Hint: Look for Elliott wave price patterns
If you had a choice of investing in a profitable company or an unprofitable company, which would you choose?
Right away, the analytical part of your mind says, “… the profitable one, of course!”
Yet, during a mania, investors’ logic often goes out the window and a crowd mentality is dominant.
As our September Elliott Wave Financial Forecast notes:
The operative principle in a mania is that prices take over and become all that matters as the “act of pushing up prices [turns] people on.”
The publication provides an example as it continued with this commentary:
The complete domination of price over performance is shown on the left-hand chart of the Goldman Sachs Non-Profitable Tech Index. As the index surged to its peak in February 2021… We headlined the chart [at left] “Straight Up Losers” and stated that [this] reflects a peak of extraordinary proportions.” As the updated version of the chart shows, the index soon became a collection of straight down losers. From its 2021 peak, the index traced out a classic Elliott wave to November 2022, declining 78%.
Yes, profitless technology companies have managed to rally since that November 2022 low, but remain far below their early 2021 high.
This April 2023 Yahoo! Finance headline captured the renewed exuberance:
No Profit? Not a Problem With Proposed Tech ETF
As you may have guessed, the article was about an exchange-traded fund which focuses on non-profitable tech companies.
As the September Elliott Wave Financial Forecast also said:
By some measures, investors are even more turned on than they were at the market’s all-time highs.
Indeed, our October Elliott Wave Financial Forecast discusses a multi-year extreme in complacency toward the stock market as a whole. The issue also gives you Elliott wave analysis of the S&P 500 index on a daily chart and the Dow Industrials on a monthly chart which goes back to the peak of the technology bubble in 2000.
You owe it to yourself to review these two charts and familiarize yourself with the message they convey.
Get started now by following the link below.
The Stock Market is Now on the Cusp of a Major Transition
This is what Elliott wave analysis clearly suggests.
Even so… surveys reveal that many investors are not convinced. Indeed, complacency has been near historic extremes.
This is a financially dangerous mindset.
Get the details of our Elliott wave analysis so you can prepare for the remainder of 2023 — and 2024.
Just follow the link below.