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It's Not Science Fiction, Isaac, it's Socionomics
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By Neil Beers
Tue, 17 Nov 2009 13:00:00 ET |
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In the 1940s, renowned science fiction writer Isaac Asimov began writing a trilogy of novels called the Foundation Series. Asimov’s protagonist discovers and develops “psychohistory,” a mathematical science that statistically predicts the general course of future events for large groups of people.
As it turns out, Asimov’s idea was actually science, minus the fiction. In the 1930s, a decade prior to Asimov's initial Foundation stories, Ralph Nelson Elliott made a discovery that became key to the development of socionomics, a new science of social prediction.
The November issue of The Socionomist is now online. The Socionomist is a new 8-10 page monthly publication from Prechter's Socionomics Institute designed to prepare you for important changes in social mood that most people never see coming. Take a look inside and learn how to get a free DVD with your subscription>>
Elliott observed that the stock market indexes trace out a natural growth model: repetitive, self-similar patterns at multiple degrees of trend. More exactly, Elliott’s basic pattern is a five-wave net advance followed by a three-wave net decline. This repeating five and three wave pattern unfolds in both up and down trends, and across all time spans. The chart below shows an idealized Elliott wave pattern with three degrees of trend:
The largest-degree wave, Primary wave 1 (circled), is comprised of five waves of Intermediate degree labeled (1)--(5). Intermediate waves (1), (3), and (5) each further subdivide into five Minor degree waves marked 1-5. When these impulsive waves peak and complete their 5 wave pattern, it signals that a 3 wave corrective pattern will follow before the upward trend resumes. Intermediate degree waves (2) and (4), and Primary degree wave 2 (circled) reflect the three-wave corrections (marked with letters) that pull back from the odd-number peaks.
Charles Collins studied Elliott's discovery, and in turn explained to Elliott that these wave patterns tend to relate to each other in Fibonacci proportions regarding size and time. Fibonacci proportions are found throughout nature, including atomic particles, nautilus shells, and the human body. Elliott posited that the markets move in this way because crowd behavior reflects this same natural growth pattern.
Several practitioners kept Elliott’s discoveries alive in the decades following his death, but Robert Prechter reintroduced Elliott to a wide audience of investors in the late 1970s and early 1980s. In 1979, he published Elliott Wave Principle – Key to Market Behavior, the definitive “textbook” on Elliott wave analysis. Prechter has since expanded Elliott's initial ideas regarding social mood into the new science of socionomics.
The foreword to The Wave Principle of Human Social Behavior (1999), Prechter's explication of socionomics, summarizes that:
Social mood trends represent changes in human attitudes. Changes in social mood trends precede compatible changes in history and culture, indicating that the former causes the latter. Thus, there is powerful evidence that the pattern of mood change produced by the social interaction of men is the underlying engine of the trends of social progress and regress... The relationship of the pattern to Fibonacci mathematics suggests that the Wave Principle is another manifestation of a type of growth pattern found throughout nature in processes of growth and decay, expansion and contraction.
As Elliott suggested and Prechter formulated, trends in social mood – widely-shared feelings including those of optimism and pessimism –unfold in a hierarchical pattern of similarly-shaped waves that are visible in charts of stock prices, our most sensitive and well-documented meter of social mood.
Socionomics has practical value: it can help you anticipate trends in social mood and the markets, and forecast the subsequent character of social behavior. Rising markets indicate a positive social-mood trend, which at large degree brings peace, prosperity and social harmony. A large-degree negative social-mood trend brings falling markets, social discord and eventually, major war. The following chart illustrates this dynamic:
The United States’ most violent conflicts all followed large-degree negative trends in social mood marked by equivalent declines in the stock market.
Socionomics provides perspective on a wide array of social expressions in addition to wars and civil unrest, such as: popular music, movies, fashion, drugs and health. The flag bearer of socionomic insight, the Socionomics Institute just released a new issue of its monthly publication, The Socionomist, which aims to help you stay ahead of important changes in social mood.
The timeliness of its launch was evident in the inaugural issue of The Socionomist:
Our socionomic and Elliott wave analysis suggest that social mood has completed an upward wave of monumental size and shifted to the negative at Grand Supercycle degree -- which is one degree larger than the change in mood that created the Great Depression. This shift is driving rapid changes for the worse in financial markets, economies, personal fortunes and the quality of life.
Socionomics warned of an approaching top well before the stock market peak in 2000. Since then, you have seen stark manifestations of this major social-mood shift in the news. But the news doesn’t anticipate; it just reports events after the fact. Here's what Asimov had to say about the value of a predictive science in a 1987 National Public Radio interview:
I think if we can somehow get across some of the problems that face us now, humanity has a glorious future, and that if we could use the tenets of psychohistory to guide ourselves we might avoid a great many troubles.
Bob Prechter started the Socionomics Institute to help people prepare in practical ways for major changes in social mood. The Socionomist is the publication that can best help you do that.
Tags: socionomics, The Socionomist, social mood