SoftBank: A Possible Omen for What's Ahead

Here's what happened to the once most valuable U.S. startup

By Elliott Wave International

SoftBank, the multinational holding company which is heavily involved in the technology sector, has had a tough go of it.

Its stock price has been in a steady decline for the past few years and one has to wonder if this is a preview of what may be ahead for many other firms, especially those in the technology sector.

The December Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus global financial markets, showed this chart and said:

SoftBank's stock price followed the tech sector higher until February 2021, then reversed and underwent a three-year nosedive of nearly 60%. For investors, the regret phase is now coming on fast. Last month, the Financial Times published an image showing the lifetime performance of 25 SoftBank-funded stocks, including former market darlings like Alibaba, Uber, DoorDash and Fitbit. Just three of the 25 companies showed a positive return since their IPOs, and 12 of them were down more than 50%.

And here's a headline from Nov. 9 (AP):

Japan's SoftBank hit with $6.2B quarterly loss as WeWork, other tech investments go sour

Notably, SoftBank's WeWork -- once the most valuable U.S. startup -- filed for Chapter 11 bankruptcy protection in early November.

The Financial Times called WeWork "one of the worst venture capital investments in history."

By contrast, the FANG+ index approximately doubled in value in 2023. However, the group performance of the well-known big cap tech names early in 2024 has been a different story (Markets Insider, Jan. 4):

It's been a bleak start to 2024 for the Magnificent 7 tech stocks after crushing the market last year

And, as you may be aware, those Magnificent 7 stocks have mainly been holding up the entire market.

In other words, if those big cap tech names crater, the main indexes are likely going to crater too.

At this juncture, you may want to keep a close eye on the stock market's Elliott wave pattern.

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

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.

Club EWI members can access the online version of the book for free!

In case you're unfamiliar with Club EWI, it's the world's largest Elliott wave educational community (about 500,000 worldwide members and growing rapidly). Club EWI is free to join and allows members complimentary access to a wealth of Elliott wave resources on financial markets, investing and trading.

You can have the book on your computer screen in just moments by following this link: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline SoftBank: A Possible Omen for What's Ahead. 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: Check Out These Striking Sentiment Gauges

This survey just reached its most extreme since August 2021

By Elliott Wave International

The extent of today's upbeat mood toward the U.S. stock market is captured in these two headlines:

• Wall Street's Stock-Market Optimism Isn't Stopping (Wall Street Journal, Dec. 20)
• American households are invested in the stock market like never before. ... (Marketwatch, Dec. 22)

This goes way beyond the typically positive bias around the holiday season. It's much closer to optimism on steroids.

Indeed, the Dec. 20 U.S. Short Term Update, an Elliott Wave International publication which provides near-term forecasts for key U.S. financial markets, discussed two specific sentiment gauges. Here's the first chart along with the associated commentary:

The Bullish Percent in the weekly Investors Intelligence Advisors' Survey is 75.9%, the most extreme since August 2021.

This second chart -- along with comments -- reveal another extreme.

The Bullish Percent in the weekly American Association of Individual Investors poll is 60.14%, the most extreme since April 2021, which coincided with the peak in SPACs, meme stocks, IPOs and the front edge of the top in the craze for electric vehicle stocks.

Also be aware that the Dow's RSI (Relative Strength Index) closed on Dec. 19 at 86.86, the highest level since January 2018.

And here's another item -- this one from the Dec. 22 U.S. Short Term Update:

The Exposure Index compiled by the National Association of Active Investment Managers ... represents the average exposure to U.S. equities reported by the organization's members, who are active money managers. At 97.32%, active managers are essentially fully invested in stocks.

This brief review of just a few sentiment gauges only scratches the surface of what we are currently examining.

Our technical analysis of the market -- including, of course, Elliott wave analysis -- is another factor that we believe you'll want to consider as you make decisions about your portfolio.

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

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

Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life. The path of prices is not a product of news. ...

The market's progression unfolds in waves.

You can read the entire online version of the book for free by becoming a member of Club EWI, the world's largest Elliott wave educational community (approximately 500,000 members). Club EWI is free to join and allows you complimentary access to a wealth of Elliott wave resources on financial markets, investing and trading.

Follow this link to get started: Elliott Wave Principle: Key to Market Behavior -- free access.

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks: Check Out These Striking Sentiment Gauges. 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.