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How Financial Exchanges Sparkle Near Financial Tops

The explosion in the number of ways to trade financial assets points to an important peak

by Bob Stokes
Updated: November 02, 2017

A famous advertisement says, "diamonds are forever." However, financial up-trends are not. Learn about these signs of a dangerous financial optimism.


In the 1953 movie, Gentlemen Prefer Blondes, Marilyn Monroe sang "Diamonds Are a Girl's Bestfriend."

On Oct. 10, 2017, the chairman of the Singapore Diamond Investment Exchange says the glittering stones are more than just a girl's bestfriend (The Straits Times, Oct. 10):

Diamonds can at last be an investor's best friend, as (SDIX) launched a new standardised form of the precious stones to rival gold ingots as a safe-haven alternative to cash. …

Diamond Bullion, produced by the Singapore Diamond Mint, is a collection of investment-grade [synthetic] diamonds … which are stored in a credit card-size device containing a chip that allows immediate valuation based on exchange trading.

SDIX launched in May 2016 and is the first and only electronic exchange for trading these diamonds.

But, whether it's trading in diamonds or in other assets, EWI sees the introduction of yet another way of participating in financial markets as one more sign of extreme financial optimism.

This calls to mind what the Elliott Wave Financial Forecast said in January 2007:

Newsweek cites the bullish implications of the global bidding frenzy to own financial exchanges. But a century of NYSE seat price history shows that extremes in the demand for exchanges come at major peaks.

As we know, just 10 months later, the U.S. stock market hit a major peak.

More recently, the June 2017 Financial Forecast showed this chart and noted:



This chart shows just how popular indexing has become. Since 2010, the number of index funds jumped from 250 to more than 5000, which is more than the total of 4,333 companies listed on U.S. exchanges.

The just-published Elliott Wave Theorist provide this perspective:

Some statistics—such as those relating to investors’ embrace of exchange-traded funds (ETFs) and passively managed index funds—are, historically speaking, brand new to the investment scene. These recent developments are an effect of extreme financial optimism.

There are many other effects of extreme financial optimism, and when EWI analysts list ALL of them, they arrive at one conclusion.

And, it is this: Investors need to prepare for a once-in-a-lifetime financial turn.

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