by Editorial Staff
Updated: February 26, 2019
In 1929, economist Irving Fisher said:
Stocks have reached what looks like a permanently high plateau.
Three days later, the stock market took a dramatic dive, and the Great Depression eventually followed.
Fisher's statement became legendary, yet that wasn't the last time that a stock market observer made a bold prediction.
As Robert Prechter's Conquer the Crash noted when the book first published in 2002:
One thing that does happen repeatedly near a top in the stock market is that investors raise their upside forecasts dramatically. In 1999-2000... books came out calling for Dow 36,000, Dow 40,000 and Dow 100,000.
As we know, those predictions came just in time for the start of a bear market in 2000. But the bull market that followed rekindled the sentiment that stocks had nowhere to go but up.
In 2014, one news source noted a forecast that was made near the crest of the 2007 bull market peak:
Goldman Sachs chief strategist... set an uberbullish 1,675 price target for the S&P 500 for .
However, the stock market index ended 2008 at 903.25, which was a 37% drop and 46% below the strategist's target.
After the stock market bottomed in 2009, an even longer bull market followed, with the DJIA reaching an all-time high of 26,951.80 on Oct. 3, 2018.
Even though that was nearly five months ago, optimism has returned, despite a very volatile Q4 2018. Our January 17 Elliott Wave Theorist notes:
There was a brief bout of pessimism heading into the low of December 26, but it has completely reversed over the course of the market's... [January] rally.
Indeed, the return of financial optimism is expressed in this Jan. 2 Kiplinger's headline / subheadline:
When It Makes Sense to Buy the Dip
If nothing serious has gone wrong with the company, consider a stock decline a buying opportunity.
Four days later, a Jan. 6 New York Times article titled "Who Wants a Market Downturn? These Investors Actually Do," quoted a venture capitalist:
“We definitely want to take advantage of a market downturn.”
Other venture capitalists told The New York Times that they were hoping for a stock market dip so they could buy. The implication is clear: A downturn would be temporary and relatively shallow, certainly not severe, with a strong rebound to follow.
Two days later, on Jan. 8, a retiring financial reporter for a national newspaper wrote:
"The best thing you can do if market gyrations are causing you emotional pain is to turn off the TV, tune out the market pundits and take a break from keeping track of the Dow’s every move. The market, I have learned, is like a lasting friendship with ups and downs along the way.”
In a nutshell, "buy and hold."
A week later, on Jan. 15, this Bloomberg headline provided another expression of "investing for the long-term":
A $1.8 Trillion Investor Says U.S. Stock Rally Has Years to Run
So, one must ask: "Is the stock market reaching 'what looks like a permanently high plateau' again?"
Sentiment is not everything. The stock market's Elliott wave pattern, a more detailed snapshot of investor psychology, is also telling a compelling story -- right now.
Find out how you can tap into the insights of our Elliott wave experts, risk-free for 30 days.
"Buy the rumor, sell the news," goes an old Wall Street wisdom. And here's another reason not to join the bullish herd:
In December, as stocks were crashing, the same crowd also blamed the sell-off on the ongoing U.S.-China trade talks.
How can the same factor -- the results of which are still unknown -- cause stock to have both the worst December since 1931 and the best January since 1987?
We're with you: It can't. Something else fueled the December sell-off, and the recent rally. What?
Investor psychology. It's been in a bullish mode since the start of the year. How long will it last?
Nothing helps you track -- and forecast -- changes in investor psychology better than Elliott waves.
Today, right now, we can help you interpret what the waves are saying right now, risk-free.
Your Financial Forecast Service guides -- three of the best-known market analysts in the world:
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