EWAVES Has Logged 2,329 S&P Points Since February

By Elliott Wave International

How powerful is EWAVES? Let the numbers speak for themselves. Imagine acting on just two EWAVES calls this year:

February 24, 2025: EWAVES identified the termination of a 2-year long uptrend before the S&P 500 closed that day at 5983. A short there, covered at the 4982 close on April 8th when EWAVES recognized that the decline was over, would have delivered 1,001 S&P points.

April 8, 2025: EWAVES turned bullish, with waves labeled to indicate a move to new all-time highs. Buying at the close around 4982 and staying with EWAVES’ bullish opinion into the July 22nd close at 6309 (a conservative bullish target) delivered another 1,328 S&P points.

That’s a total of 2,329 S&P points, following just two calls from EWAVES. With just a single S&P E-Mini contract, those points would be worth $116,450.

This isn’t hindsight. These were real-time forecasts, made before the turns, with precise wave labeling and elliotticity confidence scores.

February 24, 2025 – Bearish Setup

April 8, 2025 – Bullish Setup

July 22, 2025 – Conservative Bullish Target Met

Want to try EWAVES Live for yourself? EWAVES offers individual investor packages for US, Australia, India, UK, Turkey and Crypto markets! Try it for yourself with a 30-day trial option. This is your opportunity to explore the world’s first genuine Elliott wave pattern recognition engine with no subscription commitment required. Learn more about EWAVES Live now and choose your package today.

This article was syndicated by Elliott Wave International and was originally published under the headline EWAVES Has Logged 2,329 S&P Points Since February. 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.

Proof That the Fed Doesn't Control Interest Rates

By Elliott Wave International

Before every Fed meeting, investors and pundits wait in a state of high alert. Will the Fed raise rates? Cut them? Do nothing?

They are wasting their time.

The Fed doesn’t control interest rates; it’s the other way around.

History shows that the T-bill market moves first — and the Fed follows.

On August 30, 2007, Elliott Wave International used this reliable relationship to forecast a dramatic rate cut. Three weeks later, the Fed fulfilled their prediction. And they kept doing so until T-bill rates bottomed. This chart shows how the Fed’s rate constantly lags the T-bill rate.

This relationship has held true for decades. And not just in the U.S. – but in Europe, the U.K., and Australia, too.

Chapter 3 of The Socionomic Theory of Finance tells the full story of markets’ global dominance of interest rate policy. Read it &mdash FREE — for a limited time.

This article was syndicated by Elliott Wave International and was originally published under the headline Proof That the Fed Doesn't Control Interest Rates. 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.

How to Use Elliott Wave Channels in Your Analysis

By Elliott Wave International

Elliott wave channeling can help you identify price targets and realize how future trends could develop.

A properly drawn channel typically marks the upper and lower boundaries of an impulse wave (a five-wave move in the direction of the trend). Elliott channels are most useful in identifying targets for wave four and five.

The initial channeling technique for an impulse requires at least three reference points. When wave three ends, connect the points labeled 1 and 3, then draw a parallel line touching the point labeled 2, as shown below.

This construction provides an estimated boundary for wave four. (In most cases, third waves travel far enough that the starting point is excluded from the final channel’s touch points.)

If the fourth wave ends at a point not touching the parallel, you must reconstruct the channel in order to estimate the boundary for wave five. First connect the ends of waves two and four. If waves one and three are normal, the upper parallel most accurately forecasts the end of wave five when drawn touching the peak of wave three, as in the chart below.

Pro tip: If wave three is abnormally strong, almost vertical, then a parallel drawn from its top may be too high. Experience has shown that a parallel to the baseline that touches the top of wave one is then more useful. In some cases, it may be useful to draw both potential upper boundary lines to alert you to be especially attentive to the wave count and volume characteristics at those levels and then take appropriate action as the wave count warrants.

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This article was syndicated by Elliott Wave International and was originally published under the headline How to Use Elliott Wave Channels in Your Analysis. 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.

Third Waves Are the Ones You Want to Catch

By Elliott Wave International

"Third waves are wonders to behold. They are strong and broad.

They usually generate the greatest volume and price movement and are most often the extended wave in a series."

-- Elliott Wave Principle, Frost and Prechter, p. 78

Of the five waves in an Elliott impulse, the 3rd wave is the one you want to catch.

And you definitely don't want to be on the wrong side of one.

These idealized charts show you what I mean.

Every Elliott fan has a handful of favorite 3rd waves.

Mine? Bitcoin in 2020.

In April 2020 -- amid the COVID-19 panic -- Elliott Wave International's analysts told subscribers:

"Bitcoin (BTC) is in the very early stages of a wave (3) rally... keep the focus on higher."

Result: Bitcoin rocketed from 7,000 to nearly 65,000 in a year.

Not every 3rd wave is this dramatic, of course.

Bitcoin in 2020 is an important reminder that 3rd waves are most often the longest and strongest move in an Elliott impulse.

Want to learn more about the Elliott Principle? This handy reference guide teaches you the basics in 30 minutes (it's free).

This article was syndicated by Elliott Wave International and was originally published under the headline Third Waves Are the Ones You Want to Catch. 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.

That Can't Happen in the US -- Can It?

By Elliott Wave International

Imagine the common stocks of residential real estate developers D.R. Horton or Lennar Corp dropping 98%. What would that imply for US real estate? Back in 2022, Elliott Wave International's Global Market Perspective warned that China real estate developer Country Garden Holdings “is becoming a bellwether of contagion risk.” Here’s a June 2025 GMP update:

Country Garden shares hit a new all-time low of 38 cents a share this week, down 98% from its January 2018 peak:

The continued bearish potential is accentuated by calls for an imminent restoration of the Chinese housing boom. In recent weeks, for instance, The South China Morning Post finds a “more upbeat tone among property analysts.” When five repossessed homes recently sold at auction for multiples of the minimum bid, a Chinese news service called the “Sky-High Bids for Foreclosed Homes” a “Hint at a Real Estate Rebound.” One of the many bullish voices on China’s housing market holds that a “cocktail of conditions” will drive the “structural property market recovery.” The South China Morning Post attributes this “positive mood” to a “broader reassessment of China’s economy.” We rate this as too much optimism, too soon.

Are the Chinese and U.S. real estate markets linked? Learn about the Fear of Getting Out (FOGO) by subscribing to EWI's Global Market Perspective.

Not ready to subscribe? Get more samples of EWI's unique Global Markets analysis -- follow this link for FREE access.

This article was syndicated by Elliott Wave International and was originally published under the headline That Can't Happen Here -- Can It?. 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 Time, Don't Fall For It Supply and Demand Don’t Drive Oil Prices

By Elliott Wave International

OPEC cuts production. International conflict blocks key shipping routes. A hurricane shuts down offshore rigs.

Conventional wisdom says prices should rise — and keep climbing.

But does the evidence support this assumption?

Take Hurricane Katrina in 2005. It shut down 95% of Gulf oil production — a quarter of total U.S. output.

So what happened to oil prices?

They fell over 20% in the three months that followed.

You can’t rely on supply and demand to forecast oil prices. That’s not how markets work.

Want to know what does drive oil prices?

In 2016, @elliottwaveintl’s Robert Prechter showed decades of market data that prove supply and demand do not regulate oil prices. More importantly, he revealed a method for forecasting oil with striking accuracy.

For a limited time, you can watch Prechter's 35-minute presentation — "What Really Drives Oil Prices?" — to find out.

Don’t miss this one. Viewers call it one of the best market presentations they’ve ever seen.

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.

Debt Ceiling Drama

By Elliott Wave International

What’s another few trillion dollars? U.S. debt is already approaching a historic $37 trillion and now, Congress is discussing adding at least another $3 trillion to the “debt ceiling.” Yes, that’s the phrase that many hear on the news but know little about. Our June Global Rates & Money Flows sheds some historic light on the topic:

Get ready for a summer of apprehension in America as the financial markets fixate on the level of U.S. Federal government debt and whether lawmakers allow the legal limit on it to be (once again) raised. What is the “debt ceiling” and does it really matter?

Simply put, the U.S. debt ceiling refers to a law limiting the amount of money the U.S. government can borrow. Up until 1917, Congress would approve each and every tranche of government borrowing but because World War I was proving so costly, to enable flexibility Congress passed the Second Liberty Bond Act in which it established a limit (ceiling) on the amount of new bonds that could be issued. In 1917 that limit was set at $11.5 billion. Just over a century later it is now $36.1 trillion! In the infamous words of the room service waiter when, having brought champagne and caviar to his hotel room at 3AM, seeing George Best, the world’s greatest footballer at the time, naked along with three Miss World beauty contestants on a bed full of banknotes from casino winnings, ‘Where did it all go wrong?’

The chart above shows the amount of money in the U.S. Treasury’s General Account that it has at the Federal Reserve Bank. Think of this as just like a checking account we all have at a bank. Receipts, like taxes, come in and expenses, like payroll for government employees and interest on Treasury bonds, go out. The aim, as we all know, is to keep our checking accounts above the zero line.

As you can see, when the account gets towards zero, that is when debt ceiling crises have happened in the past because it means that unless the debt ceiling is either raised or suspended, the Treasury will not be able to pay its day-to-day legal obligations.

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

Elevate Your Elliott Wave Analysis

By Elliott Wave International

RULES are great. They tell you what you can't do. The Elliott Wave Principle has three.

In a five-wave impulse (shown in the chart below):

• Wave 2 can never retrace more than 100% of wave 1
• Wave 3 can never be the shortest of waves 1, 3 and 5
• Wave 4 can never end in the price territory of wave 1

But GUIDELINES tell you what's PROBABLE. And that's what you want to know!

For instance, the guideline of alternation states that if wave two of an impulse is a sharp retracement, expect wave four to be a sideways correction, and vice versa. The chart below illustrates.

Sharp corrections are almost always zigzags (single or double). Sideways corrections include flats, triangles and combinations.

Not quite ready for the quiz? We have a handy reference guide that can help — and it’s free:

Learn the basics of the Elliott Wave Principle in just 30 minutes.

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

Parallel to the Great Recession

By Elliott Wave International

Is the U.S. economic contraction of 0.3% in Q1 a warning of what’s ahead? Well, even a month before the start of Q1, Elliott Wave International's December Financial Forecast laid out data which spoke for itself – and the message still applies:

This chart below shows that the Conference Board’s Leading Economic Index (LEI) peaked in December 2021. The index has not had an uptick for 32 consecutive months, since February 2022. It’s now at its lowest level since March 2016. In the history of the data back to 1959, there has never been a turndown of this magnitude without an ensuing recession:

The current LEI decline is a Fibonacci 34 months old, starting at the December 2021 high. Prior to the current contraction, the longest LEI decline prior to a recession was a Fibonacci 21 months, from March 2006 to December 2007. It was followed by the steepest economic contraction since the Great Depression.

Mind you, at the time EWI's Financial Forecast made the case to expect economic contraction, the consensus among economists was that the Fed had succeeded in raising interest rates just enough to curtail inflation but not inhibit economic growth. So much for the consensus.

If a recession (or worse) is ahead, you’ll want to get ready. Read EWI's report, “Preparing for Difficult Times” – it’s FREE.

EURUSD: What the News Reported After the Fact -- and What Our Subscribers Knew in Advance

By Elliott Wave International

Over the past six months, major currency markets have seen some dramatic moves.

Mainstream financial media has largely pointed to two key drivers:

1. The 2024 U.S. presidential election
2. The Federal Reserve

These explanations may seem logical in hindsight. But markets rarely move in neat correlation with headlines. A more useful question might be: Who was tracking these moves before they happened?

Take EURUSD -- the world's most actively traded currency pair. From October 2024 to mid-January 2025, the pair declined sharply, reaching a 14-month low.

Elliott Wave International's September 2024 Global Market Perspective (GMP) noted that a B wave peak was likely in place, and it projected a downward C wave to follow. That analysis came well before the U.S. election on November 5.

Then on November 1, just days before the vote, GMP called for "significant weakness" in EURUSD. That same day, EWI's Short Term Update (STU) identified that "the trend is down." This wasn't based on political speculation -- it was based on market patterns we've studied for decades.

Fast-forward to January: on the 3rd, GMP anticipated a major reversal in EURUSD. Ten days later, on January 13, STU called for "a multi-month rally" -- which began the very same day.

As prices climbed into February and March, STU kept subscribers informed of short-term pullbacks and the larger upward trend. And ahead of another sharp move on April 21, financial headlines once again turned to political themes.

Yet on April 16, STU had already flagged a notable sentiment shift and the potential for a downturn.

The takeaway? While news tends to explain moves after they happen, EWI's analysis focuses on anticipating them -- using Elliott wave patterns and market behavior.

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See What’s Next for Key Currency Pairs

Join EWI Senior Currency Strategist Michael Madden on Thursday, May 22 at 1PM Eastern for a real-time look at the Elliott wave patterns in the U.S. dollar -- and what they might mean for major currency pairs in the days ahead. There are two ways to attend the live session.

Here's how to get your seat

An Elliott Wave Setup You'll See Again and Again

By Elliott Wave International

In his "3 Favorite Trading Setups" course, EWI senior analyst and instructor Robert Kelley teaches you the wave setups he trusts the most — including this Elliott wave triangle setup he called in COST in real time:

"Costco looks like a nice triangle on the bigger picture. Overall, I think it should bottom soon and go up to new highs."

Contracting triangles are often easy to spot because of their range-bound and sideways movement. The pattern contains five overlapping waves that are labeled A-B-C-D-E. Each of the five waves subdivide into three waves. Once complete, you can expect a thrust beyond the origin of wave A.

Result: Costco's price thrust to new highs as forecast, more than doubling!

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In his popular 1-hour trading course, Robert Kelley teaches you the same 3 setups he looks for in his own charts when trying to spot a market opportunity. He likes these particular setups because they're high-confidence, low-risk, and easy to spot.

You can learn all 3 today!

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This article was syndicated by Elliott Wave International and was originally published under the headline An Elliott Wave Setup You'll See Again and Again. 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.

EUR/USD: See What a Third-of-a-Third Elliott Wave Setup Looks Like

By Elliott Wave International

On February 28, long before "Liberation Day," Elliott Wave International's Currency Pro Service editor, Michael Madden, recorded a video for his subscribers with this chart and forecast:

"5 waves down from 1.0529 will complete this pattern. From there, we'll expect a dramatic reversal to kickstart a third-of-a-third advance. At this juncture, keep the immediate focus lower but on the lookout for wave ii to end."

Result: EUR/USD followed the Elliott wave script to perfection, reversing sharply and SKYROCKETING above $1.14.

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This article was syndicated by Elliott Wave International and was originally published under the headline EUR/USD: See What a Third-of-a-Third Elliott Wave Setup Looks Like. 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.

'Investors always want the most at the END of any advance'

By Elliott Wave International

On December 6, within two days of the Dow's all-time high, the Elliott Wave Financial Forecast offered this unique insight:

"Leverage is investors' real-money way of expressing an extremely positive social mood, which prompts the thought, "I want more." Investors always want the most at the end of any advance. The charts below show the merger of these two trends, as leveraged ETF volume now sports the classic verticality that invariably marks the end of a mania. Notice the ever more powerful risk orientation illustrated by the other chart of leveraged U.S. single-stock ETF bets. According to SentimenTrader.com, there are now $14 in leveraged long ETFs for every $1 in leveraged short funds, which exceeds the prior record from December 27, 2021, a month right between the market top in the NASDAQ in November 2021 and the Dow and S&P in January 2022. The ratio has surged a Fibonacci 62% since the end of October. Here, as in so many areas, riskier assets are experiencing the most rapid increases, signaling an impending exhaustion. Thanks to the miracle of modern financial engineering, leverage has seeped into every pore of finance."

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Were you reading EWI's analysis as the stock market topped out? If not, find out what you missed. Read 4 FULL ISSUES (including the Dec. 6 EWFF) for free now.

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This article was syndicated by Elliott Wave International and was originally published under the headline 'Investors always want the most at the END of any advance'. 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.

Coinbase and the 1.618 Multiple

By Elliott Wave International

Fibonacci Elliott wave relationships often present themselves in the chart of a financial market. One common relationship is that the fifth wave will be 1.618 x the price move of the first wave. Based on that knowledge, here's the COIN (Coinbase) chart and forecast that Elliott Wave International published in their December 2024 Global Market Perspective:

COINBASE: We expect wave 5 to end near 364.09, the 1.618 multiple of wave 1 [see chart below]:

The chart below shows a March 31, 2025 update of the price action which followed the above forecast. Notice that fifth waves at two degrees of trend terminated within 14 points of EWI's price target:

EWI's global analysts regularly use Elliott wave ratio analysis for all major financial markets, including other cryptocurrencies. Their forecasts do not always work out as anticipated, yet, you'd be amazed at how often ratio analysis helps to keep you ahead of trend changes.

Want to learn more about Elliott wave analysis? Get instant and FREE access to EWI's handy guide: Learn the Essentials of the Elliott Wave Principle in 30 Minutes.

This article was syndicated by Elliott Wave International and was originally published under the headline Coinbase and the 1.618 Multiple. 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 Goes Around Comes Around

By Elliott Wave International

Excerpted from Elliott Wave International's March 2025 Global Market Perspective:

The Conference Board's survey of consumer confidence dropped sharply in February, coming in much lower than economist expectations. The current reading of 98.3 stands in contrast to its peak of 144.7 which was made a quarter of a century ago in February 2000. The chart below shows a similar dynamic for the University of Michigan measurement of consumer confidence which also peaked in February 2000.

There is a relationship between consumer sentiment and the stock market. Why then, if the S&P 500 is hovering near all-time highs has consumer sentiment declined over the past 25 years? The answer lies in the fact that, in real terms, adjusted for the growth in money supply, the stock market is still below its peak from 1999. Using that sociometer, social mood has been trending negatively since the start of the century, backed up by these readings in consumer confidence.

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EWI's State of the Global Markets -- In Progress

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This article was syndicated by Elliott Wave International and was originally published under the headline What Goes Around Comes Around. 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.

Tesla's Troubles — Is it Musk or is it More?

By Elliott Wave International

Tesla tumbled 15% on March 10, its biggest single day drop in more than five years. Elliott Wave International's March Global Market Perspective provides this insight:

The world's richest man, Elon Musk, is also more vulnerable than most people realize. In March 2023, when a poll by Heatmap News, a website that focuses on climate news, showed that prospective electric-vehicle buyers were less likely to buy a Tesla due to Musk's behavior, the Global Market Perspective argued that his persona is so "attached to a bull market that even small shifts in social mood can damage his public cachet irreparably." Tesla's stock price has made no net progress since January 2021 and is down 42% from its all-time high in December 2024. In January, Germany's Federal Motor Transport Authority reported that just 1,300 new Teslas were registered, the lowest monthly total since July 2021. Across Europe's three largest electric vehicle markets -- Germany, France and Britain -- yearly sales were off 59%, 63% and 12%, respectively. Meanwhile, the average price of a used Tesla recently fell below $32,000, down from nearly $68,000 in 2022:

Tesla's stock price is now less than half its peak only three months ago. Think there may be trouble brewing elsewhere too? Delve into the more than 50 pages of EWI's comprehensive Global Market Perspective by following this link.

If you'd like to sample EWI's analysis before subscribing, check out their special Global Market's Highlights -- FREE.

This article was syndicated by Elliott Wave International and was originally published under the headline Tesla's Troubles — Is it Musk or is it More?. 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.

Are the Birds to Blame?

By Elliott Wave International

Egg prices have skyrocketed. Is there another force at work besides the Avian flu? Read this analysis from Elliott Wave International's Global Rates & Money Flows that you likely won't find in the mainstream media:

Commodity indices have a bullish tilt to them from a higher-degree Elliott wave perspective and so we fully expect another bout of food price inflation to come through in the coming years (something which ties in with our outlook for higher bond yields). Right now, there is a panic about the price of eggs.

Egg prices have skyrocketed in recent months. In September 2023 a dozen eggs would have cost you just over $1 in the U.S. Now it will cost you over $7. What the (s)hell is going on? Avian flu outbreaks are the most common rationalization for the price increase but there’s also an underlying sentiment that food prices in general have entered a more inflationary era.

The chart below shows that egg prices fluctuate in quite a rhythmical manner and so we fully expect prices to decline again at some point. In the meantime, enjoy those expensive omelettes:

For a free sample of EWI's Commodities coverage, check out their Highlights Issue on Commodities by following this link.

This article was syndicated by Elliott Wave International and was originally published under the headline Are the Birds to Blame?. 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.

PepeCoin (PEPE): Anticipating Reversals using Elliott Waves

By Elliott Wave International

With just a basic understanding of the Elliott Wave Principle, you have a tool that can help you anticipate trends and trend changes.

The Wave Principle says that markets move in five waves in their primary direction (motive waves) and three waves in the countertrend direction (corrective waves).

Once a 5-wave impulse is complete, you can expect at the very least a 3-wave correction in the opposite direction.

Here's a recent real-world example that shows how Elliott Wave International's analysts were able to identify the end of a 5-wave move and the reversal that followed.

On December 6, EWI shared with subscribers this forecast for altcoin PEPE:

"Look for wave (5) to end near 0.00002630, the 1.618 multiple of wave (1)."

Result: PEPE rallied as forecast to complete wave (5) and then reversed course swiftly.

So, where's the next opportunity in cryptos?

See for yourself inside EWI's Crypto Opportunity Month. You'll find their detailed wave outlook for altcoins including PepeCoin and major cryptos: Bitcoin, Ethereum, XRP, Litecoin, Solana, Cardano and more.

Want to learn more about the Wave Principle? EWI's handy guide teaches you the essentials in just 30 minutes (it's free!)

This article was syndicated by Elliott Wave International and was originally published under the headline PepeCoin (PEPE): Anticipating Reversals using Elliott Waves. 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.

Valuations Are at the Furthest Edge of the Financial Solar System

By Robert Prechter, excerpted from the January 2025 Elliott Wave Theorist.

Figure 1 updates our history of year-end valuations for stocks of S&P companies on two bases: price to book value (Y axis) and dividend yield (X axis). I thought the year-end 2021 overvaluation would never be surpassed. But as you can see, the year-end 2024 reading is both higher and further to the right. It is the highest multiple ever recorded for S&P Industrials’ price to book value and the fifth-lowest level for the S&P Composite’s dividend yield, the four lower readings all occurring in 1998-2001.

We have long called this our Pluto chart. Perhaps we should have expected another extreme valuation near that of 2021. After all, Pluto was discovered to be a planet pair.

The extreme readings of 1998-2001 stayed within the dashed-line channel, but the past six years’ closing valuations are all beyond it. In three of those years — 2021, 2023 and 2024 — price to book value was above that of 1999, the year of the all time high in stock indexes priced in real money (gold)...

Continue reading – free at elliottwave.com..

Another Blowout Ahead for Credit Spreads?

By Elliott Wave International

Credit investors aren't worried about a thing. They sneer at the possibility of a recession. A slew of corporate defaults? Nah. Complacency is so extreme that Elliott Wave International's December Global Market Perspective warned that a tipping point might be at hand:

Two of the most important credit-market sentiment indicators in the United States point to extreme optimism. On November 8, investment-grade credit spreads (left chart below) narrowed to just 74 bps, their tightest level in nearly three decades. One week later, high-yield (i.e. junk) spreads fell to 253 bps, their tightest level in nearly two decades. The equivalent spreads in Europe have narrowed to their tightest levels since early 2022:

What do these extremes mean? As we discussed in March, investors buy riskier corporate debt (over treasuries) when they view the future optimistically, causing spreads to narrow. In contrast, they buy safer treasuries (over corporates) when they view the future pessimistically, causing spreads to widen. As shown, the three major financial crises over the past two decades reached their zenith as terrified investors sold corporate bonds indiscriminately.

Are credit spreads preparing for another blowout? A decade ago, EWI observed a compelling pattern in equities, whereby European stocks peaked "prior to major tops in the Dow" (Elliott Wave Financial Forecast, July 2013). The pattern was best exemplified by the FTSE 100, which peaked one month before the DJIA in 1987, seven months before the DJIA in 1990, two weeks before the DJIA in 2000, and three months ahead of the DJIA in 2007. Could Europe's credit markets be signaling similar trouble?

Credit spreads in key sectors have already started to widen. Plus, EWI's January Global Market Perspective shows a highly revealing 3.4-year cycle of U.S. corporate high-yield spreads which directly relates to the year – 2025. Get Global Market Perspective insights now by following this link.

Not ready to subscribe? Try a sample first. Read EWI's FREE highlights issue on Global Markets.

This article was syndicated by Elliott Wave International and was originally published under the headline Another Blowout Ahead for Credit Spreads?. 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.

Will the Fed Do an About-Face in 2025?

By Elliott Wave International

Would you like the ability to predict what the Fed will do with its fed funds rate? Just watch the bond market. Elliott Wave International's August Financial Forecast did just that and predicted the Fed would “play catch up.”

The chart below shows the current fed funds rate relative to the yield on both 3-month and 6-month U.S. T-bills:

This week, the yield on both T-bills closed at their lowest levels in a year and have dropped well below the fed funds rate. Based on the current level of T-bill yields, the pressure is mounting on the Fed to lower the fed funds rate to align with T-bill rates, which again are signaling impending economic weakness. The Fed had its chance on Wednesday to lower its rate but did not act. Why? Because, as Chapter 3 of The Socionomic Theory of Finance notes, the average lag time is five months, and the rate decline began accelerating only a month ago. Of course, the more the Fed waits, the more dramatic their reduction will be as they play catch-up to the market. If U.S. T-bills are at current levels or lower by the time of the next Fed meeting on September 18, our model predicts that the Fed will lower the fed funds rate commensurately with the lower level of T-bill yields. [emphasis added]

Indeed, the Fed lowered the fed funds rate by 50 basis points in September. It was the first time the central bank had cut rates in four years. Two other rate cuts followed (November and December) in 2024.

What decisions will the Fed make in 2025? Follow this link to get EWI's current bond market insights by reviewing their new January Elliott Wave Financial Forecast.

Speaking of The Socionomic Theory of Finance, learn how financial markets really work by watching this video from Robert Prechter – it’s FREE.

This article was syndicated by Elliott Wave International and was originally published under the headline Will the Fed Do an About-Face in 2025?. 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.

Elevate Your Elliott Wave Analysis

By Elliott Wave International

RULES are great. They tell you what you can't do. The Elliott Wave Principle has three.

In a five-wave impulse (shown in the chart below):

• Wave 2 can never retrace more than 100% of wave 1
• Wave 3 can never be the shortest of waves 1, 3 and 5
• Wave 4 can never end in the price territory of wave 1

But GUIDELINES tell you what's PROBABLE. And that's what you want to know!

For instance, the guideline of alternation states that if wave two of an impulse is a sharp retracement, expect wave four to be a sideways correction, and vice versa. The chart below illustrates.

Sharp corrections are almost always zigzags (single or double). Sideways corrections include flats, triangles and combinations.

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

Debt, Defaults and Delinquencies (Oh My!)

By Elliott Wave International

It's a double whammy: U.S. credit card defaults jump to the highest level since 2010 as personal savings dry up. Expectations for the months ahead are even more glum. Elliott Wave International lay it out in their November Financial Forecast:

The latest New York Fed Consumer Loan Survey reveals that consumers' expectations for delinquencies rose to 14.22% in September, as shown on the chart below. Over the past seven years, the only higher readings came in March and April 2020 in the midst of the last U.S. recession:

The survey goes back only to 2013, but the history of consumer loan delinquencies suggests that the next debt crisis will be way more disruptive than those of the 2000s. Ahead of the relatively mild recession that began in the first quarter of 2001, for instance, delinquency rates on consumer loans barely budged, rising less than 1% from March 2000 to the start of the recession in March 2001, according to the Fed. By the end of that recession, the consumer loan delinquency rate was actually lower than it was at the beginning of the economic contraction. As its moniker suggests, the Great Recession of 2007-2009 was rockier. Ahead of the recession that began in December 2007, consumer loan delinquencies rose for two full years to 2.64%. At the end of the recession in June 2009, the delinquency rate was at a modern-day high of 4.85%. The current setup suggests a bigger rise in delinquencies. As of mid-2024, the rate has been rising steadily for 3 years and 9 months, from 1.52% in the third quarter of 2021, which was the lowest level in the Fed's half century of data. Currently at 2.74%, consumer loan delinquencies are up 79%. "Consumers Have a Debt Problem," says a headline from The Wall Street Journal on September 16. The subhead adds that they are therefore "leaning on credit cards as other sources of credit have dried up." This trend is untenable as the latest Forbes survey places the average credit card interest rate at 28.7%.

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This article was syndicated by Elliott Wave International and was originally published under the headline Debt, Defaults and Delinquencies (Oh My!). 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.