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'How Can You Be Bearish When the Economy is Improving?'
EWI Message Board Editor Vadim Pokhlebkin reports that he is getting a lot of questions from readers who want to know how we “can be bearish when the economy is improving. Most are from new subscribers – and, clearly, they are confused,” Vadim writes.
If you were with us on April 2, you have this depiction of what sentiment would be like at the end of wave 2 before it happened:
"Be prepared: In its final weeks, the advance will re-ignite some of the zaniness of 1999 and 2007, although the speculation may feature some decidedly depressionistic undertones. We can envision, for instance, public offerings comprising disabled banks’ 'toxic assets.' By the end of wave 2, many market followers and economists will proclaim that the bear market is dead and the boom is back."
The Elliott Wave Theorist added:
"Wave 2 should regenerate substantial feelings of optimism. At its peak, the Fed will appear to have saved the banking system, and investors will be convinced that the bear market is behind us."
– April 18, 2009, The Elliott Wave Theorist
The Zaniness of 1999 and 2007 is Back
The story you are reading is adapted from Steve Hochberg's and Pete Kendall's just-published, August 2009
Elliott Wave Financial Forecast. Read their entire investor sentiment section, along with critical updates for U.S. stocks, bonds, precious metals and more, in the full issue.
Learn more here.
The general tone and many of specifics are now in place. In fact, things are back so far from the brink that the Federal Reserve Board chairman felt comfortable making a headline-producing claim: “We Saved the World from Disaster.”
Despite The Theorist’s recommendation to Bernanke that he resign now to save his reputation, he embraced the ringing endorsement from the President and accepted another four-year term.
As the second (Theorist) quote above illustrates, this is perfect accord with our forecast. Those of us who understand socionomics recognize that it is axiomatic that the Chairman of the Federal Reserve will be hated at market lows and loved at market highs. We also take comfort in the folderol about an improving economy. A 30-year veteran subscriber submitted the following headlines:
Bernanke: Global Economy Reviving; Downturn Could Have Been Far Worse
– Aug. 21, 2009
Conference Board Calls Recession Bottom
– Aug. 20, 2009
S&P Reclaims 1,000 Level
– Aug. 20, 2009
He asks: “Can you think of a better group of headlines for this rally to end on?”
We cannot, as these are just a small sample of the confident proclamations.
The door to the last, great selling opportunity is wide open at the moment. But it must be close to slamming shut because the headlines now anticipate higher levels just as adamantly as they saw no bottom in sight last February-March. The headlines on our daily S&P chart (above) show the critical psychological transformation, from a fear that the economy was “the worst since the Great Depression” to widespread assurances now that the “coast is clear.”
The Zaniness of 1999 and 2007 is Back
The story you are reading is adapted from Steve Hochberg's and Pete Kendall's just-published, August 2009
Elliott Wave Financial Forecast. Read their entire investor sentiment section, along with critical updates for U.S. stocks, bonds, precious metals and more, in the full issue.
Learn more here.