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Look at This Big Reminder of “Dot.com Mania”

Here’s when a surge in IPOs tends to occur

by Bob Stokes
Updated: September 11, 2020

Let's pretend for a second we're trying to explain to an alien how the weather works on planet Earth.

When the sky turns dark and cloudy, we might tell him, this indicates rain -- perhaps even thunderstorms. However, cloudy skies do not necessarily signal when a downpour will start or how long it will last if it does start. After all, the sun could break through before an umbrella is needed. All that said, when the sky turns ominous, it's a good idea to have your umbrella handy -- just in case.

Now let's pretend we're talking to a brand-new investor and apply the same explanation to some less-talked-about stock market indicators. They "indicate" but don't guarantee a particular market development. Nor its timing should it develop. But, it's a good idea for investors to be on alert.

One such stock market indicator is the initial public offerings market. It got red hot around the peak of the dot.com frenzy back in the year 2000 and also near the time of the 2007 stock market top.

With that in mind, our just-published September Elliott Wave Financial Forecast discusses the IPO market here in 2020. Here's a chart and commentary:

InitialPublicOfferings

It's official; the market for initial public offerings is as hot as it's been since the dot.com mania. The chart shows the monthly total for IPOs starting in 1999. In terms of deals, the boom of the late 1990s is still of a larger scale, but the 42 offerings in July of this year is the highest total since August 2000. The second highest total since 2000 came in November 2007, when 39 IPOs came to market just as the 2007-2009 bear market started. A surge in IPOs tends to occur around major stock market tops, with a final last-gasp spike taking place after the stock market peaks.

Indeed, here's a Barron's headline from August 31, 2020:

Get Ready for a Crazy Wave of IPOs.

What's more, our September Financial Forecast also points out that, similarly to 1999 and 2000, many IPOs and prospective IPOs today are money losers, or even lack revenues.

As financial history suggests, such unbridled optimism usually does not last indefinitely.

Now, as suggested a moment ago, the IPO market is an indicator -- and a single one at that. It does not say whether the stock market will plummet next week, next month or whenever. It simply suggests that an investor should be prepared.

However, the Elliott wave model does offer high-confidence market turn insights.

Learn what our Elliott wave experts are saying about the stock market's price pattern.

Follow the link below to get started.

The Stock Market is a Fractal: Why That’s Important to Know

Here's how the founder of Elliott Wave International, Robert Prechter, described a fractal:

A fractal is an irregularly shaped object that is nonrandom in the sense that its discontinuities (i.e., fluctuations) at all scales are similarly irregular. For example, if someone were to show you a line representing the indentations of land along a coastline, you would not be able to say, without other evidence, whether the coastal section was 1 mile long, 10 miles long, 100 miles long or 1000 miles long. A fractal displays the property of self-similarity (or self-affinity, depending on its form) at different scales. The jaggedness of a coastline is self-similarly irregular at different scales. So it is with price graphs of financial markets. As R.N. Elliott pointed out in 1938, the patterns of the Wave Principle take a similarly jagged shape whether viewed on an hourly, daily, weekly, monthly or yearly graph.

It's important to know that the stock market is a fractal because these "patterns of the Wave Principle" repeat "at all scales."

This repetition offers predictive value!

EWI's 25-plus analysts are Wave Principle experts.

Learn what they predict for stocks, bonds, the U.S. dollar, gold, silver and more.

EXCLUSIVE

Independent Scotland = Market Crash?

Scotland's independence is again a hot topic in Britain, with many observers saying that a break-up of the union would be bad for the country's financial markets. For a different look at causality -- i.e., chicken vs. the egg -- watch our Head of Global Strategy show you the current Elliott wave setup in EURGBP and FTSE.

Stocks vs. U.S. Births: Is There Really a Connection?

In a word, yes. A couple of decades ago, Robert Prechter plotted the number of annual births on a stock market chart and noticed a remarkable correlation. Except, it's not for the reasons you may think... Watch the Socionomics Institute's Director Matt Lampert and EWI's Robert Folsom dive into details.

How This Global Financial Player Became “Primed” for a 90% Plunge

"How The Mighty Have Fallen." That's the title of one of our revealing charts inside our just-published May Global Market Perspective. Take a look at a "triple top" in the price pattern of this global financial institution -- and the 90% decline which followed.