Every day, the mainstream financial experts explain away fluctuations in stock market trends with some "fundamental factor" du jour, all of which boil down to this: good news causes a market to rise and bad news -- to fall.
Problem is, all too often a "fundamental" reason used to to justify the market's rally or decline gets brushed aside the moment the trend changes. Case in point: The following string of recent headlines regarding two breaking news stories: First, lower-than-expected revenue reports from the third largest US bank, Citigroup. And second, health concerns surrounding the leave of absence from Apple Inc. chief executive Steve Jobs.
9 AM on Tuesday, January 18, 2011: The Nasdaq and S&P 500 are down. The media says:
- "Wall Street Opens Lower As Citi Misses Estimates. US stocks set for a lower open after Citigroup earnings missed estimates while Apple shares weighed on the tech sector..." (Reuters)
- "US Stocks Slip As Citi And Apple Weigh." (Associated Press)
VERSUS one hour later: 10 AM same day; US stocks are climbing:
- "US Stocks Gain. Nasdaq Composite rose despite a 3.6% drop in Apple." (Wall Street Journal)
- "Wall Street Rises. US stocks try to brush off declines that came with disappointing earnings from Citigroup..." (NASDAQ)
How can the same events be bearish for stocks one minute, only to be swept under the market's rug as soon as stocks reverse and rally? You might as well say that the market is random, as many people do. But before you join them, consider that there may be something other than "fundamentals" driving market trends.
A groundbreaking report by EWI president Robert Prechter titled "The Human Social Experience Is A Fractal" offers evidence that price movements in stocks are, in fact, ordered. Prechter provides you with the actual, annotated research of the Elliott Wave Principle's discoverer, Ralph Nelson Elliott. He saw a fractal in the stock market charts: a pattern that repeats in form (but not in time or amplitude) as the overriding design of all stock market progress and regress. From R. N. Elliott's own research,
"The wild, senseless, and apparently uncontrollable changes in prices from year to year, from month to month, or from day to day link themselves into a law abiding rhythmic pattern of waves... Current news and political developments are of only incidental importance, soon forgotten. Extensive research in connection with what may be termed human activities indicates that practically all developments which result from our social-economic processes follow a law that causes them to repeat themselves in similar and constantly recurring series of waves or impulses of definite number and pattern."
This diagram shows you Elliott wave fractal's idealized development and subdivisions in a bull market: