It’s one thing to hear the famous expression “Buy low; sell high.” It’s quite another to know when an actual low –(or –high) is staring you in the face.
Technical indicators come in many shapes and sizes: relative strength, momentum, time cycles, Elliott Wave structure, and of course sentiment -- to name a few. But when all is said and done, our analysts are the ones stocking up on snow tires when the mainstream financial "experts" are calling for a blistering heat wave.
As EWI founder Bob Prechter himself explained in the 2004 “interviews” book Prechter’s Perspective -- “All investment is speculation, and there is no speculation more dangerous than the one that is confidently viewed by the majority as an investment.”
Take, for example, the widespread enthusiasm surrounding Germany’s DAX Index in the summer of 2007. At the time, Europe’s leading bourse was enjoying a powerful winning streak that saw prices soar above their old 2000 all-time high and onto a fresh record. And, according to the mainstream trifecta of advisors, analysts, and investors -- the next move for Germany’s stock market was straight up.
(From a never-before-seen peak to a one-and-a-half year low, and back up to the middle again -- Germany’s stock market has had a roller-coaster year. The
May 2008 Global Market Perspective reveals the next big twists and turns in store for the DAX.
Learn More)
Here, the following news items from the time speak volumes:
- “The DAX Has Done It. Investors are expanding their positions due to the friendly market environment. The record makes it clear that business in Germany is flourishing and that there is a very steady upswing.” (San Diego Tribune)
- “In contrast to seven years ago, the market is not besotted by euphoria. German shares have plenty of room to breathe. The stocks are by no means overvalued.” (Spiegel Online)
- “The German market is going to be the best during this period. The market [that] Germans are about to have is going to boggle their minds.” (Wall Street Journal)
“Boggle” the market did indeed: After setting a new record on July 13, the DAX maxed out and plunged headlong in a severe, 24% sell-off that erased the entire gains for 2007, and then some.
Let’s just say, our analysts had long since stocked up on snow tires. Case in point, the following insight on the DAX’s long-term trend from the August 2007 Global Market Perspective (published August 3):
“Thanks to lingering memories of a strong rally, most people find it difficult to imagine markets falling sharply. So it’s time for a reality check by way of the long-term chart of the DAX Index…the downtrend is likely to continue… The DAX should continue this far (6697) or farther.”
Seven months of decline later, the old bulls of summer sat licking their wounds. The belt around the bloated optimism of before had been let out. German investor confidence sat at its lowest level in 15-years. The DAX Index floated around a 16-month low. And -- while the mainstream outlook on Europe’s leading economy couldn’t have been darker, our March 2008 Global Market Perspective saw a bright light at the end of Frankfurt’s tunnel.
In GMP’s own words: “The Wave Principle observes that market tend to rebound strongly after three-wave declines. Our current outlook [for the DAX index] is bullish.”
When everyone on the boat is leaning in the same direction, the ship is about to tip. Don’t fall in with the rest. Get the most comprehensive outlook on the long-term trend changes in store for the world’s major stock markets, international currencies, global interest rates, oil, metals, and more in the May 2008 Global Market Perspective. Learn More.