Did the Mayans Get it Right? Broad Predictions for the 2012 Stock Market
Stock-Markets / Stock Markets 2012 Apr 11, 2012 - 09:02 AM GMTBy: Glenn_Neely
An Interview with Glenn Neely, Founder, NEoWave, Inc.
Part 1:
Past Social Manias and Their Impact on the Stock Market
Bud Fox: I’m Bud Fox, owner of www.GreedandMoney.com, a website that specializes in technical analysis. Today it's my privilege to speak with Glenn Neely, founder of NEoWave and renowned Elliott Wave expert. In fact, Glenn was recently named a Top 10 S&P Timer by Timer Digest for the last 10 years, 8 years, 5 years, and for the entire year of 2011.
Today we are discussing a timely subject: the December 21, 2012 “end” of the Mayan calendar plus its potential impact on social behavior and economic trends. But, before addressing this future, brewing “social mania,” let’s review some past manias and their impact.
In the late 1980s, there was the Harmonic Convergence. Then, at the end of the 1990s, there was the Y2K scare.
Glenn, would you share with the audience what the Harmonic Convergence was and how the stock market behaved at the time?
Glenn Neely: The goal of Wave Theory is to predict the behavior of markets, which are the result of mass human actions. Manias occur when you have a synchronization of mass human behavior. During my career, the first social mania I experienced was the Harmonic Convergence. It was an astrological event that occurred August 16 and 17 of 1987 when many planets in our solar system were said to “align.”
For some people, the Harmonic Convergence marked the beginning of a new age – a great, new period for humanity. I lived in California in the late ’80s, and there was a tremendous amount of “New Age” talk. In fact, “New Age” music emerged around then and was very popular at the time. Shirley MacLaine wrote her book Out on a Limb, which was about “the meaning of life,” psychic experiences, and transcendental meditation. Some people believed the Harmonic Convergence would initiate a wonderful, new age of human potential and enlightenment.
If memory serves, the U.S. stock market topped the exact day of the Harmonic Convergence – that is, right at the peak of optimism, euphoria and excitement for the future. That was the end, not the beginning, of the stock market’s advance. Within 2 months, the stock market had experienced its second-largest top-to-bottom decline in history. In one day, it dropped more, percentage-wise, than ever before.
It was interesting to see human behavior “synchronize” so perfectly as newspaper, television and investor behavior converged to pinpoint the precise top of the 1980s bull market. That event was followed by a massive decline, culminating with a 1-day public panic and stock market crash on October 19, 1987.
Those two extremes in market action and crowd psychology were reached just 2 months apart! In August 1987, people were talking of a new beginning, a new age, a new civilization, the end of wars, and an age of enlightenment. Two months later, people were talking of the “end of the world” and that the U.S. was going into a depression. In fact, 1987 produced the fastest, most dramatic change in public sentiment I’ve ever experienced.
In the summer of 1988 (nine months after the 1987 crash), I gave a talk in which presented my long-term prediction for the U.S. stock market. (You can find this in the back of my book, Mastering Elliott Wave.) I predicted the 1987 stock market low would never be broken for the rest of my life, and the Dow Jones Industrial average would eventually exceed 100,000 over the next 75 years (if the Dow still exists at that time). The audience actually broke out in laughter. The minute they did, I knew I was going to be right. For a prediction of that magnitude to work, no one can believe it. It’s just like no one would have believed, two months after the peak in 1987, the stock market would experience one of its biggest declines in history. After all, at the time of the so-called Harmonic Convergence, mankind’s future was filled with pixie dust and fairytale endings.
As predicted, 1987s stock market low of 1,616 has not been broken in 25 years. In late 1989, just 2 years after the “crash” low, the Dow exceeded 1987s high. By 1999, the Dow exceeded 11,000 – a level that was unimaginable 13 years prior! That infamous year 1999 brings us to the second, “social mania” I’ve personally experienced – Y2K.
Bud Fox: We mentioned another social mania: Y2K. How did this affect people and the markets?
Glenn Neely: Even though the stock market had been advancing for more than 10 years by this time, instead of it creating an overwhelming sense of excitement, goodwill, and hope for the future (like 1987’s Harmonic Convergence), there was a serious, growing fear. Supposedly, at midnight on December 31, 1999, computer systems around the world would fail. Financial markets would collapse. Anything and everything that relied on computers wouldn’t work. I remember reading about how oil pumping stations would stop working – which would create oil shortages – and virtually every industry and business would grind to a halt.
As everyone knows, virtually nothing happened on the changeover from the year 1999 to 2000. While the so-called Harmonic Convergence was the greatest “contrary” trading event of my career, Y2K was the greatest “non-event” of my career. All that pent-up fear was for nothing. Once everyone realized the world was safe, fear quickly turned to optimism, creating a rally of nearly 20% in the Nasdaq, just three months after Y2K.
With the Harmonic Convergence, no one expected a crash or that the economy would be bad. And, perhaps for the first time in my life, the majority of people were actually optimistic about the future, but they turned out to be wrong. In the case of Y2K, people feared the future, and this social mania generally turned out to be right – if you want to give it several years’ leeway. It didn’t happen right away, which was the expectation. Over time, we did get a big correction.
Bud Fox: Of course, now we have another major event coming up. Some people are afraid the world will end in December 2012, because the Mayan calendar “ends.” There are a lot of wild theories, such as major earthquakes, an ice age, or the Earth’s magnetic poles will switch. Clearly this counts as another huge social mania. My question to you, Glenn, is this: since you are an expert in Wave behavior and study social moves and shifts, where does this mania come from?
Glenn Neely: I’ve read that the Mayan calendar ends on December 21, 2012, which has led a lot of people to think the world is coming to an end. As I understand it, the Mayans were actually predicting the end of an “age.” This brings up some interesting discussions on what age really means. If you talk about the zodiac from an astrological perspective, the end of an age isn’t the end of the world. The end of an age is the end of a progression of the sun through the zodiac.
In this case, the Mayans have a different form of measuring the cycle of the sun going through what’s called the procession of equinox. As I recall from my reading, it takes about 25,600 years for this progression to take place. The zodiac divides this progression into 12 equal parts, which is about 2,133 years each. The Mayans separated this into five parts, which is about 4,266 years each.
Apparently, the end of the age that the Mayans were predicting is the end of this particular one-fifth of the 25,600-year period. Under their calendar, one period is ending, and we’re beginning a new age. In my opinion, I don’t think the Mayans actually expected the world to end in December 2012. Instead, they anticipated the end of one age and the beginning of a new age.
For those who believe in the zodiac, the age we’re in right now is the age of Pisces, which is the age of the fish. It’s also connected to the Christian era. That’s why a lot of Christian denominations use the fish as a sign for Christianity. We’ve been in the age of the fish for about 2,100 years, starting around 2,000 years ago. The end of the age of the fish is not the end of the world but the end of an age. It’s a very fuzzy psuedo-science. Approximately around the year 2,100, give or take a hundred years, the age of Pisces will end and the new age of Aquarius will begin. I’m sure you’ve heard the song “The Age of Aquarius.”
That’s why, from two different perspectives – the astrological perspective and the Mayan calendar’s astrological perspective – we’re coming to the end of an age. In my opinion, that’s why so many people believe the world is coming to an end.
Now couple this social mania with our bad economic times, declining employment, currency problems, and banking defaults. For a lot of people, these difficult economic times reinforce the idea that things are coming to an end.
Since Wave Theory deals with human behavior, we can’t completely discount this social mania, even if we don’t agree with it. Human behavior and mass psychology do impact the stock market, and this “end of the world” social mania will impact the 2012 stock market.
Bud Fox: Thank you, Glenn. In the next part of this 2-part interview series, let’s discuss your stock market predictions for December 2012 and beyond – and whether you believe the stock market will crash due to “end-of-the-world” fear.
About Glenn Neely
Founder of NEoWave, Inc. and author of Mastering Elliott Wave, Glenn Neely has devoted 30 years to advancing the concepts of Wave theory (Ralph Nelson Elliott’s early theory of market behavior, which quantifies each stage of an economic cycle into specific patterns of mass psychology). Mr. Neely refined Elliott Wave theory to make it objective, practical, and consistently accurate. His NEoWave technology offers a precise, step-by-step assessment of market structure that leads to low-risk, profitable investing and trading. Learn more about Glenn Neely at http://www.NEoWave.com.
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