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Patterns, the Presidency, and Elliott Waves
Follow Those Squiggly Lines...
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By Robert Folsom
Fri, 16 May 2008 17:30:00 ET |
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No one seriously questions the suggestion that many human behaviors are patterned, including collective (or crowd) behavior. But, most academics and economists have long resisted any suggestion that prices in financial markets are patterned. I find their attitude an endless source of curiosity. If collective behavior is patterned, and if financial markets are a collective activity, then it's common sense to believe that a price chart may be more than a bunch of squiggly lines.
Alas, too many academics and economists play hooky from the class in common sense.
In all fairness, "behavioral finance" is a school of economic thought that has produced a wealth of evidence in recent years showing the central role of psychology in markets and other activities. This research isn't "new," in that it simply confirms decades of experience among countless traders and technicians.
The Elliott Wave Theorist delivers original research and opinions on topics that range from presidential politics to quantum physics to 200-year stock market trends -- all from Bob Prechter, the world's foremost elliottician. See and read his just-published May issue by clicking here.
Now, all of this serves as the logic to introduce my topic, namely the stock market and presidential popularity. This may seem like a big leap, but really isn't if you bear in mind "the central role of psychology and other activities," to wit: Picture a price chart of the DowIndustrials which spans 33 years, beginning in 1981 (yes, the chart concludes in 2014). Now picture a second price chart of the Dow Industrials which also spans 33 years, but beginning in 1947. These two charts of the Dow bear a startling resemblance; what's more, the final six years of the second Dow chart are a hint of what to expect from the final six years of the first chart -- the years between now and 2014.
Where does the presidential popularity come in? Well, the chart I describe above is on page four of Bob Prechter's just-published May issue of The Elliott Wave Theorist. He lines up these two Dow charts, with the respective terms of office for all the U.S. presidents in each 33-year period. Bob also includes a couple of key Gallup poll numbers -- bottom line, the second chart hints not only at the Dow itself, but also at how the public will view the next individual to occupy the White House.
Please trust me when I say that the chart will speak much more clearly for itself than I have -- Bob Prechter's work is always as clear as it is unique. See it for yourself, by clicking here.
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