Home > Stocks
"No One Could Have Predicted It" vs. Facts
In order to FORECAST the markets, you need FORWARD-looking tools.
It's common these days to hear people say that, "No one could have predicted the ongoing economic crisis and stock market declines."
On the other hand, a picture is worth a thousand words. That's especially true if you're an Elliottician whose entire focus is on chart (or "picture") analysis. So, here is a chart of Germany's DAX stock index (Europe's equivalent of the DJIA) from January 2007 to the present.
Below it are the "Bottom Line" summary forecasts from Elliott Wave International's monthly European Financial Forecast publication – going back to July 2007, the month and year when the credit crunch first hit.
Black dots on this chart correspond to the bullish (or sideways) "Bottom Line" forecasts from the European Financial Forecast. Red dots approximate the bearish "Bottom Lines." All red text represents major turning points. Take a look.
[+] CLICK TO ENLARGE
European Financial Forecast, July 2007. Bottom Line: The overall uptrend of European stock indexes remains intact.
Aug. 2007. Bottom Line: European stock indexes have defined an important top. The wave pattern is now bearish, suggesting that investors should take a defensive stance.
Sept. 2007. Bottom Line: The overall decline is likely to resume soon.
Oct. 2007. Bottom Line: …range-bound movement may extend the correction longer.
Nov. 9, 2007. Interim Report: European stock indexes broke support decisively this past week. The overall pattern now implies that the decline is likely to continue…
Dec. 2007. Bottom Line: The trend of European stock indexes is down.
Jan. 2008. Bottom Line: Although the wave structure permits some opposing interpretations, the simplest view, which is often the correct view, favors the upside.
Feb. 2008. Bottom Line: European stock indexes began a bear market rally in January. The rise may be substantial but should be erased by the next leg of the bear.
Mar. 2008. Bottom Line: European stock indexes are likely to extend recent gains in March. However…the next leg of the bear will take back what the current rebound is giving.
April 2008. Bottom Line: European stock indexes…should have little difficulty continuing up to their February highs. However, the next leg of the bear market could resume from [there].
May 2008. Bottom Line: The bear-market rally of European stock indexes is likely to continue rising in May, but it is likely to encounter formidable resistance.
June 2008. Bottom Line: European stock indexes topped in May.
July 2008. Bottom Line: …the overall trend is down.
Aug. 2008. Bottom Line: Stocks are in the midst of a multi-week rebound, but they should ultimately fall to new lows in another impulsive segment of decline.
Sept. 2008. Bottom Line: European stocks… should fall to new lows for the year over the next few months.
Oct. 2008. Bottom Line: The trend of European stocks is down…
Nov. 2008. Bottom Line: …
The point of this quick study is not to gloat. The point is to show that yes, it was indeed possible to forecast the declines. You just needed the right, forward-looking tools.
The forecasts above were made using Elliott wave analysis. It's not a crystal ball – as you can see, there were a couple of instances where our European Financial Forecast was wrong over the past months. Still, you will agree that this is a lot better than claiming ignorance and saying that, "no one could have predicted it."
You can see our latest Elliott wave-based forecasts for these global markets online right now – risk-free for 30 days.