by Bob Stokes
Updated: September 28, 2018
When you watch financial TV, you usually see commentators talk about all the "fundamental" reasons a financial market will go up or down.
Problem is, what they are discussing are factors from the past. The GDP numbers, unemployment trends, etc. etc. -- all that tells you is what happened last month, last quarter, last year. Pundits usually simply extend those trends forward and base their opinions about future market trends on those extrapolations.
You can see the problem with this approach: It inevitably puts you behind the market trends that are happening right now. As our Chief Market Analyst, Steve Hochberg, likes to say, "It's like driving a car by looking in the rear-view mirror."
That's why we here at Elliott Wave International prefer to observe the market itself -- as it is today, not as it was yesterday.
Let me show you how this benefitted Elliott Wave Theorist subscribers back in January 2008, shortly before the worst period in the financial crisis, with this chart and commentary:
Just look at this 25-year trendline, which just burst like an Army Corps levee. This line has four touch points, meaning that the market, not we, drew it. And the market just left it behind.
This is news, but you won't read it in the paper.
After that analysis published, the DJIA went on to surrender another 46% before bottoming on March 9, 2009. The DJIA was already 8% lower from its Oct. 9, 2007 high and the trendline break confirmed that there was much more to go.
Clearly, the "news" about the trendline mattered.
By contrast, here was the headline and subheadline in a major financial publication just a month earlier (Barron's, Dec. 17, 2007):
A Bullish Call
Wall Street's seers forecast more gains for stocks next year.
A week after that was published in Barron's, The New York Times had this headline (Dec. 23, 2007):
How to Avoid Recession? Let the Fed Work
In other words, these publications were saying factors outside of the market would "cause" the stock market to bounce back and the economy to stay strong.
But, we know that neither one happened.
Today, the financial media continues to attribute stock market movements to outside forces:
There are many more similar headlines.
The point is: The market is not governed by outside forces. It's driven by investor psychology, which our decades of research reveal is predictable -- if you know where to look.
Now is the time to learn what the market itself is saying.