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8 Indicators in 1: Here's the Message of the Panic/Euphoria Model

Prior model extremes occurred in March 2000 and October 2007

by Bob Stokes
Updated: April 08, 2021

Elliott Wave International has been providing market analysis for more than four decades – which includes many bull/bear market cycles.

That said, the public’s current market mindset – especially among inexperienced investors -- is a reminder of the extremes surrounding the 2000 market top, and a few others.

For example, a February 27 MarketWatch headline said:

A new wave of fearless retail investors is ready to pour $170 billion into stocks …

Also, according to an early February Deutsche Bank survey of online brokerage users, 61% are under 34 years of age and 45% are in their first year of investing.

As Barron’s reports (Feb. 25):

Younger, Savvier Investors Are Making Up a New Movement

So, all in all, there’s no shortage of financial optimism.

Indeed, our March Elliott Wave Financial Forecast showed this chart and said:

Bulls - Altogether Now

This chart shows SentimenTrader.com’s version of the Panic/Euphoria Model, which is an amalgamation of eight indicators that range from New York Stock Exchange short interest to individual and advisory sentiment surveys and retail gas prices. Prior model extremes occurred at 1.413 on March 24, 2000, the day of the top in the S&P 500 that led to a 51% decline, and 1.337 on October 12, 2007, one day after the S&P 500 peaked and started a 58% decline. The other two extremes were 1.427 on January 7, 2011 and 1.444 on April 8, 2011, neither of which mattered immediately to stock prices, but the S&P soon declined 22% from May 2, 2011 to October 4, 2011. On February 12, 2021, one trading day before the high in the NASDAQ indexes, euphoria clearly got the best of the investment public as the model shot to a new record at 1.613.

It's important to know that this extreme in optimism ties in perfectly with what the Elliott wave model is conveying right now.

If you’d like to know what our Elliott wave analysis is revealing about the stock market’s next big move, take the first step by following the link below.

The MAGNITUDE of the Market's Next Move May Catch Most Investors by Surprise

Frost & Prechter's Wall Street classic, Elliott Wave Principle, says:

Most important, the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress. Living in harmony with those trends can make the difference between success and failure in financial affairs.

Many investors extrapolate today's financial trend into the future. So, when trends change (as they always do), these investors are caught off guard.

Portfolios are crushed or opportunities are missed.

You can be the exception.

Follow the link below to learn how you can access our Elliott wave analysis -- which helps you to anticipate major market changes.

See This “Anatomy of a Bursting Bubble”

The highly specific rules and guidelines of the Elliott wave model help you to establish high-confidence forecasts. See how a forecast for "a near 50% sell-off" worked out in this global financial market. Take a look at these two charts which depict an "Anatomy of a Bursting Bubble."

EXCLUSIVE

Russian Stocks (RTS): "A Very Interesting Setup"

Triangles are one of the most reliable Elliott wave patterns of market psychology. You only see them in very specific parts of the trend. Watch our European Short Term Update editor explain triangle's implication for the next move in Russia's RTS stock index.

8 Indicators in 1: Here's the Message of the Panic/Euphoria Model

Investor psychology has moved back and forth between extreme optimism and extreme pessimism repeatedly throughout financial history. Here's analysis of a "model" which is an amalgamation of eight indicators -- and what it shows today.