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Stocks , Investing

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

It comes down to the “stair-stepping” pattern of investor psychology

by Bob Stokes
Updated: May 17, 2023

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.

Elliott Waves Reflect Man’s Progress

Across the millennia, the human journey has been onward and upward.

Even so, progress is punctuated by periods of regress... thus it's wise to prepare for those inevitable times.

Elliott wave analysis can help you with that preparation.

See what our analysts see for major U.S. financial markets, the banking sector and the economy as you follow the link below.

What the Luxury Sector Might Be Telling Us

Stock market rallies and a zealous pursuit of luxury go together. However, watch out when people begin to drastically cut back on pricey items. It could be a warning for stocks. Consider this shift in 2007.

Have You Seen This Chart About U.S. Job Openings?

Conventional wisdom today says the U.S. economy has too many jobs and too few workers. Now see the big-picture chart that stands the conventional "wisdom" on its head.


See the Action for Yourself: the Elliott Wave Pattern Unfolded as Forecast

Asian-Pacific Short Term Update subscribers were ready in April for the opportunities in May. See what we expect in major Asia markets in the month of June, and beyond.