Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What to Expect at a Critical Stock Market Point: End of a Wave 2 Rally

Stock-Markets / Elliott Wave Theory May 25, 2018 - 06:26 PM GMT

By: EWI

Stock-Markets


"Most investors are convinced that the bull market never went away."

The great game of Wall Street -- where huge amounts of money are at stake every trading day.

Many speculators play this game by watching for events outside of the stock market that they believe will "trigger" the next big move in prices.


However, the real driver of all those green up arrows and red down arrows is nothing more or less than investor psychology. This famous Kal's cartoon sums it up perfectly:

First investor: "I've got a stock here that could really excel."

Second investor: "Really excel?"

Fourth investor: "Sell?" -- and the crowd goes, "Sell, sell, sell!"

First investor again: "This is madness! I can't take it any more, good bye!"

Second investor: "Good bye?"

Third investor: "Buy?" -- and the crowd goes: "Buy, buy buy!"

As random and unpredictable as this cartoon makes it look, EWI's research reveals that investor psychology actually goes through similar phases during every market cycle. So, if you know the current psychological phase of the market, you can make a high-confidence prediction about the next phase.

This leads us to what we call Elliott waves, which are simply reflections of these psychological phases. In other words, each wave represents a set of investor attitudes, sentiments and behaviors during a specific phase of the market cycle.

The Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, states:

... a knowledge of wave personality can be invaluable. Recognizing the character of a single wave can often allow you to interpret correctly the complexities of the larger pattern.

Specifically, EWI's analysts have observed that the stock market trend develops in five waves, while the reaction against it develops in three waves. So, in a bull market, expect five waves up, followed by a downward move of three waves. In a bear market, expect five waves down, with the upward correction occurring in three waves.

With all of the above in mind, consider these recent expressions of investor psychology. The news excerpts were compiled by the editors of our Elliott Wave Financial Forecast and shown in the March issue:

Do these positive investor sentiments seem odd in the face of the stock market volatility that occurred after the January 26 DJIA high?

Well, there is an explanation.

The March Financial Forecast said:

The bullish response to the market's decline is exactly what the Wave Principle suggests should occur at a trend reversal. Near the end of a second-wave rally in a bear market, Elliott Wave Principle by Frost and Prechter states that "investors are thoroughly convinced" that the bull market "is back to stay."

Yet, the third waves that follow second waves do convince investors that a bear market is underway. The reason is that third waves are broad, and usually generate high volume and big price moves.

At this point, the trend is unmistakable.

Free Report: '5 Tells that the Markets Are About to Reverse'

We just released this new, free report that reveals many false indicators – a.k.a. "head fakes" -- investors see every day. The report helps readers separate themselves from the herd and survive (and thrive) in volatile markets. Read the free report now.

This article was syndicated by Elliott Wave International and was originally published under the headline What to Expect at a Critical Market Point: End of a Wave 2 Rally. 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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in