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The New York Stock Exchange Purchase Announcement Sends a Major Market Clue
A big market signal may be overlooked

By Bob Stokes
Wed, 13 Feb 2013 17:45:00 ET
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Every investor has dreamed of finding the Holy Grail of Markets -- a way to successfully anticipate the direction of stock prices. 

Alas, there's no such thing.
 
Yet there are market indicators which have stood the test of time. Many are technical indicators, some are seasonal and others are sentiment indicators.
 
Paul Montgomery's magazine cover indicator is a well-known measure of sentiment. He observed that by the time a financial trend reached the cover of a mainstream magazine, that trend was about over. (The February 13 Short Term Update includes a current example.)
 
Another is the world's tallest building indicator. In other words, the desire to build the world's tallest building usually comes at a time of peak market optimism. Yet another involves luxury spending, which is usually the most pronounced at market tops. Speaking of which, consider this headline:
 
What Recession? Americans Regain a Craving for Luxury
 
Wall Street Journal, Feb. 13
 
Yet, there's one sentiment indicator that most contrarian investors may overlook. And this one involves the New York Stock Exchange itself.
 
Buyers seem to reach for the brass ring of exchange ownership before large-degree stock market peaks. Back in March 1999, the Elliott Wave Theorist published a 120-year-long chart, which showed that an extreme in NYSE seat prices foreshadowed the stock market tops of 1906, 1929, 1968 and 1987. With that background, we were able to make two very useful market calls.
 
Back in August 1999, when the New York Stock Exchange announced a plan to go public, the Elliott Wave Financial Forecast identified the effort as a sure sign of an impending market-wide slide. ...
 
A few months later, the stock market cooperated with EWFF’s bearish forecast, and the NYSE cancelled its offering.
 
The rally that started in 2002 proved powerful enough to allow the NYSE to pass off ownership to the public. When the exchange came public in 2006, EWFF classified its stock sale as 'one of the most bearish imaginable signals.' NYSE corporation shares promptly peaked in November 2006 and crashed 87% to March 2009, declining alongside the DJIA, which fell 54%.
 
Here we are again. The signal is flashing a third time, as IntercontinentalExchange Inc., a 12-year-old industry upstart, announced on December 20 that it will buy the NYSE for $8.2 billion.
 
The Elliott Wave Financial Forecast, January 2013
 
EWI's Chief Market Analyst Steve Hochberg says the announced purchase is "a sign of peak optimism, which occurs near the end of long advancing phases in equities."
 
And talk about peak optimism, read this:
 
This Could Be Threshold of a Bull Market: [CEO of Goldman Sachs]
 
CNBC, Feb. 12
 
The time to protect your portfolio is before peak optimism turns to fear.
 

 

 



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