A Chart That Only a Contrarian Could Love | Elliott Wave International

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A Chart That Only a Contrarian Could Love
Free fall territory

By Bob Stokes
Fri, 01 Jun 2012 17:15:00 ET

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Bear markets have an undeserved bad name.

But in truth, they're the necessary corrective for bullish excesses.

A market that always goes up would render the notion of price action meaningless. Of course, the idea is a fantasy. Just a glance at the market's centuries-long price pattern shows us that financial markets don't work that way.

The way it does work is in a sequence that includes three steps forward in the direction of the main trend, then two steps back. This pattern unfolds at all degrees of market trend.

Thus you can see the patterned rise and fall of prices in five-minute, hourly, daily, monthly, quarterly and yearly charts. Obviously, the trend on a five-minute chart covers less price territory than on a daily chart. And corrections on a five-minute chart come more frequently than do bearish moves on daily charts. Likewise with conspicuous downward market trends depicted on a daily vs. monthly chart.

At a particular time, the market reaches a juncture where a bear market can unfold for years or even decades.

Are we near such a juncture yet?

Well, let me show you a chart from the May 16, 2008 Elliott Wave Theorist:

Now, the Elliott wave pattern that unfolded since that chart was published has provided us with insights about the stock market's current juncture -- this time on a scale that's a full degree larger than what the chart above depicts.

With that in mind, Robert Prechter just produced another similarly formatted chart that extends back farther by almost four decades. It's an eye-opener yet it's just one of 25 charts in the new 21-page Elliott Wave Theorist.

Also in the recently-published double-issue Theorist, you'll find a sub-section titled A Fibonacci Time Relationship between the Bottom and Top Formations.

This section alone is a must read.

To most people, bear markets mean losing money. But you can stay financially strong and even prosper.

To help you achieve this, we present the NEW Financial Forecast. Published June 1, this brand new issue presents 12-charts with 10-pages and covers stocks, bonds, the U.S. dollar, gold, silver, commodities and more.

You also get instant access to the latest Elliott Wave Theorist -- a double issue that features charts that go back 2 months, 1 year, 3 years, 5 years, 12 years, 17 years, 25 years, 38 years and 80 years, covering the Dow, the S&P, the NASDAQ, and the CRB index of commodities.

Plus get near-term trend insights with the 3-days a week Short Term Update.

Read all three publications via our flagship Financial Forecast Service and discover why our analysis protected portfolios as the Dow Industrials gave back 2012 gains. Your risk-free 30-day trial can start in moments as you follow this link>>

June 6 UPDATE: A Special Report from Elliott Wave Theorist and Financial Forecast is now online>>

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See What We're Seeing

You'll get more insights, more useful charts and more timely analysis from EWI's Financial Forecast Service than any other financial publication.

Here's what you get with your risk-free 30 day trial:

1) Prechter's new, 21-page Elliott Wave Theorist

2) Near-term outlook via our Short Term Update

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Tags: Elliott wave, financial forecast, investor psychology, long-term trend, market forecasts, Robert Prechter, stock indexes, technical analysis, technical indicators

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The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.