If It’s a Bear Market, Why Are Investors So Elated?

As you may know, the S&P 500 and Dow Industrials hit their all-time highs in early January 2022.

As an interesting factoid, as of May 12, it's been 340 trading days since the S&P 500 made that all-time high. That's the longest such stretch in over a decade and the 10th longest since 1950.

So, if we're in a bear market, why does the fervor for speculation seem to still be going strong?

Well, the answer is quite simple, as briefly explained by our May Elliott Wave Financial Forecast:

Second-wave retracements in big bear markets regenerate the sentiment that reigned at the preceding peak.

As you may know, a "second wave" is the first rally in a bear market after the initial leg down in wave 1. (With waves 3, 4 and 5 to follow.)

One sign of investor complacency is reflected in the CBOE Volatility Index, the so-called fear gauge. As recently as April 19, that index closed at 16.46, its lowest close since November 16, 2021. That was just three trading days before the NASDAQ's all-time closing high.

There are other signs, literally. As you can see, this billboard encourages motorists to day-trade stocks for "quick profits."

Of course, when stocks are relentlessly falling in price, and investors are racked with fear, you usually don't see such advertisements.

"Buying the dip" is another clue that investor complacency reigns:

• 'Buy the Dip': Why the Investing Strategy Is Making a Comeback (Money, April 27)
• Retail investors are buying the dip in financial stocks in unprecedented amounts (CNBC, March 17)

The question is: If we are in a bear market, can we expect the downtrend to resume with earnest sometime soon?

While Elliott wave analysis may not be able to pinpoint an exact week or month, we believe you can get a good idea of where we are in the trend.

It appears that a great many investors will be totally surprised.

Prepare now by reading our near-, intermediate- and long-term analysis as you follow the link below.