Tag Archives: Stock Market

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Government Banks on Stocks

Guest Post by EWI

The following article was adapted with permission from the November 2014 issue of The Elliott Wave Financial Forecast, a publication from Elliott Wave International, the world’s largest market forecasting firm. Follow this link for the complete article.

Here’s a key principle concerning the role of government in bull and bear markets, as outlined in The Elliott Wave Theorist in 1991:

Government is the ultimate crowd, every decision being made by committee. It is always acting on the last trend. (For example, the Federal government passed securities laws to prevent the 1929-1932 crash…in 1934.)

The Federal government repealed that law, known as Glass-Steagall, in November 1999. [A major peak in stocks] occurred within a matter of weeks, in January 2000. Government’s effort to bring back the old bull market started in 2001 with a bailout of Argentina. Citing a critical difference from prior bull market rescue efforts, the September 2001 issue of The Elliott Wave Financial Forecast asserted that the stock market would fall straight through the effort to shore up that country. It did, as the Dow declined 30% through October 2002.

A similar short-term market plunge through a government-sponsored bailout initiative occurred on October 2. That’s when Mario Draghi, president of the European Central Bank, announced a quantitative easing program under which the central bank will buy $1.3 trillion in loans and mortgages, “including some junk-rated assets from Greece and Cyprus.”

Draghi pulled the trigger even though the Euro Stoxx 50 Index has rallied for almost three years and, at the time of the announcement, was within 5% of its June high.

In 2012, Draghi’s bold “whatever it takes” ad-lib was “seen as a masterstroke that halted the downward economic spiral that had gripped the continent.” This time he fired live rounds in the form of a long-awaited “U.S. Federal Reserve-style QE” program. But the blue chip European stock index gave him no respect; it fell. The Euro Stoxx 50 is still down 3% from its October 2 close.

The performance is similar to what happened in November 2007, when a consortium of banks organized by the U.S. Treasury created a fund (called M-Lec) to rescue the hemorrhaging market for subprime loans. At the time, The Elliott Wave Financial Forecast explained that the difference between bailouts in a healthy bull market and those in a major bear market is that in a bull market the bailouts invariably come near major lows, when the market is ready to turn up anyway. In bear markets, however, pessimism is more persistent, and the stock market ultimately falls through even the most aggressive bailout efforts.

The Elliott Wave Financial Forecast also stated that the “fascinating thing about the bailout attempt is that it was needed before the stock market even headed down. As we said in April [2007]: Chrysler and Continental Illinois were ‘too big to fail,’ the unfolding crisis will be ‘too big to bail.'”

Click here to continue reading about how the ECB’s latest scheme is already failing, and how global governments’ even more pronounced infatuation with stocks suggests an even more dramatic decline ahead >>


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More Investors Intelligence Data

Guest Post by Tom McCellan

Investors Intelligence survey percentage in correction category
November 06, 2014

Last week I wrote about a rather unique way to look at the sentiment data from the weekly Investors Intelligence survey.  This week, I want to expand on that topic a little bit more, and cover the one piece of data in that weekly report which gets the least attention.

Investors Intelligence surveys over 100 investment advisors and newsletter writers, and categorizes them as either (1) Bullish, (2) Bearish, or (3) “Correction”.  That last category is for advisors that are not willing to make a commitment to either a bullish or a bearish stance, and it is the subject of this week’s chart.

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Around the Web

  • Across the Curve channels Buffalo Springfield and sees the commodity Armageddon as bond friendly, to the point where Yellen can take the rate hike for 2015 off the table.  Who’d be surprised about that?
  • Reformed Broker on 9 surprising things the subject of my favorite book on trading/investing/markets said.

 

Stock Market Myth #8

Guest Post by Robert Prechter & EWI

Don’t Get Ruined by These 10 Popular Investment Myths (Part VIII)

Interest rates, oil prices, earnings, GDP, wars, peace, terrorism, inflation, monetary policy, etc. — NONE have a reliable effect on the stock market

You may remember that after the 2008-2009 crash, many called into question traditional economic models. Why did they fail?

And more importantly, will they warn us of a new approaching doomsday, should there be one?

This series gives you a well-researched answer. Here is Part VIII; come back soon for Part IX.


Myth #8: Terrorist attacks would cause the stock market to drop.

By Robert Prechter (excerpted from the monthly Elliott Wave Theorist; published since 1979)

I assume this is what economists mean when they say that something unexpected such as a terrorist attack would cause them to re-evaluate their stock market forecasts. At least, I doubt they mean that a terrorist attack would cause them to revise their estimates upward. It seems logical that a scary, destructive terrorist attack, particularly one that implies more attacks to come, would be bearish for stock prices.

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4 Reasons Why…

Today MarketWatch treats us to…

Four reasons why the market will rally for the rest of 2014

Aside from the fact that I hate it when people talk in absolutes (because there is no such thing as a guru who can really predict absolutes) the writer, a CFA and regular Fox Business and CNBC guest tells us why stocks will rally all the way to the end of 2014.  Wow, two whole months?

Before I even read the article let me just say that the irrational fear became extreme earlier this month and while we anticipated the bounce, its strength is now pushing through the top end of expectations.  Got to love the markets, and that ploy of putting a supposed Fed hawk, James Bullard, in front of a mic to go on about QE extension the moment the market took a decent correction.  Right there belies vulnerability and desperation.

Anyway, to the article written by the CIO of the aptly named Global Guru Capital…

He highlights how sentiment is still way too pessimistic out here…

1) The Market’s Manic Mood

Americans haven’t felt this bad about their country since Jimmy Carter’s malaise years. According to a recent POLITICO poll, 64% of respondents believe things in the United States feel “out of control” right now. Exactly half said the country was “on the wrong track.”

Yes and do you know why?  It is because the majority have not participated due to the inequality and inequity of the current recovery, born of policy and aimed at those who already have capital and have assets.  What do ‘Americans’ have to do with this?  It is all about keeping asset owners whole.  Next…

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US Stock Market Indexes

Guest Post by INO.com

Indexes Snapshot
Symbol Last Change %
DJ 30 INDUSTRIALS 16817.94 +12.53 +0.07%
NASDAQ COMPOSITE INDEX (COMBINED) 4486.90 +3.18 +0.07%
S&P 500 CASH 1961.63 -2.95 -0.15%
SPDR S&P 500 196.12 -0.31 -0.16%
QQQQ VOLATILITY INDEX 10.48 +0.33 +3.16%
iShares RUSSELL 2000 INDEX 110.985 -0.085 -0.08%

U.S. STOCK INDEXES

GENERAL STOCK MARKET COMMENT: The U.S. stock indexes closed mixed today. There were no major, unsettling news developments occurred over the weekend, which limited selling interest in stock indexes. Focus is turning to the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve’s regular meeting Tuesday and Wednesday. As usual, the Wednesday afternoon statement from the FOMC at the conclusion of the meeting will be very closely scrutinized by the market place. Most believe the Fed will formally end its monthly bond-buying program, called quantitative easing. Attention is also on the two key “outside markets” that impact many other markets: the U.S. dollar and crude oil. The dollar index was weaker Monday but still hovering not far below its recent four-year high. Meantime, Nymex crude oil prices were lower and hovering near a two-year low. The next downside technical target for nearby crude oil is $75.00 a barrel, which I believe will be reached in the coming weeks. The much-anticipated stress test results on European Union financial institutions were released over the weekend. While there were some EU banks that failed the tests, overall the results were not deemed threatening to the EU financial system. There was another downbeat economic report coming out of the EU Monday, as Germany’s Ifo business confidence index came in at 103.2 in October, versus 104.7 in September. The Ifo reading this month was at a two-year low.

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NFTRH; Russell 2000 as a Guide

Turning to one of our leaders, I wanted to show the Russell 2000 from weekly and daily views.

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