As the calendar rolled from 2021 to 2022, Global Market Perspective warned that stocks and bonds were setting up for major declines. Our analysts based these forecasts on completed Elliott wave patterns, accompanied by record-setting extremes in investor sentiment.
Here’s what happened during 2022, as published in the January 2023 issue of Global Market Perspective.
Global stock and bond markets lost more than $30 trillion. This Bloomberg chart shows 20 years of data but, according to the Financial Times, the past 12 months were the worst ever for a combined portfolio of stocks and bonds with data going back to 1871. (FT, 12/29/22)
When R.N. Elliott discovered the Elliott Wave Principle almost 90 years ago, he noticed that markets unfold in waves. Today, his unique observations are applied world-wide.
From Elliott Wave Principle – Key to Market Behavior (read it free)
Motive waves subdivide into five waves and always move in the same direction as the trend of one larger degree. They are straightforward and relatively easy to recognize and interpret… Their structures are called “motive” because they powerfully impel the market.
Once the five waves are complete, you can expect the market to move against the larger trend. Let’s look at this BITO (Bitcoin ETF) example from our Flash Services:
Our EWAVES software (which powers Flash alerts) identified a completed five-wave move in Bitcoin and sent subscribers a recommendation on January 10, at 11:05 am to buy BITO at 10.94 with a stop placement at 10.52.
The recommendation was updated on 1/17 to adjust the stop position to 11.50.
BITO is sitting at 13.54 as I type.
Flash will continue to monitor the recommendation and update subscribers through to completion.
If you can count five completed waves on your price chart, that’s a good sign that opportunity lies straight ahead!
Questions, we get questions!
Q:I recently came across a chart where the labeling appears to show a Wave v that is longer than a Wave iii. I was under the understanding that the third Wave was always the longest? Would you please explain that rule?
A: Wave 3 can never be the shortest wave, but it does not have to be the longest. If wave 3 is shorter than wave 1, then wave 5 must be shorter than wave 3. Read Elliott Wave Principle – Key to Market Behavior to review the rules and guidelines. The entire book is free here.
Why are Crypto Exchanges Collapsing? And What’s Next?
News doesn’t move markets. Markets move the news. And markets aren’t random; they’re patterned. The Elliott Wave Principle describes that pattern.
Here’s a recent example of how Elliott waves helped prepare subscribers for the recent crypto exchange debacle. Here’s what our Elliott Wave Financial Forecast said in August 2022 …
In bull markets, financial exchanges are celebrated houses of commerce enjoying popular exaltation. In bear markets, they are necessary evils that need to be curtailed. This very dependable correlation is the reason we’ve tracked a dramatic turn in the valuation of crypto exchanges over the course of the last 15 months. In classic fashion, crypto exchanges bathed in celebrity associations at the final highs. Some attached their names to major sports venues such as the FTX Arena in Miami and the Crypto.com Arena in Los Angeles. The share price of each of those exchanges is down significantly in 2022. The chart on page 7 of the July issue shows declines of more than 90% in Voyager Digital and Coinbase Global from early 2021 when Elliott Wave Financial Forecast identified them as candidates for steep falls. These selloffs attest to the potential for further declines in crypto…
The Investor Psychology section of this month’s Elliott Wave Financial Forecast provides updated analysis on crypto exchanges. As one EWI employee put it, “The crypto section of FF is worth its weight in anything other than cryptos!!” And a long-time (decades) subscriber said: “Goddamighty, Steve and Pete have outdone themselves on the Investor Psychology section. Congrats to the guys.” Needless to say, you’ll want to read this excerpt.
“An extension is an elongated impulse with exaggerated subdivisions… In the stock market, the most commonly extended wave is wave 3.” – Section 1.6
Check out this EURJPY call from our Currency Pro Service analyst, Favio Poci, to see the power of third waves in action:
EURJPY: 8/25/2022 9:43 AM
Outlook: Possible end of a three-wave corrective pullback in wave ((ii)). Looking for bullish evidence in wave ((iii)).
And here’s what happened next:
Ready for Takeoff!
You’ve seen those moments on a chart when the price first swings wide, then less so, then even less… until — boom! — the market explodes higher or lower.
Well, you’ve probably just spotted an Elliott wave pattern called a “triangle.”
Elliott Wave Principle defines a triangle like this, “A triangle appears to reflect a balance of forces, causing a sideways movement that is usually associated with decreasing volume and volatility. The triangle pattern contains five overlapping waves that subdivide 3-3-3-3-3 and are labeled A-B-C-D-E.”
What follows a triangle is where the real opportunity lies. “Elliott used the word ‘thrust‘ in referring to this swift, short motive wave following a triangle.” – EWP
Here’s an example in Bitcoin:
A Wave Counting Shortcut
This wave counting tip comes straight from our 3x per week Short Term Update:
“One of the most useful shortcuts we learned quickly when we were first studying the details of the Wave Principle is to simply count the number of waves in a move to determine if it is an impulse or a correction. Impulse waves always subdivide as 5 waves, or (+4) 9 waves, or (+4) 13 waves. Corrective waves subdivide as 3 waves, or (+4) 7 waves, or (+4) 11 waves, unless it is a sideways triangle. It’s a quick way to peruse many charts without having to spend time delving into the variants of the subwaves to determine which of the waves is the extended one.”
“The 90-minute range chart of the [S&P 500] shows how it is applied.”
Short Term Update gives you forecasts for U.S. stock indexes, as well as global indexes, bonds, precious metals, the U.S. dollar and the economy. Learn more.
“Third waves are wonders to behold. They are strong and broad.
“They usually generate the greatest volume and price movement and are most often the extended wave in a series.”
— Elliott Wave Principle, Frost and Prechter, p. 78
Our new, August Global Market Perspective identifies 33+ potential 3rd-wave setups — across multiple global sectors. They are either just starting or are about to.
Here’s a 3rd wave setup from the new issue in Japan 10-Year Bond Yields:
Earlier today, one of EWI’s analysts sent this seemingly enigmatic phrase to two other EWI analysts. But it’s not enigmatic at all, it very specifically indicated that the market was about to reverse. (Said market promptly dropped over 1.5% in the next couple hours.) That’s great if you get the lingo. If you don’t, but you’re ready to be one of the cool kids, here’s a resource you should check out – and it’s free! Elliott Wave Principle >>
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