Stocks: Is This the "Kiss of Death" for the Bull Market?
Stock market prices usually decline after this occurs
by Bob Stokes
Updated: September 09, 2021
Many market observers believe that the catalyst for the next bear market will be a piece of extraordinarily bad news.
However, Elliott Wave International has shown time and again that the stock market's price action is often "entirely detached from what most people assume are causal conditions."
Examples of stocks rising when the news is bad -- and falling when the news is good -- are so numerous that a library shelf of books would be inadequate to show a fair representation of them. For the most recent vivid example, just think back to March 2020, when the first wave of the pandemic hit and shuttered the entire global economy -- yet, stocks (around the world!) happily found a bottom and haven't looked back since.
No, the stock market is governed by the psychology and behavior of investors themselves.
One of the noteworthy behaviors is investors' use of margin debt.
Indeed, back in 1980, The Elliott Wave Theorist said:
[A] failure of margin debt to expand in an advancing market [can be] the 'kiss of death' to a bull trend.
With that in mind, consider this chart and commentary from the recently published September Elliott Wave Financial Forecast:
The arrows on the chart on the next page of the year-over-year change in New York Stock Exchange margin debt show that [The Theorist's] statement has been true at three major market tops over the last 24 years: at the market top in August 1987 ... the S&P's March 2000 top ... and at the October 2007 peak. As the latest arrow shows, a rapid expansion in margin debt has, once again, reversed trend.
Keep in mind that the stock market does not always decline after a year-over-year drop in margin debt. However, if the use of margin debt substantially falls just after reaching a record high, history does show that stock prices usually tumble thereafter.
That said, in June, margin debt reached a record high of $882 billion, which makes the July retreat of $37.7 billion especially significant.
The Elliott wave model pinpoints the patterns of investor psychology even more precisely.
As our September Financial Forecast said, the current unfolding Elliott wave of the Dow Industrials is "one for the ages."
Get the details by following the link below.
Dow Industrials: Supercycle -- Cycle -- Primary
Elliott wave practitioners know what Supercycle, Cycle and Primary mean.
If you are new to Elliott wave analysis, these three words represent big-picture degrees of trend in the stock market's chart pattern.
That means big price moves!
In the new September Elliott Wave Financial Forecast, you'll find a chart which shows the current Elliott wave degree of trend and says:
"... For the Ages"
The chart shows the Dow Industrials' price pattern from the 1970s through today. More than that, the commentary that goes with the chart references the Dow's price pattern since 1932.
Review the chart so you can prepare for what's likely ahead.
Your first step is to follow the link below.
Bitcoin and other cryptocurrencies are no strangers to volatile, sharp reversals. If you get caught up in one unprepared, it's not a good feeling. But watch our Crypto Trader's Classroom instructor show you how Elliott waves can help take the "surprise" out of crypto "surprises."
The euro vs. U.S. dollar is most-traded forex pair -- and lately, the euro has been losing, pushing EUR/USD lower and lower. At moments like that, many FX traders will try to catch the bottom. Watch our Currency Pro Service editor show you what Elliott wave evidence you need to do that with less risk.
A big shift appears to be taking place in the U.S. housing market. There are signs that the recent trend of skyrocketing prices is set to slow down -- even reverse. Learn why.