EWI Insight
By Elliott Wave International
EWI InsightFeb 11, 2020
Put 3 Experts in Your Corner
Hello, Elliott wavers, and welcome to the final episode of EWI Insight.
When we launched the podcast on January 21, the Dow was trading above 29,000. Yesterday it closed below 20,000. Oil fell to an 18-year low. Gold, silver and the cryptos have gotten shellacked. It has been quite a ride, and it's been a privilege to take that ride with you.
Now, we don't want to leave you hanging. We know in these times, you are going to want an expert in your corner to help you navigate the turbulence in the markets. And the best way I know to do that is to subscribe to the Elliott Wave Financial Forecast Service. Robert Prechter, Steven Hochberg and Peter Kendall are going to do their best to keep you updated on risks and opportunities in the markets, and give you a shot to see around the corner so that you know what's likely to come next. If you want to learn more about that service, you can click the link in the show notes or visit elliottwave.com/insight. https://bit.ly/3baqM1w
Bear Market Business Opportunities
Let's talk about business opportunities in a bear market. Bear markets, recessions and depressions test the resolve of most businesses and business owners, but they also present a unique set of tangible and psychological needs that astute entrepreneurs can satisfy.
Could your business or career use some help game-planning for the bear market? Check out our webinar, "Your Best Bear Market Business Opportunities." Learn how to watch when you click the link in the show notes or visit elliottwave.com/insight. https://bit.ly/2IWMKsR
Impotent Directors
The Fed makes a second emergency rate cut and the market just doesn't care. First, let's get this out of the way. The Fed didn't act. It reacted. The yield on 3-month Treasuries had been falling fast, and the Fed was trying to keep up.
The Fed can't help you. Elliott waves can. Get 3 Elliott Wave pros in your corner, helping you understand -- and anticipate -- the stock market's moves. Subscribe to the Financial Forecast Service when you click the link in the show notes or visit elliottwave.com/insight. https://bit.ly/2Qn2hGp
Crisis Hedges
A lot of people think gold, silver and, more recently, cryptocurrency are so-called "crisis hedges," assets you can own that supposedly will do well if there were to be an economic or financial crisis. Well, stocks, gold, silver and the cryptos have gotten shellacked recently. So, what's going on?
Robert Prechter observes that at some periods in history gold has been money. But when it isn't, then the claim that gold is a crisis hedge fails. Which brings us to the real crisis hedge during deflation: cash.
The Financial Forecast Service alerted readers to the moves down in stocks and precious metals before they happened. See our latest forecasts when you subscribe. Click the link in the show notes or visit elliottwave.com/insight for details. https://bit.ly/2WoyG38
Uncharted Territory
The rout continues. And you may have started to see the new buzz phrase in the financial media, and that is that the stock market is in so-called "uncharted territory." What a crock.
The Elliott Wave Theorist literally charted the path of the market's decline before it happened. See the charts that plot the stock market's most probable course when you subscribe to the Elliott Wave Financial Forecast Service. Learn more when you click the link in the show notes or visit elliottwave.com/insight. https://bit.ly/2QaQkDC
Free Forecast
There's so much confusion out there. People want to know what's going on in the stock market. And we want to help. So, we decided to make the entire U.S. stocks section from the latest issue of The Elliott Wave Financial Forecast, free to ClubEWI members.
The Financial Forecast is our flagship publication. If you want to understand why the stock market is so volatile and what's likely to happen next, check it out. It's available now, the U.S. stocks section of The Elliott Wave Financial Forecast, totally free. Just click the link in the show notes or head on over to elliottwave.com/insight. https://bit.ly/3aTndN1
Oil
The oil market has seen some huge moves. A 30% dive Sunday night. But what's happened in oil this year is so much bigger than that. In January, oil was $64 a barrel. It hit $27.34 intraday on Monday, so we're talking about a 57% fall in just two months. Now, a lot of folks are speculating about what this move means for stocks.
The truth is, the correlation between stocks and oil swings willy nilly from positive to negative throughout history. Pundits will try to use one market to predict the other, but the reality is there's no reliable relationship between the two at all. To understand each market, you have to look at each market's Elliott waves.
Discover how Elliott waves can help you catch moves in the oil market when you watch a special video from EWI's chief energy analyst, Steve Craig, available to ClubEWI members. Join for free when you click the link in the show notes or visit elliottwave.com/insight. https://bit.ly/2Q5H83k
U.S. Stocks
What a day we had yesterday. Circuit breakers triggered on the NYSE, oil plunges, rates down, global stocks down. If you were not ready for these moves, your pulse is probably through the roof. But that's the difference between Elliotticians and everyone else. When everyone else is panicked, we usually find ourselves feeling calm and prepared.
Readers of The Financial Forecast were prepared for the global selloff. You can join them when you click the link in the show notes or visit elliottwave.com/insight. https://bit.ly/39ERXBb
Mainstream's Mess of Explanations
One of the themes we hit on EWI Insight is that the reasons the media gives you for the markets' moves aren't explanations at all but merely rationalizations. That truth gets laid bare in volatile markets. They never know what's going on, because they're always looking for causes outside the market to explain the market's movements. But financial markets are not regulated by outside causes. They're regulated by internal dynamics.
Want clear, consistent market analysis that empowers you to surf the market's waves with confidence? Read the just-published issue of the Elliott Wave Financial Forecast. https://bit.ly/3cM01Cb
Volatility
A hundred S&P points here, a hundred S&P points there. These are some wild times in the markets. And describing the markets as "volatile" doesn't really do them justice. So if you're riding these waves, I hope you have your Superman cape on, because you're going to need nerves of steel.
Do you have nerves of steel? EWI's intraday stocks Pro Service and new Extended Hours S&P and Nasdaq e-minis Pro Service can help you see the markets' waves. https://bit.ly/2TP27ZE
Afghanistan
The U.S. invaded Afghanistan in October 2001, one of the manifestations of the same negative social mood trend that burst the dot-com bubble. More than 16,000 Dow points later, the U.S. decided to give peace a chance last week, a poetic bookend to the bull market in American equities.
Yet the social mood scenario in Afghanistan differs starkly from that of the U.S. If the bear continues to roar, Afghanistan and the Gulf region will likely remain a hotbed for conflict and unrest. If you know where stocks are headed, you'll also know the most probable paths for politics, pop culture and social trends. Let EWI's Global Forecast Service show you what the markets' waves reveal. https://bit.ly/333h7Hz
Emergency Rate Cut
Let's talk about the Fed's so-called emergency rate cut yesterday. We're being told that this is a revolutionary, proactive move that puts the Fed at the vanguard of central bank policymaking. But that could hardly be further from the truth.
If the Fed can't control markets, then what can? EWI's Financial Forecast Service helps you stay ahead of moves in U.S. markets. A new Short-Term Update publishes after today's close. Learn how to get it. https://bit.ly/2wpkcFB
Buy and Hold
We had a bit of a respite from the global selloff yesterday. Equities rebounded, which makes it a good time to talk about some articles we're starting to see in the media. We see these articles whenever the market heads lower for a while. And basically, journalists quote financial advisors who explain how they've helped their clients calm down during the decline, and how they've encouraged them to stay invested in the market.
Get the context you need to navigate the market's waves with EWI's Global Forecast Service. https://bit.ly/3cnYgLz
Deflation
With the global selloff, deflation has popped back into the news. You may have seen stories about it the past couple weeks in the New York Times, the Telegraph, Barron's -- to name a few. Deflation is a topic that confuses people. There's a lot of misconceptions about it. So let's take a moment today to talk about what deflation is -- and what it is not.
Believe it or not, you can survive and even prosper in a deflationary environment, as long as you're ready for it. You can get EWI's free report, "What You Need to Know Now About Protecting Yourself from Deflation," when you click the link in the show notes or visit elliottwave.com/insight.
Halt
Did you hear what happened on the TSX? Trading halted at the Toronto Stock Exchange a little after 2 Eastern yesterday due to what's being described as "a problem with order entry." The outage affected the main exchange, the Venture Exchange, the alternative Alpha Exchange and even Montreal's derivatives exchange. So just consider what it would be like for someone who is long in this situation.
Selloffs are more than falling prices. They represent a change in psychology. Global selloff got you worried? EWI's Global Forecast Service can help. https://bit.ly/2PxnoWe
Disney
The House of Mouse has a new leader. Bob Iger is out as Disney’s CEO. He’d held the position since 2005. During his tenure, he grew Disney’s empire with acquisitions of Pixar, Marvel, Lucasfilm and 21stCentury Fox. He expanded the company’s theme parks, opened Shanghai Disney in 2016, launched Disney+ last year. He oversaw mega successful live-action remakes of Disney’s animated classics, re-started the Star Wars franchise, brought new hits to the screen like Frozen, Moana, Frozen II and the Marvel movies. And to top it all off, last year Disney had the biggest year of any studio in box office history, and the company’s stock price registered its all-time high. Suffice to say, it’s been a busy time for Iger and Disney.
China
Pop quiz. Can you think of a major equity index that's above its January high? There's only one: the Shenzhen Composite Index in China, a country at the epicenter of the disease outbreak that we're told is responsible for sending global markets lower. Raises an eyebrow, doesn't it?
Global selloff got you worried? EWI's Global Forecast Service can help. Subscribe now and get instant access to the webinar, "Coronavirus: Opportunities in the Chaos." https://bit.ly/380GgDm
Global Stocks
Have you hit the panic button yet? Selloff in global equities yesterday. And what's behind the selloff? From the perspective of the Elliott wave model, action in global equities both prior to and during yesterday's selloff was entirely normal. EWI's Global Forecast Service gives you clear and actionable forecasts for the world's major financial markets. https://bit.ly/2Tepvzh
Ethereum
The crypto markets still have some drama left in the tank. When you hear about a market making a double top or double bottom, check in on the wave count because you might find a big opportunity that folks who don't know waves will surely miss. It's not too late to join EWI's Crypto Opportunity Month. https://bit.ly/2HPe7od
U.S. Stocks
In less than 45 minutes, the Dow dove 400 points off the day's high, throwing the financial media into a frenzy. They went looking for causes, and there were none to be found. EWI's Financial Forecast Service gives you the context you need to make sense of the market's moves. A new Short-Term Update publishes after today's close. https://bit.ly/38ZAanW
Gold Sentiment
Let's talk sentiment in the gold market. There's been a lot of excitement surrounding gold lately. And when a technical analyst detects a tide of enthusiasm in a market, it gives you pause. Does the enthusiasm signal that we're getting toward the end of a bear market rally, or does it indicate that a new bull market has begun? EWI's latest Global Market Perspective clarifies the current juncture. https://bit.ly/2vTbHSA
Elections
Back in 2016, there were editorials aplenty about how a Donald Trump win would be terrible for the stock market. When you look at all the history and adjust for outliers, the stock market has done about the same under Democrat and Republican presidents on average.
For market analysis based on what matters--instead of what doesn't--check out our Global Market Perspective. https://bit.ly/3bQts5A
Deflation
Are the stocks of small companies likely to provide shelter from deflation? As The Elliott Wave Financial Forecast observed all the way back in the December 2009 issue, small firms "are also less well capitalized and thus susceptible to price wars, spiraling asset devaluations and tighter credit conditions." Want to know how to protect yourself from deflation? https://bit.ly/3bGJzme
Epidemics
Conventional wisdom says epidemics should make the stock market go down, but we looked at more than 150 years of history and found that epidemics are most likely to occur toward major lows in the stock market or shortly thereafter.
What does the coronavirus outbreak signal about the current juncture in China's stock market? Find out in EWI's new webinar, "Coronavirus: Opportunities in the Chaos," free for our GMP subscribers. Find out more about Global Market Perspective. https://bit.ly/39wbxzl
Cash
Cash is trash. That's the message from the founder of one of the world's largest hedge funds, who says essentially that speculators should be all-in, invested in a diversified mix of stocks, stocks and more stocks. When you hear the masses trashing cash, check your stock index charts. You might be surprised at just how often you find a wave pattern nearing completion. Is cash really trash? Get EWI's latest forecasts for global markets. https://bit.ly/3bzbTa1
Pot Stocks
Pot stocks have gone up in smoke. You may have seen articles in the news about how some pot companies have something like just months of capital left. You might think, "Markets are near record highs. Shouldn't this be a time for pot stocks to enjoy a blaze of glory?" Some research in the July 2009 issue of The Socionomist offers some insights. Watch the webinar, "20 Trends You Can Anticipate in 2020." https://bit.ly/2utNZwd
Parasite
Spoiler alert. The Oscar for Best Picture went to Parasite. If you know its director’s reputation, then you know that his movies are famous for sudden shifts in mood. You think he’s telling you one kind of story, headed down one path, and then, boom, it turns out he’s going in a totally different direction. That’s something you can pull off if you are a master storyteller.
Likewise, the financial markets are master storytellers that throw dramatic, surprising mood shifts at their audiences all the time. That’s what you can get in the markets when you use socionomics and the Elliott Wave Principle. Are you ready for your close-up? Learn the basics of the Wave Principle with the free Elliott Wave Crash Course. https://bit.ly/2Hdof9V
Coronavirus
The coronavirus narrative is still kicking in the financial press. Look, we’re used to the media pointing to any news item at all to explain moves in financial markets, but I don’t know if I’ve ever seen a single event used to explain literally any move—up, down or sideways—in any market on the planet.
Want to know what’s really moving in the markets? Hint: It’s not the coronavirus. https://bit.ly/2tPdbgg
Middle East
Alright, check your politics at the door. We’re talking about a pair of Middle Eastern markets today: the Palestine Stock Exchange Al Quds Index and Israel’s Tel Aviv 125. Now the trends in these two indexes could hardly be more different. Since its 2005 high, the Palestine Al Quds Index is down 60% while the Tel Aviv 125 is up 80% over the same period.
So which side recently proposed a peace plan? The one whose stock index has soared, the one with the more elevated mood. https://bit.ly/2vaSID0
Bitcoin
The cryptocurrency markets are no strangers to big moves and in recent weeks—and really over the past year—we’ve seen that although the Bitcoin bubble is well past its peak, there’s still plenty of drama to be had in the crypto space. https://bit.ly/2v7xiqc
Trump
Today the Senate plans to vote in Donald Trump’s impeachment trial. We’ve been tracking Donald Trump’s prospects to stay in office on socionomics.net. Historically the stock market has been a reliable indicator of how a presidential removal vote in the Senate will go. In a nutshell, the higher the market goes, the better a president’s chances to stay in office. For an in-depth look at President Trump’s chances to win the 2020 election, including key levels to watch in the Dow, click the link in the show notes. https://bit.ly/2OwnI70
Shanghai Composite
Chinese stocks got slammed in Monday's session. The Shanghai Composite was down nearly 8%. 8% in a single day for an equity index. That is huge. That'd be like the Dow losing 2,200 points in a day. So all the time, and certainly when a market gets volatile, one of the best things you can do is block out the noise. The media's going to be going crazy, so are your fellow traders for that matter, emotions are running high. And in that environment, it can be tough to make good decisions. https://bit.ly/2v0RpGw
Earnings
Let's make this a myth-busting Monday. "Earnings drive stock prices." How many times have you heard that? Dozens of times, right? It seems logical, but is it true? Well, one problem is that quarterly earnings reports document companies' earnings from the previous quarter. Using what a firm did three months ago to predict what the company's stock is going to do in the future is like driving down the highway with your eyes glued to the rearview mirror instead of the windshield. https://bit.ly/2tqwz31
Brexit
Today is Brexit Day. The UK begins its withdrawal from the EU, embarking on an 11-month transition. Now for the past three years we’ve heard all about how Britain’s departure from the European Union would impact stocks and economies in Britain, Europe and beyond. And one thing’s for sure: No matter where British stocks go over the near term, the media will make Brexit take the brunt of the credit or blame. https://bit.ly/2S45quU
Interest Rates
Yesterday was Fed day. Were you sitting on the edge of your seat, biting your nails, hardly able to breathe until you found out the Fed’s rate decision? Well, that’s what a lot of traders do, but around here we mostly yawn and go to lunch because we’ve observed for decades that the Fed just follows the rates set on the freely traded Treasury market. The yield on 3-month T-bills has been flat since early November, so it’s no surprise that the Fed kept its rate flat as well.
And, look, we’re talking about the U.S. because of the rate decision yesterday, but you can do this with any country. If you’re the kind of person who has fun looking at financial charts, well you can have a whale of a time pulling up a chart of any central-bank-set rate on the planet and comparing it to a chart of the yield on freely traded short-term government debt for the same country. You’ll find time and time again that the central bank is a market follower, not a market leader. The market’s in control, not the Feds of the world.
A cactus with sunglasses would direct the course of interest rates just as effectively as a central bank—actually more so because the cactus is cheaper.
Happy surfing, Elliott wavers. Let’s talk again tomorrow.
Using central banks to forecast the markets? That’s putting the cart before the horse. For analysis of global rates, equities and more that puts the horse before the cart, click the link in the show notes.
Global Trade
President Trump is planning to sign the USMCA today. The agreement replaces NAFTA. And, of course, Phase 1 of the U.S.-China trade agreement got signed a couple weeks ago. Now for the better part of two years, the media’s blamed just about every bout of market volatility on global trade tensions, yet now that we have two major international trade agreements, volatility in global equities is back.
U.S. Stocks
We had a significant day in the stock market yesterday. U.S. equities down. We saw the strongest downside breadth on the NYSE since August. Wow. VIX had its highest close since October. The Dow shed 453 points, closing down 1.57%, as did the S&P which snapped its 70-day streak of closes that were within one percent of the previous session close.
Tesla
Alright, let’s talk Tesla. The stock tripled over the past eight months. It’s market cap eclipsed GM and Ford combined. Now, was it the Cybertruck? China? Elon Musk’s striptease? I mean, surely there’s someone out there who thinks it’s because he smoked pot on Joe Rogan’s show.
Crude Oil
From its high a couple weeks ago, oil’s down 14%, about 6% this week alone. The narrative in the news is all about oversupply, coronavirus fears. Learn why that approach is all wrong…
Hang Seng
The Hang Seng Index in Hong Kong has seen some big moves this week. From Monday’s open to Tuesday’s close, the index fell 4%. Coronavirus got the blame, but the market’s plunge had nothing to do with the virus.
Coronavirus
You’ve probably seen the headlines about the coronavirus outbreak in China. The CDC has now confirmed that the virus has reached the U.S. There’s concern out there about a potential epidemic. I’ve even seen some recent market action blamed on coronavirus fears. When you think about the possibility for an epidemic, you might think that would be bad for stocks. But there’s actually more compelling evidence in the other direction.