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U.S. Stocks: “Big Guys” Follow “Little Guys”

by Editorial Staff
Updated: September 09, 2020

Lots has been said about the rally since March. But here are some stats you probably won't see any place else. Our Friday, Sept. 4 U.S. Short Term Update explains today's "amazing market dynamics."

There are some amazing market dynamics developing. Let's start with the Dow Jones Industrial Average. Last Friday, August 28, the Dow closed at 28,653.80, meeting EWT's target of 28,648 + or -- 9 points, first identified in December 2017 (see September 2020 issue). The index declined on Monday, August 31 and then rallied on Tuesday, September 1, closing at 28,645.60, again meeting the closing target range. On Wednesday, September 2, the index gapped higher at the open and rallied to 29,162.80 intraday and closed at 29,100.50. Wednesday's intraday extreme was just 11.2 points from EWT's highest target of 29,174 and less than 74 points based on the close. [Thursday], September 3, the Dow opened higher again, carrying to 29,199.30 in the first twenty minutes of trading. This push brought prices 25.3 points above the top target. That was all she wrote. The rout was on after that, as stocks fell hard throughout the remainder of the day.

The S&P 500 closed down 3.51% [Thursday]: It was only the third time in history the index declined more than 3% for the day, starting directly from an all-time high (thanks to for the stat). The NASDAQ, which had led the rally from March 23, led the decline, with a drop of 5.23% (NDX). Two of retail investors darling stocks, Tesla and Apple, were each down 9% and 8%, respectively. The two tech issues that were just added to the DJIA, Honeywell and, declined 3.6% and 7.1%, respectively. Exxon Mobil, which was just removed from the index, was down just 0.2%. The financial media reports that SoftBank, a Japanese conglomerate, spent approximately $4 billion buying call options tied to the underlying shares of most of the FAANG+ stocks. As we pointed out in [Friday's] (September 4) new issue of The Elliott Wave Financial Forecast, it appears the "big guys" are following the "little guys" in their unbridled optimism, betting heavily on a continued stock market rally. The market gods don't usually accommodate such extremes.

What is “market wisdom”?

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It’s quite another to pull critical insights from various studies, indicators and historical precedents, cut through the emotions of the moment – and see the big picture.

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