What do all of the following items have in common?
- A needle in a haystack
- A diamond in the rough
- A confident investor in the U.S. stock market
Answer: They’re all next to impossible to find.
It’s not so much the fact that stock prices have undergone one gut-wrenching, triple-digit swing after another since early August. Rather, it's that the mainstream experts have been just as shocked by those swings as the regular folks. At this point, the notion that the market is “rational” is as naked as the Emperor in new clothes. Consider this October 12 news snippet:
“Reporters tracking share values around the world [drew] images of… a vehicle spinning out of control, a berserk beast, or some combination” thereof. (AP)
Such was the case in the week ending October 10, otherwise known as “Black Monday through Friday.” The five trading days saw the Dow Jones Industrial Average plunge more than 18% to a five-year low -- the worst week in the market’s entire 112-year history.
In the words of one Nobel Prize-winning economist: “I’m as puzzled as anyone else. I don’t have any particular wisdom to sell.” (New York Times)
“It’s very scary,” added another top authority. “I feel numb, like I’m in a horrible nightmare.” (AP) AND -- “This is a disaster of unimaginable proportions.” (BBC)
(700 Points Down; 900 Points Up. Has the U.S. stock market gone berserk? Our answer: Absolutely NOT. In fact, according to our October 2008 Financial Forecast Service publications, the long-term direction in stocks has NEVER been clearer. Act Now)
News Flash: While the historic selloff in the DJIA was “unimaginable” to the usual suspects, it was exactly the kind of abysmal decline our analysts saw coming from miles away.
Here, the April 2008 Elliott Wave Financial Forecast presented the following close-up of the Dow Jones Industrial Average (some labels have been removed for this publication) -- alongside the following bearish insight:
“The support provided by the trendline up from the 1974 low is the more critical level because a convincing break will confirm that the next leg down is underway. The next potential trendline support is thousands of points lower.”
The stock market is not “out of control.” The mainstream market prognosticators are.