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8 Indicators in 1: Here's the Message of the Panic/Euphoria Model

Prior model extremes occurred in March 2000 and October 2007

by Bob Stokes
Updated: April 08, 2021

Elliott Wave International has been providing market analysis for more than four decades – which includes many bull/bear market cycles.

That said, the public’s current market mindset – especially among inexperienced investors -- is a reminder of the extremes surrounding the 2000 market top, and a few others.

For example, a February 27 MarketWatch headline said:

A new wave of fearless retail investors is ready to pour $170 billion into stocks …

Also, according to an early February Deutsche Bank survey of online brokerage users, 61% are under 34 years of age and 45% are in their first year of investing.

As Barron’s reports (Feb. 25):

Younger, Savvier Investors Are Making Up a New Movement

So, all in all, there’s no shortage of financial optimism.

Indeed, our March Elliott Wave Financial Forecast showed this chart and said:

Bulls - Altogether Now

This chart shows SentimenTrader.com’s version of the Panic/Euphoria Model, which is an amalgamation of eight indicators that range from New York Stock Exchange short interest to individual and advisory sentiment surveys and retail gas prices. Prior model extremes occurred at 1.413 on March 24, 2000, the day of the top in the S&P 500 that led to a 51% decline, and 1.337 on October 12, 2007, one day after the S&P 500 peaked and started a 58% decline. The other two extremes were 1.427 on January 7, 2011 and 1.444 on April 8, 2011, neither of which mattered immediately to stock prices, but the S&P soon declined 22% from May 2, 2011 to October 4, 2011. On February 12, 2021, one trading day before the high in the NASDAQ indexes, euphoria clearly got the best of the investment public as the model shot to a new record at 1.613.

It's important to know that this extreme in optimism ties in perfectly with what the Elliott wave model is conveying right now.

If you’d like to know what our Elliott wave analysis is revealing about the stock market’s next big move, take the first step by following the link below.

The MAGNITUDE of the Market's Next Move May Catch Most Investors by Surprise

Frost & Prechter's Wall Street classic, Elliott Wave Principle, says:

Most important, the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress. Living in harmony with those trends can make the difference between success and failure in financial affairs.

Many investors extrapolate today's financial trend into the future. So, when trends change (as they always do), these investors are caught off guard.

Portfolios are crushed or opportunities are missed.

You can be the exception.

Follow the link below to learn how you can access our Elliott wave analysis -- which helps you to anticipate major market changes.

EXCLUSIVE

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Scotland's independence is again a hot topic in Britain, with many observers saying that a break-up of the union would be bad for the country's financial markets. For a different look at causality -- i.e., chicken vs. the egg -- watch our Head of Global Strategy show you the current Elliott wave setup in EURGBP and FTSE.

Stocks vs. U.S. Births: Is There Really a Connection?

In a word, yes. A couple of decades ago, Robert Prechter plotted the number of annual births on a stock market chart and noticed a remarkable correlation. Except, it's not for the reasons you may think... Watch the Socionomics Institute's Director Matt Lampert and EWI's Robert Folsom dive into details.

How This Global Financial Player Became “Primed” for a 90% Plunge

"How The Mighty Have Fallen." That's the title of one of our revealing charts inside our just-published May Global Market Perspective. Take a look at a "triple top" in the price pattern of this global financial institution -- and the 90% decline which followed.