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Why This Forecasting Method Fits the Stock Market Like a Glove

As a "growing number" of investors are piling in the market, mass psychology matters more than ever

by Bob Stokes
Updated: March 21, 2019

Let me start off by saying that the just-published March Elliott Wave Theorist serves up its usual delicious dish of market analysis with a surprise dessert.

Readers also get a list of the long-time editor Robert Prechter's favorite market analysis books. He lists six, and here's how he began his description of one of them:

When I was at Yale, Professor Irving Janis became aware of my interest in mass psychology and asked if I would be interested in seeing a manuscript he was working on. I jumped at the chance and soon was reading Victims of Groupthink. I thought the book was terrific, especially since the topic of mass psychology had been woefully overlooked for decades.

Groupthink or mass psychology is what drives the markets. For example, people who trade the S&P 500 index and its component stocks are legion. The trading decisions they make are far from rational. We have shown many examples on these pages of how even professional money managers and traders get swept up into exuberant optimism near market tops and deep pessimism near bottoms. That's mass psychology on display.

Because Elliott waves are a direct reflection of the patterns of mass psychology, they work best with the stock indexes and other markets with large participation.

This leads us to why Elliott wave analysis is ideal for many of today's investors.

A March 8 Associated Press article notes:

As the bull market for U.S. stocks celebrates its 10th birthday, joining the party has never been cheaper or easier.

Investors can buy or sell stocks on their phone with the flick of a thumb, and... a growing number of them are investing passively with funds that track a benchmark such as the S& P 500 or Nasdaq 100 indexes.... [emphasis added]

Index funds have become the default way for many to invest.

The Elliott wave model is based on the observation that the stock market indexes move in fives waves in the direction of the main price trend, and this applies whether the trend is up or down. Further, countertrend moves occur in three waves.

Here is the basic Elliott wave design in both bull and bear markets:


Right now, our Elliott wave experts are pinpointing the market's current price juncture within one of the above cycles.

Moreover, our analysts are telling subscribers what they expect next for the S&P 500 index, the DJIA and the NASDAQ 100 index.

Learn how you can tap into their analysis and forecasts, risk-free for 30 days, by reading below.

Why 5-Minute Stock Market Charts Look Like Monthly Charts

Suppose you have three charts of the Dow Industrials on your desk: First is a five-minute chart that covers the past six hours. Second is weekly chart which includes the past six years. Third is a monthly chart that goes back six decades.

Yet, if the time lines were not on the charts, could you distinguish one from the others?

Probably not.


The same chart patterns repeat at all degrees of trend. This "sameness" makes the stock market probablistically predictable!

Find out what our Elliott wave experts are saying about the stock market's next big move.

Learn how to get started with our 30-day, risk-free trial, just below …

Elliott Wave International’s Financial Forecast Service

All month long, FFS shows you the patterns in U.S. stock indexes, bonds, gold, silver, the U.S. dollar, as well as market psychology and cultural trends. We show you where the trend is now, and when prices should turn -- specifically, we show the pattern at multiple degrees of trend, with precise risk/reward calculations. If you have fewer surprises, you can be better prepared.

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