by Bob Stokes
Updated: June 19, 2018
An old Chinese saying goes, "Fool me once, shame on you. Fool me twice, shame on ME!"
Yet, the stock market has a way of fooling investors time and again, pulling them in near tops and pushing them away near bottoms."Buy low, sell high?" If only.
The stock market has been around a long time, so you'd think by now that investors would be wise to the market's tricks. But, no, they fall for them during every market cycle.
I could go back centuries and show you examples of how once-reluctant investors eventually capitulated to a rising trend, but there's a prime case-in-point from as recently as the start of 2018.
Take a look at this from the Financial Times:
Investors buy stocks in record numbers amid optimism over growth
More money flowed into global equity funds last week than ever before
What's interesting to note is that this headline and subheadline published on the very day of the DJIA's top of 26,617, which was January 26.
This brings us to the just-published June Elliott Wave Theorist. As you probably know, Elliott Wave International President Robert Prechter has written this monthly publication since 1979, and in this latest issue, he shares a personal story with the help of this chart:
Forty years ago, a brilliant and accomplished doctor asked me what I thought he should do with his portfolio of stocks. I looked at the purchase dates to find that he had bought all his shares in December 1968. December 2, 1968 was the day of the high in a B-wave advance in the DJIA. The average held near that level through December 13, when the Value Line Composite index ... made an all-time daily closing high that stood for decades. ... The arrow in the chart shows that timing. The ensuing bear market crushed prices for 1968's high-flying stocks.
Here's how the Wall Street classic book, Elliott Wave Principle, by Frost & Prechter, described B waves:
B waves are phonies. They are sucker plays, bull traps ... and are virtually always doomed to complete retracement by wave C.
You are strongly encouraged to learn how all of this is related to what is currently going on in the stock market. The new Elliott Wave Theorist explains it very clearly.
The DJIA may well be on the cusp of a major move -- call it "momentous."
Dear reader, this is no exaggeration.
"AFTERMATH" -- What does that word conjure for you?
Well, if financial history is any guide, most investors will be stunned in the AFTERMATH of this big DJIA move. Yet, for you, it can be different.
You can be prepared.
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