, major corporate insider selling is by no means the only indicator investors should watch.

Market participants may also want to monitor the repetitive patterns of investor psychology -- which show up as Elliott waves on price charts.

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

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.

The ability to identify such junctures is remarkable enough, but the Wave Principle is the only method of analysis that also provides guidelines for forecasting. Many of these guidelines are specific and can occasionally yield stunningly precise results.

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

Just follow the link and you can have the Wall Street bestseller on your computer screen in moments: 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 Stocks: What to Make of All This Insider Selling. 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.

Commercial Property Prices: Why the Decline May Have Just Started

This index has already retreated 20% since May 2022

By Elliott Wave International

The major bust in property prices 15 to 20 years ago started with the residential real estate market.

This time, the commercial real estate market may have taken the lead. Here are some recent headlines:

• ["Shark Tank Star"] Says a Coming Real Estate Collapse Will Lead to 'Chaos' -- Yahoo Finance, Jan. 30
• Commercial Property Losses Hammer Banks on Three Continents (Wall Street Journal, Feb. 1)
• Bracing for the commercial real estate 'reckoning' -- Reuters, Feb. 2

As rough as it's already been for the commercial real estate market, it appears that "reckoning" is only in its early stages.

Keep in mind, as you review this chart and commentary from the February Elliott Wave Financial Forecast, that progress in a market takes the form of five waves. Once those five waves are complete, a correction is due (Note: The Elliott Wave Financial Forecast is a monthly publication which covers major U.S. financial markets):

This chart of the Green Street Commercial Property Index shows the latest decline, a 20% retreat from May 2022. In terms of time, the 20-month plunge is already close to the 22-month decline from September 2007 to June 2009. ... [T]he crumbling demand for commercial space, not to mention the five-wave form of its rise from 1998, suggests that further declines are "baked in."

The U.S. commercial real estate market is valued at $20 trillion, according to Bloomberg, so the developing crisis is not a minor ordeal.

Part of the reason the full brunt of the crisis has been delayed is that many loans have been granted extensions.

When those mature loans are refinanced, some borrowers could see their interest rates skyrocket. This could set off a wave of defaults.

Business Insider recently quoted an economist who specializes in the property sector (Jan. 23):

"[B]uilding owners are looking to 'extend and pretend' but that strategy can't last forever as there's still a $2.2 trillion mountain of commercial real estate debt that will mature by 2027."

Some building owners have already experienced a lot of financial pain. For example, Aon Center -- the third-tallest tower in Los Angeles -- sold for $147.8 million. That's 45% less than its 2014 purchase price.

This is just one example of what's going on in commercial real estate.

Also know that the property and stock markets tend to be correlated.

If you would like to ascertain the trend of the stock market via Elliott wave analysis, you may want to read the 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.

Just follow the link and you can have the Wall Street bestseller on your computer screen in moments: 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 Commercial Property Prices: Why the Decline May Have Just Started. 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.

Stocks: What This "Record Extreme" May Be Signaling

"The total easily exceeds the prior net long extreme"

By Elliott Wave International

When most everyone agrees on the future trend of a market, it's almost guaranteed that the market will go in the other direction -- sooner rather than later.

The reason why is that there is no one left to convince, hence, the market in question will likely have difficulty going in the predicted direction.

As Robert Prechter notes in a classic Elliott Wave Theorist (a monthly publication which analyzes major financial and cultural trends):

The more convincing the arguments seem, the surer one can be that a consensus is signaling a turn in the other direction.

With that in mind, consider this chart and commentary from the February Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets:

[A] new record was recently reached in the net long position of Small Traders as published weekly in the Commitment of Traders Report. The combined net long futures position of Small Traders in the S&P 500, NASDAQ 100 and DJIA soared to an all-time high of $51.59 billion on January 9. The total easily exceeds the prior net long extreme of $42.06 billion in September 2021.

As you may recall, that prior peak reading in investor sentiment occurred just weeks before the November 2021 top in the NASDAQ indexes.

That doesn't mean that the exact same scenario will play out again.

However, keep in mind that the patterns of investor psychology tend to be similar each time around -- as markets go from an uptrend to a downtrend and then back again.

And these patterns don't just apply to the typical retail or Main Street investor, they also apply to money managers who may oversee portfolios in the tens of billions of dollars. Here's a quote from another classic Theorist:

Small traders are typically on the wrong side of the market at the turns. You might think that large traders, because they have a lot more money, are right a lot, but they are likewise usually wrong at the turns.

The repetitive patterns of investor psychology show up as Elliott waves on the charts of widely traded financial markets.

If you are unfamiliar with the Wave Principle, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from this "must read" book:

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.

No analytical method can guarantee a particular outcome in financial markets but given Elliott waves reflect the repetitive patterns of investor psychology, the knowledge those waves provide about the market's position within the behavioral continuum is extensive and second to none.

You may be interested in knowing that you can access the online version of the book for free once you join Club EWI, the world's largest Elliott wave educational community.

A Club EWI membership is free and allows you access to a wealth of Elliott wave resources on investing and trading without any obligations.

Just follow the link to get started: Elliott Wave Principle: Key to Market Behavior -- get instant and free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks: What This "Record Extreme" May Be Signaling. 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.

This Measure of Stock Market Interest Far Surpasses 1987 & 1929

"More than half of U.S. households have been in the market for a generation"

By Elliott Wave International

A lot of people think that it's perfectly normal to participate in the stock market -- you know, like getting a drink of water or -- breathing.

We here at Elliott Wave International call this the "equity culture" and it's been going strong for a good many years now.

It's difficult for many people to remember that it's not always been thus.

Yet there's been significant stretches of time when the populace at large wouldn't touch stocks with the proverbial ten-foot pole -- the years following the historic 1929 crash being a prime example.

Even at the top of the market in 1929, pollster Al Sindlinger estimated that only 20% of U.S. households participated in the stock market -- based on interviews conducted in 1939. At the market top in 1987, the percentage of households in the market was 36%.

With this perspective, here's a chart and commentary from the February Elliott Wave Financial Forecast which you may find interesting (the Elliott Wave Financial Forecast is a monthly publication which offers analysis and forecasts for major U.S. financial markets):

The percentage of stock holdings by U.S. households hit an all-time high of 58% at the end of 2022. The analysis in the Fed's Survey of Consumer Finances lags by 11 months. Given the market's recent rally, the 2023 figure is likely to be even higher. ... Thanks to the Grand Supercycle degree of the bull market, more than half of U.S. households have been in the market for a generation.

And here in early 2024, the optimistic financial sentiment persists. Indeed, here's a Jan. 16 Barron's headline:

Investing In U.S. Stocks Still Makes Sense Despite High Valuations

And, on Jan. 18, the view of the CEO of one of the world's largest money management firms was reflected in this headline (Seeking Alpha):

"Animal spirits" will stir the markets again in 2024

Only time will tell how the remainder of the year will play out, yet keep in mind that optimistic attitudes toward the stock market are unlikely to go on indefinitely. Another historic shift is all but inevitable.

Our analysis reveals what this shift may very well look like -- so you can prepare.

As you might imagine, Elliott Wave International's primary way of analyzing financial markets is employing the Elliott wave method.

The definitive text on the Elliott wave method is Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

The Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress. Living in harmony with those trends can make the difference between success and failure in financial affairs.

All that's required for free access to the online version of the book is a Club EWI membership. Club EWI is the world's largest Elliott wave educational community (about 500,000 members and growing rapidly) and is free to join.

Just follow this link and you can have the book on your computer screen in moments: Elliott Wave Principle: Key to Market Behavior -- get free and unlimited access.

This article was syndicated by Elliott Wave International and was originally published under the headline This Measure of Stock Market Interest Far Surpasses 1987 & 1929. 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.

GameStop (GME): 88% Shellacking Yet No Lesson Learned

"Every major peak gets cinematic treatment"

By Elliott Wave International

Back in early 2021, the meme stock craze was going strong.

As you'll recall that craze was all over the news and revolved around favorite stocks promoted by largely novice traders via social media. This January 27, 2021 New York Times news item sums up the frenzy surrounding one of those stocks:

'Dumb Money' Is on GameStop, and It's Beating Wall Street at Its Own Game

GameStop shares have soared 1,700 percent as millions of small investors, egged on by social media, employ a classic Wall Street tactic to put the squeeze -- on Wall Street.

A few days later, after GameStop shares had fallen hard, the February 2021 Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, offered this warning:

Every major peak gets cinematic treatment and the current one is no exception. ... The Wall Street Journal reported, "Netflix, MGM Race to Produce Projects About GameStop Saga."

After that big decline in Gamestop shares in late January and early February 2021, the share price did bounce back, but has since fallen dramatically. Even so, some traders are not fazed, which is testimony to the high degree of overall optimism toward financial markets.

The recently published February Elliott Wave Financial Forecast provides an update with this chart and commentary:

The sustained public tolerance for falling prices is well illustrated by the resilience of retail demand for GameStop shares. GME is down 88% from its intraday high of $120.75 on January 28, 2021. But the faith in GME as a vehicle for wealth continues. ... On January 22, TheStreet's "meme maven" columnist added a host of "Reasons to Buy GameStop." There's just no quenching the demand for GME shares.

Again, this speaks to the high degree of optimism toward the market as a whole and our latest analysis of the main U.S. stock indexes is something you need to see for yourself.

As you might imagine, the main way Elliott Wave International analyzes financial markets is by employing the Elliott wave model.

If you'd like to learn the details of the Wave Principle, read Frost & Prechter's definitive text on the subject, Elliott Wave Principle: Key to Market Behavior. Here's a quote from this Wall Street classic book:

In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form but not necessarily in time or amplitude. Elliott isolated five such patterns, or "waves," that recur in market price data. He named, defined and illustrated these patterns and their variations. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns of the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle.

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This article was syndicated by Elliott Wave International and was originally published under the headline GameStop (GME): 88% Shellacking Yet No Lesson Learned. 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.