How to Use “Ecstatic” Investor Psychology to Your Advantage
See how it helped to identify a turn in this “wildly overpriced” market
by Bob Stokes
Updated: April 29, 2021
Free stock trading apps like Robinhood have proliferated beyond the U.S.
They're available in the U.K. and Europe -- for instance.
In December, our Global Market Perspective mentioned one such app in Turkey and then offered this analysis:
The Midas app is aiming to be the most-digitalized trading venue among Turkish stock brokers. From our point of view, zero-cost trades in a peak mood environment will probably do something far more damaging: They will coax ever-more amateur investors into a wildly overpriced market.
Well, this assessment proved to be timely.
Our April Global Market Perspective provided an update with this chart and commentary:
Within a month [of our December analysis], Turkey's Borsa Istanbul 100 Index peaked near 1600 and fell 10% in five days. Prices vacillated in January and February before eking out a new all-time high of 1589 on March 17. Then, the bottom fell out on Monday, March 22, as the [index] dropped nearly 8% and registered its biggest single-day decline since 2013. Shares plunged another 9% when the exchange opened on March 23, marking the index's worst two-day slump since the global financial crisis in 2008.
Fundamental analysts searched for an "external cause" for the decline.
For example, this is from a March 22 Marketwatch article:
Turkey's currency and stocks collapsed after the abrupt termination of its central bank head...
Sounds like a plausible reason, however, this was the third such change at Turkey's central bank in just the past three years. Neither of the previous two changes resulted in steep price declines.
The factor that really drives stock prices is investor psychology, and the introduction of free stock trading apps has reflected a positive mood environment that was ripe for reversal.
Yet, the Elliott wave model can help investors determine what's next with even more precision.
So what does the Elliott wave model suggest is next for Turkey's stock market, as well as other equity markets around the globe?
Get clear answers for 50+ of the world's biggest markets inside our current Global Market Perspective.
Follow the link below to get started.
Major Global Financial Markets Reach Pivotal Junctures
EWI's analysts see historic shifts ahead for asset classes in the Asian-Pacific, Europe, the U.S. and other regions.
Yes, "historic" is a sweeping word -- but once you read our forecasts for global stocks, bonds, metals, forex, cryptocurrencies, energy (and more), you'll likely agree that the word is fitting.
Almost no one expects historic turns in major markets before they happen. Hence, EWI strongly suggests that you not look to the mainstream financial press for guidance.
Instead, get an independent perspective that EWI believes will serve you well in the immediate months ahead.
You can have our Global Market Perspective on your computer screen in moments as you follow the link below.
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