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What This Survey Reveals About Investor Sentiment

Swings in mass emotions tend “to follow a similar path each time around”

by Bob Stokes
Updated: October 27, 2020

After a multi-month rally since the March low, many stock market investors remain optimistic.

Here are a sample of October headlines:

  • [Major bank] lays out 3 reasons why the stock market will continue to rise... (Business Insider, Oct. 11)
  • 'Get long' --... stocks higher no matter who wins election (CNBC, Oct. 12)
  • ... Study Reveals Retail Investors Remain Bullish... (businesswire.com, Oct. 14)
  • Big Money is Bullish... (Money & Markets, Oct. 21)

This continued financial optimism is not surprising. Indeed, it's to be expected at this juncture in the stock market's trend.

As the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, says:

The progression of mass emotions from pessimism to optimism and back again tends to follow a similar path each time around, producing similar circumstances at corresponding points in the wave structure.

And, right now, it appears the current mass emotion of optimism has progressed to an extreme.

Our Oct. 21 U.S. Short Term Update showed this chart and said:

opt-full

This week's Investors Intelligence Advisors' Survey has pushed to 59.2% bulls, just shy of the September 1-2 extreme. The red arrows on the chart show the four prior instances since September 2018 when the II survey was at a similar level or slightly higher.

The Investors Intelligence Advisors' Survey doesn't mean that the stock market will make a dramatic turn on a specific day in the near future. Market history repeats, but not exactly.

The best approach at this juncture is to keep a close eye on the market's unfolding wave structure.

Let's return to Elliott Wave Principle: Key to Market Behavior:

No matter what your convictions, it pays never to take your eyes off what is happening in the wave structure in real time. Ultimately, the market is the message, and a change in behavior can dictate a change in outlook. All one really needs to know at the time is whether to be long, short or out...

Subscribers have access to our current Elliott wave count of the stock market's price pattern -- as well as commentary on what this current wave count indicates is just ahead for the main indexes.

Follow the link below to get our latest Elliott wave analysis.

Why Bonds May Not Be Your Best Bet During the Next Financial Downturn

Many investors believe that bonds are a "safe haven" during a severe financial downturn.

Yet, read this quote from Robert Prechter's 2020 edition of Conquer the Crash:

If there is one bit of conventional wisdom that we hear repeatedly with respect to investing for a deflationary depression, it is that long-term bonds are the best possible investment. This assertion is wrong. Any bond issued by a borrower who cannot pay goes to zero in a depression. In the Great Depression, bonds of many companies, municipalities and foreign governments were crushed. Some became wallpaper as their issuers went bankrupt and defaulted.

Right now, Elliott Wave International's analysts are preparing subscribers for what will likely take most financial observers by surprise.

Think about it: How many financial observers anticipated the 2007 stock market top?

Or, consider recent history: How many market watchers anticipated the stock market volatility in early 2020?

Right -- almost everyone was caught off guard -- in both instances. Yet, the record shows that Elliott Wave International's publications kept subscribers ahead of these major financial turns.

Get ready for what Elliott wave analysis suggests is next for stocks, bonds, gold, silver, the U.S. dollar, the U.S. economy and more.

Your preparation begins by following the link below.

Stock Market: Why You Should Prepare for a Jump in Volatility

EWI's 25+ analysts regularly review 100+ market indicators to keep subscribers ahead of big price turns. Right now, one of these indicators -- well-known to most experienced market players -- is flashing a warning signal. Get the details now.

EXCLUSIVE

See Why 2021 Could be a “Monumental Year” in Financial History

What can you learn when you look at the stock market -- the Dow Jones Industrial Average, specifically -- going all the way back to 1788? A lot! For one, clear Fibonacci proportions begin to emerge between multi-decade historical periods. What's more, the same Fibonacci proportions also begin to point to the year 2021 as a very important moment in financial history.

The Nat Gas Bears Great Vanishing Act: Abracadabra or Elliott Waves?

In June 2020, it seemed the natural gas bear would stay for a while. Yet early July saw a turn from its long-term low. A four-month rally followed and prices more than doubled: See the forecast that got it right.