Markets: Understand the Present to Forecast the Future (Part 1)
Knowing where you are within a trend helps you see around the next corner
by Alexandra Lienhard
Updated: December 23, 2016
Steve Hochberg, our Chief Market Analyst, sits down with ElliottWaveTV to talk about his background, how he discovered the Wave Principle, and why "it's applicable to all markets."
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[Editor's note: A text version of the interview is below.]
Alexandra Lienhard: I'm Alexandra Lienhard for ElliottWaveTV, and today I'm joined by Steve Hochberg, Chief Market Analyst at Elliott Wave International. Now Steve, everyone's got a background, a story to tell, so what's yours? How did you become interested in the financial markets in the first place?
Steve Hochberg: Probably like a lot of other people did. Growing up, you start reading the financial papers and you probably have a family member involved. In my case, it was my grandfather who was involved in the market. So you start, you hear things people talk about; you get interested in companies and so forth. It really wasn't until college that I started really getting involved in what was going on. I was in college in the 70s, and if you remember in the 70s, we were in tumultuous times, you had the big gas lines, oil prices were skyrocketing and commodities, stocks were going up and down. I kept reading in the newspaper all the things that were going on and you start to wonder, how does this affect me? And it leads you to the financial markets -- so that's how I got involved.
Alexandra: And what about the wave principle, how did you discover it and then ultimately end up at Elliott Wave International?
Steve: Well the story involves a dog, the 1812 Tchaikovsky overture and about 10-foot speakers.
Alexandra: Do we have enough time for this?
Steve: No, we don't have enough time! But if people see me speaking at conferences, ask me about the story, it's a great story. I started working for Merrill Lynch right when I got out of college in 1983. Working with Merrill and the financial markets, you kept reading about this man named Robert Prechter. In 1984 he won the United States trading championship, at the time with a huge gain, biggest gain, 444% in a quarter. I said, 'You know what, what is this guy doing that I'm not doing? I need to learn what's happening here.' So I started reading Bob's analysis. The interesting about the Elliott Wave Principle and the Wave Principle model is they don't teach it in college, there's no course on it. So in order to learn it, it's really self-taught. You've got to go to the source material. I think that's the best way to learn things in life. Not so much being taught about it, reading in a textbook, but actually for yourself, going back to the source material. Now, in our case, Bob did all the heavy work because he actually went to the New York library and got all of R.N. Elliott's original works and published them in a book. You were able to go to one of Bob's books and actually read Elliott's writings. That's really how I came to the markets, just going to the source material and saying, 'You know what, this makes a lot of sense to me in how I look at things.'
Alexandra: So you've been using the Wave Principle for quite a while now. What do you find to be the most useful thing about using the Wave Principle to forecast the financial markets?
Steve: Well, obviously, its logic. It's very logical. There are set patterns that we look at, and it's not so much that we can see the future, but we can understand what's going on in the present which implies something about the future. So if you can determine where you are within the structure of this psychology that moves from optimism to pessimism, then you can kind of orient yourself about what's going to happen. It's great for understanding the tenor of the times, and it's applicable to all markets because people are people. When we get into a crowd, psychology, crowd psychology as we call it, or social mood, trends and reverses in these recognizable patterns so you can kind of ascertain where you are within the development of these patterns, you can make a forecast about the future. Sometimes our forecasts can be very accurate because we know exactly where we are, sometimes we're not quite sure, but that's OK. Those are markets and psychology and people.
Alexandra: You cover almost every asset class. What keeps you excited about covering so many markets?
Steve: When you're able to make a successful forecast, that really gets you going because you're able to see around that next corner. So many people think what's happening in life is random, random events. The actual events themselves might be random, but the tenor of the times aren't. The tenor of the times goes through these trends. What excites me is kind of identifying where you are within a trend because you can kind of see around that next corner and that's kind of cool when you're able to make a good forecast, or make a good trade in the market. It gets you excited about the next day and what's going on.
Learn more about Steve Hochberg's forecasts and analysis: