In this guest piece, Prechter's colleague Nico Isaac analyzes current investor sentiment...read on, and think about whether you should hop on the investment train leaving the station, or run for the hills!
New Year: New Economic Boom? Why 2010 Should Be One to Remember
January 19, 2010
Elliott Wave International's latest free report puts 2010 into perspective like no other. The Most Important Investment Report You'll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.
By Nico Isaac
In the realm of market psychology, there's a big difference between optimism and extreme optimism. The first is seeing the glass half full. The second is seeing the glass half full deep in the heart of a bone-dry desert. In finance, it's what we call "Buying the Dip" mentality -- when all outcomes, even losses, are cause for celebration.
We are there now.
To wit: With a new year upon us, the mainstream has already come up with a fresh tagline to define the next 360-or so days. It even rhymes: The Bull Runs Again In 2010. This projection is in no way "in spite of" the fact that the U.S. stock market just finished its first decade of negative returns since the Great Depression; it's because of that fact.
See, according to the mainstream experts, this "Lost Decade" of abysmal stock performance (in which the Dow ended 9% in the red, the S&P 500 - 24%, and the NASDAQ Composite - 44%) is the very foundation on which a new bull market will apparently be born. One economic scholar recently coined the phenomenon the "Slingshot Effect" -- the more severe the downturn, the faster the recovery. (Associated Press)
Adding to the upbeat chorus are these recent news items:
"The horrible decade has wiped out all the excesses of the previous two decades and put us back on track for more normal returns." (USA Today) -- AND -- "It may be the best of all possible worlds." (Business News)
Back in the late 1990s, when the "unstoppable" NASDAQ began to experience regular days of double-digit drops, it was "Buy-the-Dip." Now, it's "buy the entire lost decade." And, as the Dec.31, 2009 Elliott Wave Financial Forecast Short Term Update reveals -- current sentiment readings "continue to show that stock market bears have packed up and moved to Florida for the winter."
The Dec. 31 Short Term Update also reveals two mind-blowing charts of the S&P 500 versus Investor Intelligence Advisors Survey Percentage of Bears -- AND, the S&P 500 versus the percentage of "Fully Committed" bullish advisors since 2000. The current reading is the lowest bearish percentage in 22 years.
Take one look at the evidence, and you'll see that a defining pattern emerges: Low levels of bearishness have consistently coincided with one kind of market move. Combine this picture with the other measures of investor sentiment like momentum, volume and Elliott wave structure, and the evidence tilts overwhelmingly in favor of an unforgettable year.
Elliott Wave International's latest free report puts 2010 into perspective like no other. The Most Important Investment Report You'll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.
Nico Isaac writes for Elliott Wave International, a market forecasting and technical analysis firm.
***
New Year: New Economic Boom? Why 2010 Should Be One to Remember
January 19, 2010
Elliott Wave International's latest free report puts 2010 into perspective like no other. The Most Important Investment Report You'll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.
By Nico Isaac
In the realm of market psychology, there's a big difference between optimism and extreme optimism. The first is seeing the glass half full. The second is seeing the glass half full deep in the heart of a bone-dry desert. In finance, it's what we call "Buying the Dip" mentality -- when all outcomes, even losses, are cause for celebration.
We are there now.
To wit: With a new year upon us, the mainstream has already come up with a fresh tagline to define the next 360-or so days. It even rhymes: The Bull Runs Again In 2010. This projection is in no way "in spite of" the fact that the U.S. stock market just finished its first decade of negative returns since the Great Depression; it's because of that fact.
See, according to the mainstream experts, this "Lost Decade" of abysmal stock performance (in which the Dow ended 9% in the red, the S&P 500 - 24%, and the NASDAQ Composite - 44%) is the very foundation on which a new bull market will apparently be born. One economic scholar recently coined the phenomenon the "Slingshot Effect" -- the more severe the downturn, the faster the recovery. (Associated Press)
Adding to the upbeat chorus are these recent news items:
"The horrible decade has wiped out all the excesses of the previous two decades and put us back on track for more normal returns." (USA Today) -- AND -- "It may be the best of all possible worlds." (Business News)
Back in the late 1990s, when the "unstoppable" NASDAQ began to experience regular days of double-digit drops, it was "Buy-the-Dip." Now, it's "buy the entire lost decade." And, as the Dec.31, 2009 Elliott Wave Financial Forecast Short Term Update reveals -- current sentiment readings "continue to show that stock market bears have packed up and moved to Florida for the winter."
The Dec. 31 Short Term Update also reveals two mind-blowing charts of the S&P 500 versus Investor Intelligence Advisors Survey Percentage of Bears -- AND, the S&P 500 versus the percentage of "Fully Committed" bullish advisors since 2000. The current reading is the lowest bearish percentage in 22 years.
Take one look at the evidence, and you'll see that a defining pattern emerges: Low levels of bearishness have consistently coincided with one kind of market move. Combine this picture with the other measures of investor sentiment like momentum, volume and Elliott wave structure, and the evidence tilts overwhelmingly in favor of an unforgettable year.
Elliott Wave International's latest free report puts 2010 into perspective like no other. The Most Important Investment Report You'll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.
Nico Isaac writes for Elliott Wave International, a market forecasting and technical analysis firm.
Ed. note: I am both a subscriber and affiliate of Elliott Wave International, and highly recommend their work.
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