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A Socionomic Manifesto 

Men have tried for millennia to forecast human events. In the long history of social forecasting, the chronic propensity for immense error has resulted from linear thinking, the extrapolation of current trends into the Future. 

This nearly ubiquitous approach is a result of the assumption that laws governing billiard ball behavior apply to human behavior. Simply stated, most people, including economists, are social mechanists. They believe that markets and societies share the property of an object in motion, which will continue along a calculable path until some new outside influence – a force or an obstruction – alters its trajectory. It remains a source of amazement to me how often I am asked what events will cause (or, in modified form, what “catalyst” will “precipitate”) a change in the direction of the market, politics or the economy, a query which has as its basis the unquestioned assumption that the record of human history is somehow at the mercy of random outside influences, such as earthquakes, volcanoes and floods but with regard  to one presumed social influence over another presumed social effect. Yet social forces cannot be “outside influences” because they reside within the human social experience, in which all elements are interrelated. The general assumption of outside causality nevertheless persists and has as its result the continuing bizarre state of affairs in which most people involved in areas of life where the future is important waste hours debating the various potential “causes” of the trends they hope to predict. They usually conclude that forecasting with any reliability is impossible, yet they persist in the exercise anyway! Successfull anticipation of future events is possible. However, it is possible only with the knowledge that human behavior changes as a result not of external forces but of internal ones. 

Generally speaking, the human mind has two aspects, which impel two types of actions. Rational, conscious mental processes can induce actions that create airplanes, computers and skyscrapers. Unconscious mental

Processes do not produce goods and services but rather generate hard-wired emotional signals that trigger impulsive actions. These emotional signals developed through eons of evolution, which is why they impel all kinds of actions with respect to concerns that are common to lower animals, such as territorialism, fighting, fleeing and sex. (The production of art probably involves both mental aspects, which is why it provides the richest experiences.) One of the unconscious mind’s occupations is increasing the changes of survival through mimicking, which is reflected in the herding impulse, a fact that provides a biological and psychological basis for socionomics. 

Conventional economists have been mired in the error that trends in finance result from the exercise of the first type of thinking: the rational and the conscious. It is a false premise, which has just begun to be undermined. In twenty years, academic economists have gone from believing that markets are rational, efficient calculators of intrinsic value – and therefore random – to believing that psychology occasionally might have something to do with extremes in short term financial valuation. Someday, a large segment of the profession will surely come to understand that a mix of randomness and psychology is not the answer to overall financial market behavior. 

At the forefront of the new understanding is the Chairman of Psychiatry at Metro West Medical Center (Boston), Dr. John Schott, who is also an instructor at Harvard and Tufts medical schools and a successful money manager. Even on the subject of practical investing for the individual, he states unequivocally. “Emotions are central, they are the entire ball game.” Emotions are certainly the entire ball game for many individuals, so that as a rare few investors’ individually informed and rational decisions cancel each other out, what remains on the stock market graph is a record of the trends of shared emotion, the mood of the herd. 

It is not in the social nature of mankind to accept and be content with stasis. If there is one constant regarding social mood, it is its continuous flux. However, the fact that social mood is ever-changing is not, as many would assume, an impediment to forecasting; it is the key to it. Investigations by R.N.Elliott in the 1930s and 1940s yielded the crucial knowledge that social behavior changes not randomly but according to a pattern. Social mood, experiences and conditions vary from time to time and place to place, the patterns of behavior that lead to a reversal  in trend do not. In order successfully to anticipate changes in society reliably, one must understand the consistent pattern of society’s internal dynamics. (Pioneering Studies in Socionomics, 2003 by Robert R.Prechter ,Jr.)

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Dax-Ausblick: Sonne über den Börsen
(Handelsblatt, 28.April 2007)

In bester Kauflaune 
26. April 2007
Die Erhöhung der Mehrwertsteuer ist abghakt – die Verbraucher haben gut verdient und wollen das Geld auch ausgeben. So stieg der GfK-Konsumklima-I ndex im Mai erneut. Besonders viel trauen die Deutschen derzeit dem Aufschwung zu, hieß es vom Nürnberger Marktforscher. Entsprechend schoss ein Indikator nach oben. Handelsblatt, 26.April 2007

Konsumklima: Verbraucher im Kaufrausch - Konjunkturerwartung auf Rekordhöhe
Sensationeller Anstieg der Konjunkturerwartung: Der GfK-Indikator liegt so hoch wie noch nie seit Beginn der Erhebung im Jahr 1980. 
Auch die Kaufneigung und die Einkommenserwartungen sind stark gestiegen. Der Spiegel online, 26.April 2007

Über 13,000 Punkte
Dow schließt mit Rekordhoch (Der Spiegel online, 26.April 2007 

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EUROPE'S NEW PROTECTIONISM
Endesa Reflects Growing Government Interference
Protectionism is alive and well in Europe, as evidenced by German utility company E.on's failed attempt to take over Spanish utility Endesa. Governments are increasingly obstructing foreign takeover bids -- and Brussels is seemingly powerless to stop them. Spiegel online, April 8,2007

U.S. to Apply New Duties on Chinese Imports  
Following Ruling on Subsidies, Bloomberg.com, Mar 30,2007

S&P 500 Index Falls on China Trade Tension;
Bloomberg.com, Mar 30,2007

BCA Research
U.S. Home Equity CDO Prices Still Falling 
Mar 28,2007

 

Stocks Take a Tumble

TheStreet.com 
3/2/2007 

Wall Street ended a chaotic week with fairly sizable losses on Friday as traders moved to pare their positions ahead of their two-day absence from the market. "This isn't a good way to end this week. This is our first major correction, but it hasn't scared the daylights 
out of investors yet," said Paul Mendelsohn, chief investment strategist with Windham Financial. "I don't think the market has come
down enough yet to shake out the weak investors. There is a massive change in psychology now." 

Half right. The change in psychology took place at 12,795 in the Dow and 1462 in the S&P 500. 

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The Direction of Social Causality

If social mood is patterned, it cannot be the result of random social events, and there is no basis upon which to suggest that is is somehow the result of social events that are themselves perfectly patterned to produce the Wave Principle, which would require utter event determinism. Therefore, the only possible direction of causality is the opposite of that popularly assumed. Events do not shape social mood, social mood shapes events. Mass psychological fluctuations are not simply correlated with mankind’s actual progress and regress through history, but in fact are their engine. Collecitve mood shapes the character of social interaction, and thus of resulting actions and events. 

The evidence of this fact is continually available. Just the past few months provide several dramatic examples. The financial collaps in Indonesia in October 1997 led to riots in April 1998 and the ousting of a previous popular ruler, Suharto, who had been president for 32 years. The financial collapse in South Korea beginning in October 1997, which brought its stock market to an 11-year low, led to massive labor strikes in April 1998. The collapse in the Russian stock market, the ruble and its government bonds in 1998, has led to “a profound political crisis.” Financial uptrend precedes social euphoria, and financial downtrends precedes social crisis. 

Related articles Socionomics Insight>>>

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Women Power Women gain dominance in bear markets. Prechter's Perspective

Prechter's PerspectiveCAMBRIDGE, Mass., Feb. 9 — Harvard, the nation’s oldest university, plans to name Drew Gilpin Faust, 
a historian of the Civil War South, to be the first female president in its 371-year history, university officials said Friday.

 

 

Women gain dominance in bear markets

 

Woman Chosen to Lead Harvard
Washington Post, 02/10/2007

Can't Buy Me Love... Or Can You?
With Valentine's Day gifts, monetary value is secondary to sentimental value, right? If only it were that simple.
Yahoo finance, 02/09/2007

60 Prozent der Bayern wollen Stoiber nicht mehr

Edmund Stoiber rutscht ab: 60 Prozent der Bayern wollen ihn nach einer Umfrage des "Stern" 
nicht mehr als CSU-Spitzenkandidaten 2008. Spiegel online, 3.Jan.2007

 

Women gain dominance in bear markets.  
Prechter's Perspective

Frankreichs Sozialisten nominieren
Royal für Präsidentschaft 
November 17, 2006, (yahoo.com) 
On a major trend basis, it's becoming increasingly a women's world. We had the feminist movement in the 1970s, more women heading into the work force and so on. I mean, maybe at the bottom we’ll see another Joan of Arc or something. (Prechter’s Perspective)

 

It's settled: A woman can be president.

President Mackenzie Allen in the first two episodes of ABC's Commander in Chief already has taken the oath of office, addressed a joint session of Congress, launched a military rescue operation and foiled the machinations of the scheming House speaker, all the while conveying the cool glamour of, well, Geena Davis. 

Her Gallup Poll ratings — make that the Nielsens — are doing well, too. The series is the most-watched new show thisn.  And New York Sen. Hillary Rodham Clinton, 57, has become the first woman to lead a presidential field in national polls and to command a fundraising base that ensures she could compete for the long haul. Among Republicans, Secretary of State Condoleezza Rice, 50, ranks a close third in the GOP field for 2008, behind former New York mayor Rudy Giuliani 
and Arizona Sen. John McCain. USA Today, October 11, 2005

 

USA
Pelosi: "Heute ändern wir die Richtung unseres Landes"

Machtwechsel im Kapitol: Innerhalb der nächsten 100 Stunden wollen die Demokraten mit der neuen Präsidentin des US-Abgeordnetenhauses, Nancy Pelosi, eine Fülle von Gesetzesvorhaben auf den Weg bringen. Die Welt, 4.1.07

 

Gabriele Pauli
Die schöne Landrätin aus Fürth
Kurz vor Weihnachten machte Gabriele Pauli ihre Vorwürfe gegen Edmund Stoiber öffentlich. Focus, 4.1.07

 

30.05.2005
Das Merkel-Duell
CDU-Chefin Angela Merkel ist seit heute die erste Bundeskanzlerkandidatin in der Geschichte
Deutschlands. Für Frauen ein Grund zur Freude, unabhängig von der politischen Einstellung? 
brigitte.de

10.10.2005
Die ersten 100 Tage von Kanzlerin Merkel
Angela Merkel ist die erste Kanzlerin Deutschlands. Auf die große Koalition der sie vorsteht, 
kommt eine Menge Arbeit zu. Stern.de


16.01.2006
Frauenpower im Andenstaat
Eine Frau mit allen "erdenklichen Sünden": Michelle Bachelet ist Sozialistin, Atheistin, 
geschieden und allein erziehend. Sie überlebte Pinochets Folterkeller, war Verteidigungs-
und Gesundheitsministerin. Nun ist sie neues Staatsoberhaupt Chiles. Stern.de

 

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Real Estate:
Tough Market: Prices fall in Naples, Fla.
WSJ, Jan 10, 2007

Home prices down 1.2% in third quarter
Rustbelt markets and Florida lead the decline. Sales volume plummets nearly 13%. CNNMoney.com , November 20 2006: 


NEW YORK (CNNMoney.com) -- Once-hot housing markets cooled considerably this summer: The National Association of Realtors (NAR) reported Monday that the median price of a single-family house in the third quarter dropped 1.2 percent from a year earlier, continuing a reversal of fortune for sellers that started last winter.

Prices in the Northeast, down 4.8 percent, fell the most. Prices dropped 2.6 percent in the Midwest, 0.9 percent in the West and 0.1 percent in the South.

The Detroit market, buffeted by auto industry layoffs, suffered the largest loss; prices there plummeted 10.5 percent, to a median of $154,100. Other rustbelt areas with drops included Canton, Ohio (down 9.2 percent to $112,300), Akron 
(down 8.4 percent to $118,200) and Bloomington, Illinois (down 8.5 percent to $156,300).
Three Florida metro areas were hit hard by price drops. In Sarasota, the median home now sells 
for $320,700, off a whopping 9.4 percent from last year; Palm Bay/Melbourne/Titusville prices sank
9 percent to $193,600; and Cape Coral prices plunged 8 percent to $255,400 
Cnn, money.com, Jan 10, 2007

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Trade gap falls to 16-month low 
cnn money, com , Jan 10, 2007

EURO, U.S. Dollar & Trade Deficit

Late December 2004, when the greenback stood at an all-time record low, the media across the board was dark out bearish for greenback. 

"The market will continue to look at the trade deficit. Should it stay in the area
where we have record deficits, the dollar is going to hurt." (Bloomberg). 

Even the world's second-wealthiest man Warren Buffett boarded the bearish bandwagon with a $20 billion bet against the US currency," wrote EWI.

On June 5,2005, ELLIOTT today posted a chart of the Euro and based on the rules and guidelines of the Elliott Wave Principle made this forecast:  

"Once again, the Elliott Wave Principle shouted a warning late last year, as the EUR/USD completed a five-wave advance. The trend has changed from bullish to bearish and as the wave count suggests, there is more to come to the downside."

"The market broke the 0.236 Fibonacci retracement and the position of the ML-1 suggests, that the market will ultimately break through for further losses. A short-term correction low lies way ahead most likely at the previous fourth wave position about 1.19-1.20. But even that mark is not considered as an overall turning point, since wave (iv) and (v) still need to unfold." 
Read more

 

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Use the News and you Loose...

Exklusiv: Die Charts der Woche
22. Dezember 2006
"Nachrichten bewegen Börsenkurse. Mal weniger, 
mal mehr. Die Handelsblatt.com-Redaktion zeigt 
in Form einer Bildergalerie, bei welchen Unternehmen
es aktuell Kursbewegungen und Analystenstimmen gibt, 
die für Anleger besonders interessant sind." Studies>>>

 

Glücksspiel
Die Chinesen überholen Las Vegas

Die chinesische Regierung baut die ehemals portugiesische Enklave Macau zum
Casino-Zentrum aus. Der Umsatz ist in diesem Jahr erstmals höher als in der US-Glitzermetropole. Die Welt online, 25.12.2006

59 % der Engländer haben 
Weihnachten keinen Sex
Die Festtagsfreuden enden für die meisten Briten kurz vor der Schlafzimmertür. 

Eine Umfrage ergab: 59 Prozent der mehr als 6000 Befragten sind während der 
Weihnachtstage regelmäßig zu betrunken oder zu vollgefuttert, um es im Bett 
noch einmal richtig krachen zu lassen. bild.de, 24.12.2006 See Fibonacci>>>

 

Israel gibt 100 Millionen Dollar an Palästinenser frei

Nach dem überraschenden Treffen zwischen Israels Ministerpräsident Ehud Olmert und
Palästinenserpräsident Mahmud Abbas, gibt Israel 100 Millionen Dollar zurückgehaltener 
Steuereinnahmen frei. Beide Politiker wollen den Friedensprozess wiederbeleben und
kündigten weitere Treffen an. Stern.de , 24.12.2006

Why Now?

 

 

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DVD der Woche

Aalglatter Held in Strumpfhosen

Superman kehrt nach langer Abwesenheit wieder auf die Erde zurück.
Doch die Menschheit braucht scheinbar keinen überirdischen Retter mehr. 
Focus, 23.12.2006

Market Dispatches 12/22/2006 
Stocks dive ahead of holiday

The Dow falls 78 on disappointing economic news and leaves investors a bit wary. Toyota is poised to surpass GM
as the top automaker. News Corp.'s Rupert Murdoch and Liberty Media's John Malone swap assets. Pfizer's
McKinnell walks away with a huge package. Msn, Dec 23, 2006

Deutsche sehen schwarz für 2007 

Die Deutschen gehen mit größerem Pessimismus in das kommende Jahr als die Bürger
vieler anderer Länder. Sie beurteilen die Zukunft zudem düsterer, als noch vor einem Jahr. 
Focus, 23. Dez 2006

 

Oracle earnings head upward
Business software maker reports in-line numbers, 
but shares dip in after-hours trading on high investor
hopes. December 18 2006

 

FORTUNE: 
Investor's Guide 2007 Full coverage 
More cream for the fat cats
Corporate profits are at their highest level since 1929. Fortune's Justin Fox
tells you what that means for the stock market in the coming year. December 18 2006

 

 

Investor Psychology

When pessimism about the future course of a market is widespread, the market is nearer a bottom than a top. When optimism about the future course of a market is widespread, the market is nearer a top than a bottom. This fact appears perverse to novice investors who read the news for guideance, but in fact is true by definition. A market top is the point at which the most money has been committed, and a market bottom is the point at which the least money has been committed.

People commit money when they are optimistic and withdraw it when they are pessimistic. there are several gauges of optimism and pessimism that are useful in confirming an analysis based upon the Wave Principle. As with momentum analysis, measures of investor sentiment are insufficient for an accurate market analysis because they do not address the question: How bullish is enough or how bearish is enough to indicate an approaching trend change in the current environment? Some tops and bottoms are of Intermediate degree, and some are of Grand Supercycle degree. 

The only way to anticipate the extremity of market mood is with an approach that can address that crucial factor. Once that approach is available, psychological measures can be invaluable in confirming or negating a market opinion. If the sentiment picture fits, fine; if it does not, then the analyst must reconsider. (At the Crest of the Tidal Wave, 2000 Edition, Robert R. Prechter) 

The chart of the Ifo Business Climate Index displays a clear five-wave structure according to the Wave Principle, indicating German business sentiment heads toward a top. See DAX>>

 

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Socionomics:

Corporate Earnings

As I write this paragraph, today's newspaper sports this headline in the business section: "Determining What Will Move Market Not
Difficult - But Forecasting Its Direction Is Harder." The "easy" part is no surprise, since virtually everyone in finance agrees: "Earnings
are the primary sources of stock price movement, which accounts for Wall Street's preoccupation with next month's earnings reports.
Is the indicator valid? Are stocks driven by corporate earnings? In June 1991, The Wall Street Journal reported on a study by Goldman Sachs's Barrie Wigmore, who found that "only 35% of stock price growth (in the 1980s) can be attributed to earnings and interest rates." Wigmore concludes that all the rest is due simply  to changing social attitudes, toward holding stocks. (Actually, all of it is due to 
changing social attitudes, and earnings are their product.) Says the Journal, "This may have just blown a hole through this most 
cherished of Wall Street convictions."  Loewenstein,R. (1991, June 6). "Goldman study of stocks' rise in ´80s poses a big riddle."  
The Wall Street Journal, p.C1 

This study shows that even in retrospect, the "fundamentals" that most analysts are relying upon have little relationship to stock market movement. What about simply the trend of earnings vs. the stock market? Well, since 1932, corporate profits have been down in 19 years. The Dow rose in 14 of those years. In 1973-74, the Dow fell 46% while earnings rose 47%. 12-month earnings peaked at the bear market low. Earnings do not drive stocks. As Figure 19-2 Illustrates and as Arthur Merrill showed years ago, earnings lag stock trends. As shown in Chapter 16, the economy lags stock trends. It is therefore impossible for earnings or the economy to drive stocks. Forecasting the stock market is indeed impossible when the supposedly easy part is a wrong premise. (The Wave Principle of Human Social Behavior, 1999 by Robert R. Prechter) 

 

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DAX & Social Mood

(c) ELLIOTT today, 14.Dez 2006

 

Artkel einer großen deutschen Tageszeitung, erschienen am 14.Dezember 2006
mit dem Titel: 

"Aufschwung 2007"  und  die 
"Die Aussichten sind günstig" heisst es, 

"Wirtschaftsinstitute und Wirtschaft überschlagen sich mit guten Nachrichten: 

RWI und Ifo-Institut erhöhen ihre Prognosen für 2007, der Deutsche Industrie- und Handelskammertag rechnet mit 200.000 neuen Jobs."

Und weiter heißt es: 

"Der kräftige Konjunkturaufschwung in Deutschland, sind sich die Wirtschaftsforschungsinstitute einig, wird im kommenden Jahr nicht abreißen." 

Wegen günstiger Investitionsbedingungen und des positiven internationalen Umfelds werde die Wirtschaft um 1,9 Prozent wachsen, teilte das Rheinisch-Westfälische Institut für Wirtschaftsforschung (RWI) heute mit. 

Bislang waren die Forscher von 1,7 Prozent ausgegangen. Für das laufende Jahr gehen sie von 2,5 Prozent aus. Auch das Münchner Ifo-Institut sagt für 2007 ein Plus von 1,9 Prozent voraus, das Kieler IfW sogar eines von 2,1 Prozent. 
Auch der Bankenverband erhöhte seine Prognose von einem auf bis zu 1,5 Prozent.

Nach Angaben des Ifo-Instituts ist die Auslandsnachfrage die treibende Kraft des Booms in Deutschland. Diese habe trotz der diesjährigen kräftigen Aufwertung des Euro gegenüber dem Dollar aufgrund der schwungvollen Weltkonjunktur erneut sehr kräftig zugelegt. Anders als im Vorjahr sei aber auch die Binnenkonjunktur in Schwung gekommen.

open chart 

DAX, Dec 1,2006

 

 

Chart: futuresource.com

Full story >>>

 

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DAX & Crude Oil

"Crude at $60, trade concerns pummel stocks."
"Oil slides, but so do stocks"
"Lower rates, falling crude push Dow up"
"Stocks slip on falling energy prices"

 

Socionomics explains:

The Uselessness of News Even to the Clairvoyant

Champions of news causality truly have a fundamental problem, which is that no investor really knows the implication of any piece of news. This fact is hidden by the ease with which financial news writers can retrospectively pull out from the plethora of news on any given day a story that appears to justify whatever market movement occurred. The reverse order of things is not so accommodating. If you could construct a time-machine mailbox that would generate The New York Times a full day early but with news about the stock market omitted, you would be just as unable to forecast the next day's market action as if you had nothing at all to read. Riots, peace pacts, summits, earthquakes, destructive hurricanes, price changes in commodities, assassinations, triumphs of statesmanship and political scandals - nothing of this sort has more than a momentary effect on the stock market, much less any predictive value. This week, an economics writer for the Atlanta Journal-Constitution said quite accurately, "If history is any guide, the stock market could go either way today in the wake of the U.S. air strike against Afghanistan and Sudan." (Walker, T. (1998, August 6) "Identifying sell-off trigger difficult." The Atlanta Journal-Constitution, p.F3)

Correct! Kudos for an economic writer who bothered to look at the record before opining. In August, the Atlanta Journal-Constitution ran an article that reviewed a 42-year history of surprise news and the stock market entitled, "Identifying Sell-Off Trigger Difficult." 

That is to say,it is difficult even in retrospect to make any connection between dramatic surprise events and what the market does. The biggest decline in the period studied was the 1987 crash, about which the article quite accurately says, "Scholars still debate the reasons why." Imagine scholars endlessly debating about things that history proves have no valitidity! That is what so many scholars do because their ideas of financial market causality, rationality and efficiency are all wrong, yet they see no alternative. 

Once you understand that news is not causal, that even if you got it in advance, you could not forecast the stock market, then you realize that there is no satisfactory news-related explanation for the market's behavior on Black Monday, last Tuesday or next Thursday, either, or on any market day at all, or any week, month, year, decade or century. It does not take a dedicated market student long to observe the acausality of news to the stock market. A socionomist observes, and more important, understands, the reverse causality. 

As R.N. Elliott said: "At best, news is the tardy recognition of forces that have already been
at work for some time and is startling only to those unaware of the trend." 
Elliott R.N., (1946). Nature's Law). 
(The Wave Principle of Human Social Behavior, 1999 by Robert R. Prechter) 

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Surprise, Surprise?

On November 27, 2006, the SPX tanked -19 points.. 

"Investors push Google over $500 The Internet giant joins a select company with 
its lofty stock price." "Shares of Google jumped past the $500-per- share mile 
mark for the first time today."

"Google was the big star when its shares closed up nearly 3% at $509.65.

The stock's gain gives the Internet company a market capitalization of more than $155 billion -- more than other big-name technology companies like Apple Computer, Yahoo! and IBM.

Google is now the second-most valuable company in Silicon Valley -- behind only networking giant Cisco Systems. It also has the 23rd-largest market capitalization in the world -- right behind Swiss pharmaceutical giant Roche Holding. Today, the Internet firm joined an even more select club. It is one of just 10 companies with market caps above $100 million whose shares trade at $500 or more. It has the second-largest market cap of the group at more than $155 billion, behind Warren Buffett's Berkshire Hathaway, with $165.3 billion.Google trades at 57 times projected 2007 earnings, which makes the shares fairly pricey. 

But Standard & Poor's analyst xxxxxxxxx said many investors simply don't care.
"A lot of people feel not only that they will lose out, but they will feel and look stupid" if they do not own the shares, he told the Financial Times. 

"But there's a risk to the herd mentality pushing this stock," analyst xxxxxxxxx 
of Jeffries & Co. told the newspaper.

"At the first sign of weakness, investors will be running for the hills," he said. Google shares are up 22% for the year and 26% for the third quarter. That's in stark contrast to the company's closest competitor, Yahoo!, which is down nearly 31% on 
the year. November 22, 2006 

 

Forecasting Pattern on the Basis of Pattern

As L.F.Richardson pointed out, the length of a seacoast is dependent upon your method of measuring and your scale. A ruler placed on a globe will give one answer; the same ruler applied to every indentation as one traverses the coast itself will give a vastly different one. Similarly, when people ask me where the stock market is going
or even what its trend has been, I have to ask, "What degree of trend are you talking about?" There can be mulitply answers, as in, "The Minor trend is down within a sideways Intermediate trend within a rising Primary trend."

One important test of scientific hypothesis is its ability to predict outcomes. Although
the Wave Principle hypothesis is difficult to quantify on the basis of predictability because it forecasts only probabilistically, there is nevertheless substantial evidence of its unique value. While reviewing the following example excerpts, it is important that you honestly consider the utter uncertainty that exists in real-time forecasting. Psychological experiments show that most people who review events in retrospect consider them to have been obviously implied at the time. I think that after you read these statements and consider them in the proper light, you will agree that the author's accuracy in describing the future is due to his knowing something useful. 

ELLIOTT today's Forecast of November 20, 2006

 

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..Use the News and You Loose 

      "Trotz eines höheren Ölpreises und des teuren Euro
haben die europäischen Aktienmärkte gestern zugelegt", schreibt die FTD.

"Das ist eigentlich erstaunlich. Der Euro nimmt ein neues Hoch, 
und wir steigen weiter", sagte ein Händler der Postbank.

      Champions of news causality truly have a fundamental
problem, which is that no investor really knows the
implications of any piece of news. This fact is hidden
by the ease with which financial news writers can 
retrospectively pull out from the plethora of news on
any given day a story that appears to justify whatever 
market movement occurred. 
(The Wave Principle of Human Social Behavior, 1999, R.R.Prechter) 

Read more

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"The coming trend of negative social psychology will be characterized primarily  by polarization between and among various perceived groups, whether political, ideological, religious, geographical, racial or economic. The result will be a net  trend toward anger, fear, intolerance, disagreement and exclusion, as opposed to the bull market years, whose net trend has been toward benevolence, confidence, tolerance, agreement and inclusion. Such a sentiment change typically brings conflict in many forms, and evidence of it will be visible in all types of social organizations..." 

(The Wave Principle of Human Social Behavior, 1999, R.R.Prechter) 

 

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Frankreichs Sozialisten nominieren Royal für Präsidentschaft 
November 17, 2006, (yahoo.com) 

On a major trend basis, it's becoming increasingly a women's world. We had the feminist movement in the 1970s, more women heading into the work force and so on. I mean, maybe at the bottom we’ll see another Joan of Arc or something. 
(Prechter’s Perspective)

 

 

The Economy

The standard presumption is that the state of the economy is a key determinant of  the stock market’s trends. All day long on financial television and year after year in financial print media, investors debate the state of the economy for clues to the future course of the stock market.If this presumed causal relationship actually existed, then there would be some evidence that the economy leads the stock market. On the contrary, for decades, the Commerce Department of the federal government has identified the stock market as a leading indicator of the economy, which is indeed the case. Read more

Socionomics:

"A rising mood leads to substantial consensus in politics, culture and social vision; a falling mood leads to a divided, radical climate. 
After the social mood has risen for a number of years, the society tends to be peaceful; after it has fallen for a number of years, it
tends to become involved in wars." (The Wave Principle of Human Social Behavior, Robert R.Prechter,1999).

 

Making History: 
An Interview with Film Director David Edmond Moore
David Edmond Moore of Eyekiss Films in Atlanta recently completed a documentary on socionomics titled History's Hidden Engine, which is freely available for viewing or download at http://www.socionomics.net/films/history/. 

More about Socionomics

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Death of the Dollar
Another Day Another Dollar Low
Currency on a Collision Course
Downhill Dollar Disaster

The belief in the dollar's continued fall is now so entrenched that financial television is running segments on
how to invest in a weak dollar environment, assuming the current trend will continue indefinitely. In Shanghai,
ordinary Chinese citizens are standing in long lines to convert their dollar savings to yenm, yuan, euro
oder renminbis, anything but the dollar. A headline in The Wall Street Journal explains that the Chinese
are "Losing Dollar Faith".

Two distinguished international economists, university professors, predict a dollar decline "by as much as
50% from its peak," which, they offer only after the dollar has declined 33% over three long years. Even
Robert Rubin, the former Treasury Secretary known for "talking" a strong Dollar policy has gone soft on
the buck. The Maestro himself, Alan Greenspan, is also "warning about America's skyrocking current- 
account deficit" and its damaging effect on the U.S. currency unit. Like most economists, Greenspan is suddenly fearful that a burgeoning trade deficit will facilitate the flight. 

What is the basis for this claim? 

The chart of the U.S. Current Account Deficit /Surplus as a percentage of GDP shows that there is none.
From October 1980 to February 1985, as the deficit emerged and increased to 2.25% GDP, at the time
the largest deficit in well over a decade, the dollar surged  50%. From April 1995 to December 2000, the
deficit grew from 1.67% to 4.41% of GDP, another huge leap, and the dollar rallied 34%. But with the 
dollar cut by a third since mid- 2001, a continued downtrend has become an almost universal certainty 
to most observers, and they need to rationalize their bearish view.

It is these exact conditions that create lows. At this point, bearishness is so strong that the resulting rise
should unfold over many months, not weeks. The implication of the historic bearish sentiment is perfectly
consistent with the dollar's Elliott wave pattern. The two wave counts discussed last month remain intact 
and both carry the same implication for 2005 - a major dollar rally. (EWFF, December 2004)

 

Nobodys Talking About Newsweek?!
by Chip Hanlon, March 22,2005, 

"Really, how can Newsweek run a cover story titled  "The Incredible Shrinking Dollar" without
the entire investment world taking notice and commenting on it?

"To review, here's why such cover stories aren't just interesting, anecdotally, but are in fact noteworthy: Newsweek isn't stupid, it just happens that the well-known phenomenon of major news publications helping
to mark the end of important market moves takes place simply because of their very nature - they publish
stories about what has already occurred, and a story like the Dollar's fall only becomes news when it has happened in the extreme. While news magazines print what has already taken place, the market, on the
other hand, discounts future outcomes." 

 

 

Surprise, Surprise

Aktienprognosen sind revisionsbedürftig 
FAZ, 17.2.2005

"Vor allem die Erholung des Dollar steht Analysteneinschätzungen entgegen." 

"Anlagestrategen haben es in diesen Wochen schwer. Viele von ihnen müssen das, was die Finanzmärkte an zum Teil überraschenden Bewegungen darbieten, so zu deuten versuchen, dass es noch in ihre gerade erst etwa acht Wochen alten Ausblicke auf das Jahr 2005 passt."

"Die grösste Überraschung stellt die Erholung des Dollar dar. Noch kurz vor der Jahres wende galt 
es weithin als ausgemacht, dass sich die Schwäche der amerikanischen Währung
fortsetzen werde." 

 

 

Euro - Pure Elliott

Analysis & Forecast of June 5, 2005, (c) ELLIOTT today

 

Chart: futuresource.com

Late December 2004, when the greenback stood at an all-time record low, the media across the board was dark out bearish for greenback. 

"The market will continue to look at the trade deficit. Should it stay in the area where we have record deficits, the dollar is 
going to hurt." (Bloomberg). 

Even the world's second-wealthiest man Warren Buffett boarded the bearish bandwagon with a $20 billion bet against the US currency," wrote EWI.

On June 5,2005, ELLIOTT today posted a chart of the Euro and based on the rules and guidelines of the Elliott Wave Principle made this forecast:  

"Once again, the Elliott Wave Principle shouted a warning late last year, as the EUR/USD completed a five-wave advance. The trend has changed from bullish to bearish and as the wave count suggests, there is more to come to the downside."

"The market broke the 0.236 Fibonacci retracement and the position of the ML-1 suggests, that the market will ultimately break through for further losses. 
A short-term correction low lies way ahead most likely at the previous fourth wave position about 1.19-1.20. But even that mark is not considered as an overall turning point, since wave (iv) and (v) still need to unfold." 

 

Bereits am 17.November 2004 posted ELLIOTT today diese Analyse und die folgende Einschätzung:

 

EUR/USD
(C) ELLIOTT today,11/17/04

 

Chart Courtesy futuresource.com

 

EUR/USD

 (C) ELLIOTT today, 17. November 20/04

Ein Blick auf den längerfristigen Chart des DAX zeigt, dass der DAX seit März 2003 im Trend steigt. Von einem Tief von 2188 Punkten erreichte der DAX im Januar 2004 einen Hochpunkt 
mit 4175 Punkten. Ein Anstieg um +1987 Punkten oder 90.8%, gemessen vom Tief.
Im Vergleich zum Alltime-High, machte der Anstieg +33% aus. 

Der Euro markierte im Jahre 2000 sein Tief und stieg seitdem in einem klassischen Elliott-Trendkanal. Im Februar 2004 komplettierte der Euro Intermediate Welle (3) und die anschliessende Korrektur erreichte im April-Mai 2004 einen Boden. Der DAX markierte im 
August 2004 einen Tiefpunkt und steigt seitdem. Ein Vergleich der Bewegungen des Euro 
und des DAX zeigt, dass beide Märkte im Trend parallel verlaufen sind. 

Es kann also keine Rede von  „brutalen“  Schwankungen im Euro sein. Denn gleichzeitig, 
so heisst es, „nahm der Dax Anlauf in Richtung Jahreshoch“. 

Es kann auch keine Rede davon sein, dass der Euro „die Jubelstimmung an den Märkten“ verdorben habe. Denn wie kann es dann sein, dass die „Grundstimmung“ an den deutschen Märkten „prächtig“ sei. 

Der Chart des Euro zeigt, dass der Anstieg des Euro in einem parallelen Trendkanal verläuft, 
der nach der klassischen Definition von R.N. Elliott gezeichnet ist: eine Trendlinie, die die Tiefs der Wellen (2) und (4) verbindet und parallel über das Hoch von Welle (3) verschoben wird. Sie sehen, dass die Intermediate Welle (5) exakt die obere Linie des Trend- kanals im Februar dieses Jahres erreichte und Primary Welle [3] beendete. 

Die anschliessende Korrektur formte ein „double zigzag“, eine a-b-c x a-b-c Korrektur. Diese Korrektur komplettierte Intermediate Welle (a), den ersten Teil eines (a)-(b)-(c) „Expanded Flat.“ Das neue Hoch im Euro zählt als Intermediate Welle (b), dem zweiten Teil der Korrektur. Was fehlt ist die Intermediate Welle (c). Die Welle C eines „Expanded Flat“ fällt (EWP p. 38) unter den Endpunkt von Welle A und sollte in der „Zone der vorherigen 4.Welle des nächst niedrigeren Grades“ enden. Diese Zone liegt zwischen 1.20 und 1.07 beim Euro. Der RSI (Relative Stärke nach Welles) zeigt, dass das gegenwärtige Hoch im Euro nicht bestätigt wird. Divergenzen warnen vor einem Trendwechsel. 

Die neuesten Sentiment-Indikatoren beim Gold und beim USD reflektieren „extreme bullische“ Stimmung für das gelbe Metall und eine „extrem bärische“ Psychologie für den USD. Die Geschichte der Märkte zeigt, dass sich „einseitiges“ Marktverhalten sehr schnell ins Gegenteil verkehren kann und oft einen dramatischen Trendwechsel vorausgeht.

 

"Point Of Recognition"

USD
© ELLIOTT today, Nov.13,2004 

There is a point along the way in every bull (bear) market when investors suddenly seem to get the message. It always happens in the "third of third wave," the centerpoint of the entire structure. (At The Crest Of The Tidal Wave, Prechter, 
Year 2000 Edition)

 

Chart: futuresource.com

 

 

manager-magazin.de
Der Euro sprengte die Party 
Freitag 5. November 2004 

Zum Wochenschluss nahm der Dax Anlauf in Richtung Jahreshoch: Gute Arbeitsmarktdaten aus den USA und ein fallender Ölpreis hievten ihn zunächst über 4100 Punkte. Doch ein neuer Kursrekord des Euro verdarb die Jubelstimmung. 

Frankfurt am Main - Nach Bekanntgabe guter Arbeitsmarktdaten aus den USA hatte der Dax am Nachmittag einen deutlichen Sprung über die Marke von 4100 Punkten gemacht. Börsianer zeigten sich daraufhin optimistisch, dass er weiter Kurs auf seinen Jahreshöchststand von 4175 Zählern
aus dem Januar halten würde. 

Doch der neue Rekordkurs des Euro sprengte die Party: Bis Handelsschluss gab der Dax einen Großteil seiner Gewinne wieder ab und ging nur noch mit einem Plus von 0,6 Prozent bei 4064 Punkten ins An der Wall Street verbesserte sich der Dow Jones bis zum Handelsschluss in Deutschland um 0,5 Prozent auf 10.365 Punkte. Der Nasdaq Composite kletterte um 0,5 Prozent auf 2033 Zähler. 

Die europäische Gemeinschaftswährung erreichte am frühen Abend mit 1,2953 Dollar ein neues Rekordhoch - und verdarb damit die Jubelstimmung an den Märkten. Denn der Euro ist nun so teuer wie noch nie seit seiner Einführung im Januar 1999. Seinen bisherigen Höchststand hatte er Mitte Februar bei 1,2930 US-Dollar erreicht. Die Europäische Zentralbank legte den Referenzkurs mit 1,2856 US-Dollar fest. 

Händler begründeten das neue Allzeithoch des Euro mit dem enormen Defizit der USA in Handelsbilanz und Staatshaushalt. Diese Verwerfungen in der US-Wirtschaft seien nach der Präsidentenwahl wieder in den Mittelpunkt gerückt und hätten den Dollar belastet. Experten gehen davon aus, dass der im Amt bestätigte Präsident George W. Bush seine Defizitpolitik fortsetzt. Mit einem niedrigen Dollar-Kurs lässt sich das Doppeldefizit leichter finanzieren.

Die Grundstimmung an den deutschen Märkten war prächtig: "Ich gehe davon aus, dass wir uns zunächst über 4000 Punkten halten und bis Ende des Jahres das alte Jahreshoch noch knacken",
sagte ein Händler. Die Zinsen schienen weiter niedrig zu bleiben und viele befürchteten einen Rückschlag bei den Renten, so dass diese Anlageklasse als Alternative nicht so attraktiv sei, fügte er hinzu.

Dollar gains against euro extend

LONDON (MarketWatch) -- The dollar extended gains against the euro on Wednesday, with political turmoil expanding amid an expected "no" vote from Holland on the European Union constitution. A German magazine report saying top officials have discussed a possible break-up of the European monetary union also weighed on the common currency. Freerealtime.com, June 1,2005