According to mainstream economic thought -- fundamentals are to financial markets what tire pressure is to a Tour de France bicycle racer. To wit: Inflated (i.e. positive) news makes it easier for a market to soar up those steep mountain hills (i.e. price charts). AND, deflated (i.e. negative) news makes prices fall behind and struggle to climb.
In reality, however, this is NOT true. Take the Crude Oil market, for example. Over the past week, the amount of air in certain "fundamental tires" hasn't changed a bit. YET, the performance of oil prices has been all over the map. On this, the following news items from the time ride the point home:
- "Crude Trades Lower After Jakarta Bomb Blasts... Investors have basically ignored these types of geopolitical pressure points." (Associated Press)-- VERSUS -- "Oil prices continue to be buoyed by... perhaps the political turmoil in Iran." (Wall Street Journal)
- "Gas prices drop as crude prices waffle... crude often correlates with prices at the pump." (Orlando Business Journal)-- VERSUS -- "Gas prices continue to drop as crude oil increases to two-week high."(Greenville News)
- "Oil prices climb above $63 amid economic hopes... after CIT Group Inc expected to announce emergency financing for bond holders." (WSJ)-- VERSUS --"Oil prices fell even as encouraging economic reports and word that CIT Group Inc. bondholders would keep the commercial lender out of bankruptcy..." (AP)
Any questions?
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Oil: The Long-Term Picture. In the new, July
Elliott Wave Theorist, Bob Prechter reveals how much "peak oil" potential there is in the energy market. Get the complete publication today.
Click HERE)
Truth be told, external factors do not create broad trends in financial markets. The internal measure of social mood -- which unfolds as Elliott wave patterns in a market's price charts -- does. It is the clarity and precision of these patterns that enabled Elliott Wave International's analysts to see the end to oil's long-time uptrend back in 2007.
At the time, crude was the "Contador" of the financial world. Energy prices were leading the asset pack to record-highs while the usual suspects called for an oil "super spike" to lift the market to $300/barrel.
EWI's president Robert Prechter, on the other hand, foresaw the air leaking out of crude's bullish tires. In the months leading up to the final $50 run-up in crude oil, Bob presented the following close-up of the energy in the October 2007 Elliott Wave Theorist and wrote:
"Today, oil is near the end of wave 5 (of (5)). Fifth waves in commodities are not easy to identify. Some times they are blowoffs, in which prices move upward vertically and then just fall as fast as they went up… The price of oil and the inflation that propelled it are reaching a historic peak."
When the wheels of change began to turn in earnest, Bob set the stage for energy's coming slide in the June 9, 2008 Elliott Wave Theorist. In his words:
"I am publishing this issue a bit early in order to alert you to an opportunity developing in the oil market. One of the greatest commodity tops of all time is due very soon.”
From its July 2008 peak, oil plunged 80% in value to a five-year low before turning back up in March 2009.
Now, in the just-published July 2009 Elliott Wave Theorist, Bob Prechter revisits the crude market to discuss the odds of "Peak Oil" becoming a reality. In this ground-breaking publication, Bob presents a stunning, Elliott Wave labeled picture of crude oil prices from 1859 - to - 2011 that perfectly complements our long-term outlook.