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See How the 2020 Stock Market Shows “1929-Type Action”

Recently, this particular indicator has been acting in a very telling manner

by Bob Stokes
Updated: September 10, 2020

A lot of hullabaloo has been made of the stock market returning to record-high territory.

An August 26 Marketwatch headline captured the sentiment:

Why the stock market's record-breaking rally has investors on the cusp of 'euphoria'

Yes, the S&P 500 had fully erased the 34% plunge that began in February and bottomed on March 23.

Yet, as you may know, the rally has been driven by just a handful of big names. This brings to mind that famous stock market year of 1929.

The September Elliott Wave Theorist explains with the aid of a chart and commentary:

AdvanceDeclineCrumbled

The advance-decline line topped early in the rise of the 1920s, then trended sideways through November 1928. Then it began to plummet. Yet the DJIA kept rising, on the strength of a few issues. Does that sound familiar? The Dow rose for nine full months while the a-d line crumbled. Then it topped on a spike and crashed.

The September Theorist goes on to discuss the parallel with the recent 2020 rally:

In recent days, the a-d figure has been negative even when one or more of the major averages has closed up on the day. This is 1929-type action. The a-d line, however, has not been in a steady state of multi-month decline. Must it replay the final months of the Roaring Twenties bull market before it reverses? One would think so... On the other hand, it has been nearly eight months since the secondary stock indexes topped out, and they are lagging the S&P and the NASDAQ indexes by a huge amount. Is that not the equivalent of a lagging a-d line? Some seven stocks account for huge percentages of the rises in the leading blue-chip averages.

The September Theorist published on August 31 and just three days later, this occurred (Forbes, Sept. 3):

Stock Market Sell-Off: Dow Plunges 800 Points, S&P 500 Falls 3.5%

The next day, the DJIA had another triple-digit slide.

Now, keep in mind that while there may be parallels between stock market tops, each one is different.

The important thing is to keep an eye on the stock market's Elliott wave pattern. That is the most reliable way of determining what's next for prices that we know of.

See our complete analysis now. There is still time to get a handle on what's going on -- and what's likely next.

Stay on Top of EWI's Near-Term Stock Market Analysis

The Sept. 4 U.S. Short Term Update said:

There are some amazing stock market dynamics developing.

What follows are extensive insights into the Dow Industrials, S&P 500 index and the NASDAQ.

This analysis will help you to properly position your portfolio for what our Chief Market Analyst Steven Hochberg anticipates next.

More than that, subscribers get actionable analysis and forecasts for bonds, the U.S. dollar, the euro, gold and silver.

The 3-days-a-week U.S. Short Term Update is part of EWI's flagship investor package -- which also includes two monthly publications: the venerable Elliott Wave Theorist (new, September issue online) and Elliott Wave Financial Forecast (new, September issue online).

Markets are at key junctures. Now is the time to read all three publications.

EXCLUSIVE

TSLA: Closing a Gap Tells You What's Next

On September 16, Tesla had finished up a significant selloff. The stock was moving up. The question was, "Where is it going from here? Up even more? Or is it about to sell off again?" Watch our Trader's Classroom editor show you the likely answer -- from watching gaps in real time.

Zillow Stock Opportunity: No Clear Fundamental Picture? No Problem

After a 4-year low in March, Zillow soared to all-time highs on September 25. See why so many mainstreams analysts missed the, versus what we said to Trader's Classroom subscribers.

EXCLUSIVE

Corporate Bonds: Market Leads, Fed Follows

Back in March, in the thick of the sell-off, the Fed pledged to buy corporate bonds, as a "last-resort" measure. Investment-grade debt rallied. But Elliott waves were one step ahead. Watch our Interest Rates Pro Service editor explain using LQD, a corporate bond ETF.