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Here’s What Signaled the End of Stock Market’s Upward Trend

When the public fully commits to a trend… that trend is toast

by Bob Stokes
Updated: March 12, 2020

We look at more than 100 indicators when analyzing the stock market.

Well, just after the start of the new year, one of the things that jumped out to EWI's analysts was that the public was furiously jumping aboard the stock market's (then) uptrend.

Indeed, in the week of January 17, small trader call-buying jumped to 46%, the highest level since a reading of 47% during the weeks of October 12, 2007 and November 2, 2007. The October 2007 reading coincided with the beginning of a 54% decline in the Dow. The all-time high in small-trader call buying was 52% in March and April 2000, coincident with another historic stock market top.

Our February Elliott Wave Financial Forecast, which published on Feb. 7, mentioned the jump in small trader call buying and said:

The public generally commits most fully to a trend as it approaches its end.

Just five days later on Feb. 12, the DJIA hit its all-time high of 29,568.50.

Even so, a Feb. 21 headline noted (Bloomberg):

Mom and Pop Are On Epic Stock Buying Spree...

Our just-published March Elliott Wave Financial Forecast followed up with this chart and said:

MomPop

On March 2, the chief equity strategist at a Wall Street firm confirmed our observation [that the public generally commits most fully to a trend as it approaches its end], saying, "There is no denying the fact that in the month of February 2020, the public is back." In the wake of such a powerful sell-off, one might expect at least a dash of concern, but there is little trace of it. The "epic" nature of the little guys' involvement and the five-wave form of the commitment shown on the chart suggests very strongly that the bull market ended in February.

 

Of course, as you know, since our March Elliott Wave Financial Forecast published March 6,, even more historically wild stock market volatility has unfolded.

If, indeed, February did mark the end of the bull market that started in March 2009, how low could stocks go? Or is this a rare opportunity to "buy the really BIG dip"?

Get our latest outlook without any obligation for 30 days. Follow the link below to get started.

What’s Next for U.S. Stocks?

Well, on Feb. 7, our Elliott Wave Financial Forecast said:

The Great Bull Market has become so entrenched that pundits use words such as raging and relentless to describe it (CNBC, January 18). One pundit projected a January rise and then an accompanying rally through the remainder of the year based on historical precedent. With a late January swoon, however, the Dow Jones Industrial Average began the year with a down month. It is a small hint at what we view as strong potential for a bearish surprise in 2020.

Yes, the majority of stock market investors were totally surprised by the big eruption in stock market volatility that followed our Feb. 7 analysis.

Now, our analysts have more to say about what's next for stocks.

You can read their stock market forecast without risking a penny.

Learn how by following the link below.

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