Stocks: Here’s What a Key Indicator is Telling Us

“The lack of ‘belief’ in the advance leaves the market vulnerable to…”

Many investors remain highly bullish on the stock market.

This recent magazine cover pretty much sums it up:


Since this “Feeling bullish” cover published on June 30, we’ve had these headlines:

  • Investors are the most bullish on stocks since before the 2022 bear market, says Vanguard (Marketwatch, July 19)
  • A Big Bear Turns Bullish. It Shows the Stock Market’s Might. (Barron’s, Aug. 2)

These are just a couple of sample headlines. As you might imagine, there are others which express a similar sentiment. Plus, Elliott Wave International’s publications have shown subscribers indicators which show that many investors are more enthusiastic about the stock market than they were at the January 2022 top.

This is not surprising because the first big rally in a bear market often retraces so much of the first leg down that many investors are convinced that the bull market is back to stay. And, indeed, the uptrend in the Dow Industrials since October 2022 has retraced a significant portion of the initial downturn.

However, here’s a key reason why those who are bullish may soon be dismayed. This is from our July 31 U.S. Short Term Update:

A series of lower highs in 10-day NYSE cumulative advancing volume during [the stock market rally] reveals a decreasing lack of commitment to the market’s advance… The lack of “belief” in the advance… leaves the market vulnerable to a selloff.

As you probably know, expanding volume is generally associated with bull markets, not volume which is decreasing.

Yet, this is by no means the only warning sign for stock market bulls.

The stock market’s price pattern is also something worth watching.

Learn how you can get our latest Elliott wave analysis of the U.S. stock market by following the link below.

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The Elliott Wave Financial Forecast covers major U.S. financial markets, to help you prepare for what’s next for U.S. stocks, bonds, gold, silver, the U.S. dollar and more.

We just published the July issue: Here’s how our silver commentary begins:

Silver declined relentlessly from a peak just under $50 on April 25, 2011 to $11.62 on March 18, 2020, a 77% decline in nine years. Prices then rallied sharply for five months, jumping 157% to $29.89 on August 7, 2020. That peak has been followed by a series of lower lows and lower highs, all contained by the… “

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