The widespread idea is that events around the world direct the financial markets. We are told to believe that the market reacts to the news and people’s mood changes accordingly. When the news are good, people feel good and they buy stocks they say. When the news are bad, people sell stocks according to the orthodox view. But is that really so? What if it was the other way around? What if the mood changed first and it’s economic, political and social effects became apparent later? Could it be possible? If not, why can’t the news editors trade the markets get rich? Would you get rich if you knew the news ahead of everyone else? If you are Rothschild, maybe. But for the rest of us, it is not so clear cut.
History’s Hidden Engine
Part 1 – Presumed cause and effect relationship goes like this: War, prosperity, civil protest dictates society’s social mood. A strong economy, good leaders, rising stock market creates positive social mood. Adversely, inept leaders, bad economy, unemployment, declining markets create negative social mood. We will now start to look into this entrenched belief. What if the change in social mood was the cause of the rest? The part 1 of this series of videos talks about the correlation between stock prices and the rest of the social events such as pop culture, clothing, music, movies. Certain social trends become apparent at stock market tops and bottoms.
Part 2 – The changes in social mood give rise to history. They dictate economic events, political events. Social mood drives cultural trends and even philosophical trends. The 400 year history of stock prices show that the economy and politics follow the stock market. In other words, stocks are a leading indicator. This is because a change in social mood is first registered in stocks and the rest of the economy feels it later. But then can the stock market be predictable? This would require that the change in social mood is something that is predictable. Here comes the Elliott Wave Theory that identified fractal patterns in the form of waves in stock prices at all degrees, from 1 minute harts to 400 year stock market charts.
Part 3 – How perfectly does the market follow the wave principle? Consider the stock prices around 9/11. After a disastrous event like that our emotions could tell us the market would fall much lower. But soon after 9/11 the stock market started it’s rally and this had to happen because according to Elliott Wave Principle a 5 wave decline was already almost complete. Is it always possible to read the Elliott Waves correctly? Or do they have problems that reduce their usability? Yes, it is hard to know here you are in a bigger wave as you go. You may think you are at a top, yet the market may go higher. But waves combined with other market indicators can help you turn the odds in your favor in the markets.
Part 4 – What makes the stock market patterned? What makes the social mood patterned? What is a fractal pattern? Where else do we see similar patterns? Trees, ferns, blood vessels, lighting and more. The theory goes on to say that the society is part of the nature and the social mood is patterned just like the rest of the nature. This is what gives the patterned nature of the stock market prices.
Part 5 – A fractal is not the only patterned natural phenomenon we see in the nature and in stocks. There is another form that is commonly seen in the nature: A spiral. A logarithmic spiral depicts growth and expansion in the universe. How does a spiral connect to the stock market and the wave theory? This is the basis of the fibonacci numbers. The market wave lengths seem to be following the fibonacci sequence. Why is it that way? Perhaps simply because we are part of the nature and many other things follow the same patterns.
Part 6 – In a society whose social mood seems to be governed by the laws of nature, is there room for an omnipotent FED (Federeal Reserve) that can control the economy? Do the politicians really control the masses? Or are they at the mercy of the trends in social mood?
We hope you enjoyed watching this series as much as we did. Check back again for more videos and articles that challenges the traditional beliefs of out time on the stock market.
You can learn more about socionomics and effects of social mood at the Socionomics Institute.
Robert Prechter, Jr., president of Elliott Wave International, resurrected the Wave Principle from near obscurity in 1976 when he discovered the complete body of R.N. Elliott’s work in the New York Library. Robert Prechter, Jr. and A.J. Frost published Elliott Wave Principle in 1978. The book received enthusiastic reviews and became a Wall Street bestseller. In Elliott Wave Principle, Prechter and Frost’s forecast called for a roaring bull market in the 1980s, to be followed by a record bear market. Needless to say, knowledge of the Wave Principle among private and professional investors grew dramatically in the 1980s.
2 thoughts on “What moves the stock market?”
I concur, and aeaumulctcd the broader indexes since the DJIA was last above 11,000- (where I last took gains). I’m going to take my profit again at the next near term top you show- Lets say 11,150. Now; there is a measure of thought supporting the notion of a secular bear market beginning in year 2000 for the DJIA. But since the DJIA topped out in Oct. 2007, at 14,163, the secular 2000 theory ends. How would you see markets longer term given the hypothesis that the secular bear started in 2007?
It’s finally clear to me. When I take pooniists in the markets, I often wondered how anyone could take the other side and be so consistently willing to lose. It’s was baffling. Now I know why. My primary tool is the wave principle. It keeps me from getting into too much trouble when I’m wrong and it makes me money consistently. Neither the Fed nor the govt can alter market trends but they fool people into thinking they can and they have the rare gift to ruin anything they get involved.
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