One of the most remarkable things about the Elliott Wave Principle is its ability to forecast the market's path. Not just the final destination, but how it will get there.
That's an important distinction. It's one thing to forecast a market gain or loss -- conventional analysts on TV and in print media do it all day long. It's quite another to outline the actual twists and turns the market will take to achieve your price targets; a rare forecaster can do that.
Prices never move in a straight line. You may be expecting your investment (or trade) to double, but on its way there, it'll have enough intermediate peaks and valleys to cause plenty of heartburn. Knowing the market's projected path greatly reduces the stress of your investment decisions. While others are guessing whether to stay in or get out, with Elliott wave you know the answer long before they do. While others are jumping ship, you know to stay calm and stay in. When they stay in, you know to get out.
What makes this possible is that the Wave Principle looks for specific patterns in market charts. Once you've identified what part of the pattern you are in, you can have a reasonable expectation for what comes next. This diagram shows the idealized Elliott wave path in a bull market. (Flip it upside down for a bear market.)
Why am I writing about this today? I was re-reading the April issue of our European Financial Forecast (EFF) and on page 5 saw a remarkable chart. It's a long-term chart of the UK Financial Times All-Share Index going back to the 1960s -- with the label "You Are Here" on it and a diagram of its projected path. In the words of the EFF editor Brian Whitmer,
You Are Here.
Perspective matters. The FTSE All-Share Index traced five waves up from its 1974 low and culminated in the speculative mania that surrounded the 2000 top. This entire decade since is unfolding as an a-b-c correction of the wave (III) advance.
Presently, stocks are finishing Primary wave 1 of Cycle wave c down... To the right of the “You Are Here” marker is a sketch of the Elliott wave pattern that we expect to see. If the current rally turns into a prolonged affair, many pundits will argue that stocks are safe again. Don’t believe them; the market’s wave pattern says otherwise.
You can see the "You Are Here" chart in the new, April European Financial Forecast right now -- instantly, and risk-free.