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A 90-Year-Old Investment Insight That's Relevant in 2020

R.N. Elliott’s work explains why stocks rallied despite Covid and other bad news

by Bob Stokes
Updated: July 29, 2020

Many of you know that Ralph Nelson Elliott discovered the method of forecasting the markets that today we call Elliott wave analysis -- or, more formally, the Elliott Wave Principle.

R.N. Elliott lived from 1871 to 1948, and July 28 was his birthday.

A way to pay tribute is to mention one of the key observations he made during his years of studying the stock market (R.N. Elliott's Masterworks):

As the Wave Principle forecasts the different phases or segments of a cycle, the experienced student will find that current news or happenings, or even decrees or acts of government, seem to have but little effect, if any, upon the course of the cycle. It is true that sometimes unexpected news or sudden events, particularly those of a highly emotional nature, may extend or curtail the length of travel between corrections, but the number of waves... remains constant [emphasis added].

What this means, simply, is what our subscribers have known for decades: News and events don't affect or create broad market trends. Of course, this seems to defy logic because most people believe that news and events are the very things that drive the stock market.

Yet, there was also a time when most people believed that only birds could fly. But what governs airplane flight, the buoyancy of metal ships, the light produced by an incandescent light bulb, radio transmission over the air -- and, yes, the Wave Principle of price formation in the financial markets -- is natural law.

Natural law is inherent in prices patterns of stocks and other markets. Those are the patterns of the market participants' collective psychology, the true driver of price trends. That's why outside events do not materially influence the pattern's behavior.

In fact, often the stock market behaves in a completely opposite manner from what the majority of market observers would expect from the news.

Here's a chart and commentary from our July Elliott Wave Theorist:

WavesNews

[This figure] is updated from the June issue and shows that on Sunday, July 12, Florida reported the largest tally, from any state, of new Covid cases since the pandemic began. Did the stock market care? No, it gapped up the following morning. This morning (Friday, July 17), Bloomberg reported that profit at the consumer banking unit of Bank of America has “plunged 98%,” and overall profit at the bank is down by more than half. The U.S. banking system is in serious trouble. Does the stock market care? No, it gapped up on the day.

In the nearly 90 years since R.N. Elliott observed that news does not alter the market's wave pattern, his insight has been proven time and again.

So, it's wise to keep your market eye on what really matters: the Wave Principle of human psychology.

Our team of Elliott wave experts can help you do just that.

Learn what they see just ahead for stocks, bonds, gold, silver, the U.S. dollar and more by taking advantage of our 30-day, risk-free trial.

Follow the link below to get started.

How to Get Yourself AHEAD of the Stock Market's Next Big Turn

To be in this enviable position, stay on top of the market's unfolding Elliott wave pattern.

Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, says:

When after a while the apparent jumble gels into a clear picture, the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%. It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so. [emphasis added]

Yes, opportunity!

It awaits you now as you review our latest stock market forecast -- 100% risk-free.

That's right -- you get a full 30 days to absorb all the analysis from our flagship investor package, which includes the new August Elliott Wave Financial Forecast -- set to publish on July 31.

Follow the link below to see what our team of analysts see.

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JNK: What's Next for "Junk"

High-yield -- a.k.a. junk -- bonds are challenging even when the economy is doing well, let alone in the middle of a pandemic. Our Interest Rates Pro Service editor looks at JNK, an ETF that tracks this markets, to see what Elliott waves show next.

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EURUSD: This Technique Is "Better Than Any Moving Average"

When forex markets trend, prices often move along a trendline. What's more, often another trendline forms -- and together, the two trendlines form a so-called trend channel. Watch our Currency Pro Service explain how put this trend-following technique to good use.

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What's Next for Asia's Two Recent Stock Market Leaders?

Stocks in South Korea and Taiwan have been outperforming their regional counterparts. See our Asian-Pacific Short Term Update editor give you a glimpse of what's next for both, with an eye on the U.S. dollar.