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How the Stock Market Loves to Trick Investors

“This is yet another record sentiment reading”

by Bob Stokes
Updated: October 08, 2021

There are times during a full market cycle when the direction of a major trend is obvious to observers, like the middle parts of uptrends and downtrends, when big price moves are repeatedly occurring.

That said, Mr. Market tricks investors more often than not.

As a classic Elliott Wave Financial Forecast noted:

The market fools most of the people most of the time...

Robert Prechter put in this way in his 2017 book, The Socionomic Theory of Finance:

Consensus regarding the future course of financial-market prices has an awesome power to become ossified in the wrong direction at markets' major turning points.

And the consensus among most investors this year has been to "go all in."

Look at this revealing chart from the September Elliott Wave Theorist with the commentary below:

MassiveMoneyFlows

[The chart] shows Bank of America's tally of the annual net inflows of money to equity funds around the globe. As a MarketWatch headline put it, "The $1 Trillion that has flowed into stocks in 2021 is bigger than the last 20 years combined." This is yet another record sentiment reading, again by multiples.

The voracious appetite for stocks has continued through the first half of September.

As a Sept. 17 Reuters headline put it:

"Monster reallocations" to stocks...

Is this the market being up to its usual trick of luring as many investors into stocks just before a major turn?

Well, as implied a moment ago, if you go back to any major top or bottom, you'll find that the majority were bullish at tops and bearish at bottoms.

These Elliott wave patterns of "crowd behavior" have repeated throughout financial history, and this repetition makes the next market turn predictable.

Learn what the Elliott wave model is saying now about the stock market as you follow the link below.

Buy, Sell, or Hold?

This is the question that active financial market participants face every trading day.

No investor wants to “miss out.” Hence, this comment from our new October Elliott Wave Financial Forecast:

At this point, investors’ commitments to equities continue to expand as they act upon the “buy-the-dip” mentality …

However, be aware that our Elliott wave analysis reveals major risk for investors who are positioned on the wrong side of trends.

Get timely insights into the price patterns of stocks, bonds, gold, silver, the U.S. dollar and more by following the link below.


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