Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Here's Why Blind Contrarianism Investing Failed in 2020

Stock-Markets / Investing 2020 Jan 14, 2021 - 05:32 PM GMT

By: EWI

Stock-Markets


There is only one instance when the investing crowd is right

Yes, there are many times when the market's Elliott wave structure suggests that an investor should take a position "against the crowd," or put another way, be a contrarian.

Prime examples are at market bottoms and tops.


However, keep this in mind from a classic Global Market Perspective, a monthly Elliott Wave International publication which provides analysis of 50-plus worldwide markets:

[S]trict adherence to the wave model habitually puts wave analysts where they should be: against the market crowd. But not always. At specific points in the market's wave structure, wave analysts run with the herd.

A prime example of when Elliott wave practitioners have a lot of company is during the most severe part of a bear market. At such times, the Elliott wave model suggests that more downside is likely ahead and the crowd is likewise fully aware that the market is in the grip of a ferocious bear. The same applies to the strongest part of a bull market.

So, following the Elliott wave model and consistent contrarianism are not the same.

Indeed, read this quote from our just-published January Global Market Perspective:

Blind contrarianism failed in 2020, because some of the world's most influential benchmarks -- the DJIA in the United States, the DAX in Europe, and the Shenzhen Composite in China -- spent much of the year rallying in small-degree third waves.

That issue of the Global Market Perspective went on to show this chart and said:

Turns out that 2020 was not just a bad year for contrary investing, it was the strategy's worst year on record.

The contrary strategy's best years are also illustrative. The technique returned 80% as the first technology bubble burst in 2000, and it made 60% in 2009, as equities rallied following the 2008-09 financial crisis. The year 2016 was also a good year for contrarians who wagered that cyclical stocks would benefit most from an economic expansion.

What about major global markets in 2021? Will contrarian investing be successful for the market or markets in which you are interested? In other words, should you be selling when others are buying, and vice versa?

Elliott wave analysis can help you answer those questions.

As the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, says:

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 minimum.

If you'd like to find out about "Elliott's highly specific rules," you can do so by reading the online version of Elliott Wave Principle: Key to Market Behavior for free.

That's right -- Elliott Wave International has made this Wall Street classic available to Club EWI members for free. Don't worry -- membership is also free. Moreover, Club EWI members enjoy free access to a wealth of Elliott wave educational resources.

Join the approximately 350,000 Club EWI members who are already gaining insights into trading and investing from an Elliott wave perspective by following this link: Elliott Wave Principle: Key to Market Behavior (free access now).

This article was syndicated by Elliott Wave International and was originally published under the headline Here's Why Blind Contrarianism Failed in 2020. 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.


© 2005-2022 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