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Swine Flu and Elliott Wave Analysis (Updated)
Think epidemics are random? Hold that answer.
When R.N. Elliott first discovered the Elliott Wave Principle back in the 1930s, he applied it to forecast the stock market. It was only in the 1970s that EWI's founder Robert Prechter observed that Elliott wave patterns in stocks reflect much more than just stock prices.
First and foremost, major stock market trends mirror the ups and downs of society’s overall mood state – or social mood, as Prechter termed it in the new science he called socionomics. A rising (bull) market indicates improving social mood, while a falling (bear) market signals that society’s overall mood is worsening.
Of course, social mood as the driving force behind stocks, economy and cultural trends turns the conventional idea of causality completely on its head. For example, it means that investor confidence doesn't follow the trend in the stock market; instead, stock market trends follow investor confidence. News doesn't create stock market trends; social mood determines both the character of human events and the trend in stocks.
And, relevant to the latest threat the world is facing, swine flu, epidemics don't just "happen." Historically, they occur at specific moments in human history. Here's is a short excerpt from Robert Prechter's two-volume set on socionomics, The Wave Principle of Human Social Behavior, Chapter 18 (bold added):
The fact is that epidemics and pandemics seem to hit populations during major negative social mood trends. ...When we study pandemics of the Dark Ages or the Spanish influenza epidemic that broke out during the bear market of 1917 (which year also saw intense fighting in World War I and the Communist coup in Russia), there always appears to be a bear market in force, and the extent of the epidemic tends to correlate with the size of the setback in mood.
If you find this statement eye-opening, take a look at this chart of Asian bird flu outbreaks plotted against the prices of Hong Kong's Hang Seng stock index, a measure of Asia's social mood. As you can see, bird flu outbreaks have occurred during downturns in the stock market:
So, is it a coincidence that the first cases of swine flu in Mexico were reported in early March, when global stock markets (read: global social mood) were hitting lows they hadn't seen in years or decades?
Hold that answer. First, read the just-published issue of The Socionomist -- the newest publication of Robert Prechter’s sister organization, the Socionomics Institute. Its lead study shows you the 600-year history of social mood as it relates to epidemic disease.