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Here’s a Strong Indication That the Bear Market Has Legs

This is what investors look for at or near a stock market low

by Bob Stokes
Updated: January 18, 2023

Elliott Wave International's analysts have been observing financial markets for decades. They monitor dozens of stock market indicators, in addition to Elliott wave patterns.

No single indicator can tell the whole story of what's going on with the market, but sometimes, a single observation can carry a lot of weight.

One current observation is that many investors are still looking for reasons to be bullish, even though stocks have been in a downtrend for more than a year. In other words, they think the bear market is over.

For example, the view of a prominent market researcher is unequivocal, according to this Jan. 11 headline (Bloomberg):

Bull Market Is Back as Recession Worries Fade, [Market Research Firm Founder] Says

In Elliott Wave International's view, if recession concerns are dwindling, that's a reason to be on the lookout for a recession -- or, something worse.

But, setting aside whether a recession is pending or not, the point is the latching on to reasons why the bull market is back.

This Jan. 11 headline captures the view of a vice-chairman of a financial firm (CNBC):

The market is telling you that the economy's not going to be as bad as expected: Financial services firm

Of course, this is close to the same message as the first headline.

Other headlines mention lower inflation as a reason for rising stock prices.

But, let's get back to Elliott Wave International's observations over the years. Our Jan. 11 U.S. Short Term Update noted:

Investors are still searching for rationalizations to buy, which is a strong sign that [the] bear market has yet to run its course. People do not look for reasons to buy at or near a low, they look for rationalizations to sell.

Consider the last major bear market from 2007 to 2009. On Feb. 23, 2009, the "reason" stated for the continuation of the then bear market was "uncertainty about the latest potential U.S. government action to shore up beleaguered banks." As a headline said (Reuters):

Dow tumbles to 11-year low on fear about banks

Fears about a big drop in business in the technology sector was also mentioned as a catalyst for plummeting stock prices.

Well, 10 days after that headline published, the stock market bottomed.

Getting back to 2023, now is the time to think independently from the mainstream.

Tap into the insights that Elliott Wave International has gained from decades of market observations by following the link below.

Read This Quote from Our January Elliott Wave Financial Forecast:

"These four charts show the Dow Jones Industrial Average's wave structure at Supercycle degree from September 1929, Cycle degree from December 1974, Primary degree from March 2009 and Intermediate degree from March 2020."

Wow!

The message -- the clear and unequivocal message -- that these four charts are sending is sobering.

Review them for yourself so you can put current market action into context.

You can have these four charts -- plus the associated commentary -- on your screen in mere moments as you follow the link below.

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