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Stocks , Investing

Here’s a Potential Signal for What May Be Next for U.S. Stocks

This action by investors resulted in “the highest total since 2014, and probably ever”

by Bob Stokes
Updated: September 01, 2022

Frost & Prechter's Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, first published nearly 45 years ago and said:

"Eight years of a raging bear market have taught today's investor to be cautious, conservative and cynical. Defensiveness is not in evidence at tops."

Considering this description of investors' mindset in the late '70s and early '80s, many market observers were not contemplating the start of a big bull market.

Yet, Elliott Wave Principle did forecast a major uptrend and that's what happened.

Bull markets are generally born after investor sentiment has reached a negative extreme.

Here in the late summer of 2022, there's the opposite mindset. Instead of playing "defense," investors are aggressively on the offense -- and in at least one sector -- by a record degree.

Consider this chart and commentary from our August Elliott Wave Financial Forecast:


The depth of the dip-buying zeal is evident by a late-July retail surge into technology stocks. Investors pushed about $580 million into a basket of tech stocks, the highest total since at least 2014, and probably ever. "I'm extremely bullish tech stocks," one 27-year old investor told The Wall Street Journal. The FAANG stocks--Facebook (Meta), Apple, Amazon, Netflix and Google (Alphabet)--and various ancillary issues are once again the big favorites.

Some professional investors are also gung-ho on tech stocks (CNBC, August 28):

[Famous Market Pundit]: I will not abandon tech stocks because the end of their downturn is near

This well-known stock picker might be right. Yet, keep in mind that stocks which lead on the way up tend to lead on the way down.

Also keep in mind that stocks in the technology sector are not the only focus of investors. According to a poll by deVere Group, a Zurich-based asset management firm, "56% of Investors Plan to Buy More Stock Before 2022 Ends."

And here's another CNBC headline (August 26):

S&P will be at 4,400 by year end, says "chief equity strategist"

In other words, the complete lack of "defensiveness" is likely a signal that stocks are not set to kick off another major uptrend.

The stock market's Elliott wave pattern can help you gain more insight into what to expect next for the main indexes.

See what our analysts see by following the link below.

Here’s What the Latest Elliott Wave Theorist Says:

"Investors are still heavily margined, cash levels in mutual funds remain historically low, price/earnings and price/book value ratios remain historically high, and stock investment among the population remains at its all-time broadest. At the June low, there was little evidence of panic, and no indication of a generational realignment of investors' attitudes."

The Theorist also shows charts of the S&P 500's Elliott wave pattern -- which speak loudly and clearly for themselves.

Do yourself a big favor and review these charts along with the commentary.

The Elliott Wave Theorist is part of our flagship Financial Forecast Service, which also includes the monthly Elliott Wave Financial Forecast (coverage of major U.S. financial markets) and the thrice weekly U.S. Short Term Update (near-term forecasts for key U.S. financial markets).

Follow the link below to get our forecasts for U.S. stocks, bonds, gold, silver, the U.S. dollar and much more.

Financial Forecast Service


All month long, Financial Forecast Service helps you stay ahead of the waves in the U.S. markets on the timeframes that matter the most. FFS covers the stock indexes, bonds, gold, silver, the U.S. dollar, as well as market psychology and cultural trends. It is our most popular service.

Comprises the monthly Elliott Wave Financial Forecast, 3x-per-week Short Term Update and at least 12x-per-year Elliott Wave Theorist.

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