One of the reasons is that, at the time, Prechter said the bull market in U. The market has only risen since then, and it even got a bump from the November election of businessman Donald Trump as president. In the page book, which took 13 years to write, he proposes a cohesive model that takes into account trends in sociology, psychology, politics, economics and finance. I highly recommend the book.
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One of the reasons is that, at the time, Prechter said the bull market in U. The market has only risen since then, and it even got a bump from the November election of businessman Donald Trump as president. In the page book, which took 13 years to write, he proposes a cohesive model that takes into account trends in sociology, psychology, politics, economics and finance.
I highly recommend the book. What is your general timing for this to occur? Robert Prechter: The true top for stocks in terms of real money gold occurred way back in Overall prosperity has waned subtly since then. Their tops should be nearly coincident. Prechter: Triggers are a popular notion, borrowed from the physical sciences.
Waves of social mood create trends in the stock market, and economic and political events lag behind them. Because people do not perceive their moods, tops and bottoms in markets sneak right past them. At the top, people will love the market, and events and conditions will provide them with ample bases for rationalizing being heavily invested. How long could that last?
All I can say for sure is that the degree of the corrective wave will be larger than that which created the malaise of the s and s.
Prechter: The increasingly positive trend in social mood over the past eight years has been manifesting in rising stock and property prices, expanding credit, buoyant pop music, lots of animated fairy tales and adventure movies, suppression of scandals, an improving economy and — despite much opinion — fairly moderate politics.
In the next wave of negative mood, we should see the opposite: declining stock and property prices, contracting debt, angry and somber music, more intense horror movies, eruption of scandals, a contracting economy and political upheaval.
Just as people give up on the future, its brightness will return. The financial contraction during the negative mood trend of was the second worst in years. Yet, thanks to the return of positive mood, many people have already forgotten about it. Investors again embrace stocks, ETFs, real estate, mortgage debt, auto-loan debt and all kinds of risky investments that they swore off just a few years ago. Prechter: Short-term notes of the least unstable governments, held in the safest manner possible.
The plan is to trade those investments for stocks, property and precious metals near the bottom. The trick to maintaining personal prosperity is to avoid popular investments at the turns. Gilburt: With the advent and proliferation of computer-executed trading, what effect have they had on Elliott Wave analysis, other than the speed at which trading is done? Prechter: Virtually none. People build their errors of thinking into their programs.
Gilburt: How have markets changed, if at all, in the decades you have been analyzing Elliott waves. Prechter: Markets have changed in superficial ways but not in any essential way. They still trace out Elliott waves. The closest thing to it in the record is the rise, in which wave five lasted 15 times as long as wave one.
But even as the Fed was expanding the money supply at a record rate, the drop in the Dow was deeper than one would have expected for wave C of a Primary-degree flat. So, that causal argument is spurious. I chalk it all up to Grand-Supercycle-degree optimism. All that will change when mood turns negative. I have suggested three variations on forms: the leading diagonal in which the odd-numbered waves can subdivide into five , the expanding diagonal and the skewed triangle.
I remain skeptical about the legitimacy of all three of these forms. I suspect the patterns I described are more likely artifacts of imperfect mood recording than legitimate formations. On the other hand, over the years I and my colleagues have made a number of valuable observations about wave forms that Elliott never noticed. Some have become well-known, others not. They are:. Even so, E waves of triangles in the wave four position always end within the territory of the preceding third wave.
The barrier triangle is a more useful idea than the idea of independent ascending and descending triangles. Gilburt: While we use various technical indicators to support or show the weakness in any wave count, my favorite has been the MACD. Do you have any favorites that have been most useful to you over the years?
Prechter: Nearly all momentum indicators provide the same basic information. There are hundreds of them, because they are easy to construct, especially with computers. But momentum analysis is not simple. In the stock market, slowing momentum nearly always precedes reversals, but slowing momentum does not mean a reversal must follow. The and periods are classic examples.
In each case, the market slowed its rise — looking terminal from a momentum standpoint — and then accelerated. In the first case, I knew wave 3 of 3 was dead ahead, so I was really bullish. The second one threw me off. The most consistently useful momentum indicator is breadth. If I had to rely on only one momentum indicator, that would be it. Gilburt: Do you have any specific time frames in charts that, in your experience, have provided the most insight into a specific market or commodity? Prechter: No.
Markets are fractals. Nothing quantitative is meaningful or useful. Gilburt: There is a debate among various schools of thought as to what is more important — price or time. Prechter: What matters most is form. Form involves both price and time, although arguably price is the more definitive component. Gilburt: I am sure you have seen a lot of time-cycle analysis in your career. I am just wondering why you think we are unable to develop the same accuracy percentages in timing models as we do in pricing models using Elliott Wave?
Prechter: I think the reason for your observation is that cycles are not the essence of markets. They are artifacts of the fractal form. They appear for a while and then disappear. Usually by the time someone recognizes a cycle and bets on it, it is poised to vanish. I think Fibonacci ratios between the prices and durations of related waves are meaningful.
Gilburt: I have personally noted how I view socionomics as the ground-breaking work that will eventually lead market analysis into the future.
But I also understand how old habits are hard to break, and most still desperately cling to the old Newtonian-based exogenous-causation theories of market analysis.
What sort of reception has the socionomic theory been receiving from the world of academia? Prechter: It has had wisps of success. We have had several academic papers published, and another was accepted by a journal [recently].
A ranking member of the Academy of Behavioral Finance and Economics commented to me that the term socionomics was becoming part of the lexicon, which was encouraging to hear. Several professors at mid-level universities are including it in their courses, and several top professors have been kind enough to provide a good word for the book.
Socionomic theory explains why such a reaction is, generally speaking, imperative: People are built better to participate in waves of social mood than to analyze them.
People like you, who do pure market analysis, have been the quickest to get it. Gilburt: As new studies into the socionomic aspects of financial markets are performed all the time, are there any other resources for us to follow to gain continuing insight into this perspective? Prechter: The Socionomics Institute puts out tons of interesting material. The website is full of studies, articles, events and videos. People who like this field should become a member.
Gilburt: What are your top three arguments to present to those who do not believe in socionomics but still hold fast to the old exogenous-causation theories? But I can make three brief statements:. See chapters 1, 2 and Financial markets differ in numerous fundamental ways from economic markets, implying that their behaviors spring from different causes. See chapters 12 and See chapters 8 and Another project we have going is computerizing Elliott Wave analysis.
On the business side, I have cut back. Make sense? Economic Calendar. Retirement Planner. Sign Up Log In. Home Investing Stocks. ET By Avi Gilburt. Advanced Search Submit entry for keyword results.
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Elliott Wave investor Robert Prechter says a Depression-like shock is coming
Despite the highly dramatic behavior of the stock market, many market participants have been remarkably calm. Ironically, such a sentiment indicates the opposite. Financial history suggests that may be pivotal for the U. The just-published December Elliott Wave Theorist explains why through 12 illuminating charts. Take a look at these two sample charts Some of the biggest players on Wall Street include institutional investors like pension funds and mutual funds. There's another group of "big players" that is taking its stock market investments into the stratosphere.
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Over pages of text and charts every month. At the start of every month, APFF gives you the longer-term view of the main Asian-Pacific stock indexes as well as insight into the region's economic and social trends. At the start of each month, The Asian-Pacific Financial Forecast delivers 10 pages of insightful charts and text. You'll see the most likely path for key Asian-Pacific stock indexes in the next weeks, months and years, plus how the market's prices fit in with major events in the region. APFF gives you in-depth market research and a forward-thinking Elliott wave perspective you simply won't find anywhere else. When you subscribe, you'll be privy to upcoming market moves and investment opportunities that the majority of investors won't see until it's too late. In his monthly commentaries, Mark not only discovers opportunities in Asian-Pacific markets, but also shows how cultural and political events relate to financial trends in the region.
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The Elliott Wave Theory was developed by Ralph Nelson Elliott to describe price movements in financial markets, in which he observed and identified recurring, fractal wave patterns. Waves can be identified in stock price movements and in consumer behavior. Investors trying to profit from a market trend could be described as "riding a wave. The theory gained notoriety in when Elliott made an uncanny prediction of a stock market bottom and has since become a staple for thousands of portfolio managers , traders, and private investors. Elliott described specific rules governing how to identify, predict and capitalize on these wave patterns.