Any Stock Investors?? Take Note/Discuss

[bogie]

There is speculation that we are reaching the peak of an "Elliott Wave", which is an economic model developed in the 1940s. It's pretty dry stuff, but you can read more about it here. If you apply this model to the Dow Jones Average, we are basically at the peak of the current cycle. Here's a ghetto breakdown...

The model predicts that we will see three periods of growth, where the first two are followed by a short decline. After the third peak, there is a significant decline in market value. The model is also considers the market as a fractal, where the same behavior repeats itself on smaller and smaller scales. You'll see three minor upswings in each of the major upswings, and so on. See the following figure, which shows Elliot's model.



The model predicts that market is due to decline after this current peak, and probably in a significant way. To demonstrate the model, I got the last 5 years of DJIA off of Google and 'roughly' plotted the model trend over the actual Dow data. The red line is my fudged fit, but I think it demonstrates the principle reasonably well. This model works for the S&P and NASDAQ indexes as well over the same time periods. It also works for the last upswing prior to the 2008 financial fiasco.



There are a lot of stock forecasters that use this theory in developing the strategies for some of the large investment firms. You can find many articles about this online.

I'm not fear mongering here, and am not telling you to go and dump all you shares, but it's at least worth considering that the market may see a significant drop soon. Also, I'm only an amateur investor, but I like to stay informed with what the market is doing, and check on my investments at least weekly. I'll bet some of you finance guys know a lot about this stuff and thought we could discuss.

[Cylinder Head]

I'm just gonna go ahead and say that you can throw everything you think you know about technical analysis when it comes to this market. We are officially in completely uncharted waters and assuming models from the 40's isn't going to help you. Are we do for a correction? Yes. Are we due for a market collapse? Don't think so.

[hatidua]

The same folks running Wall Street now are the same folks that were at the helm in '07.

[ben4372]

The stock market as a whole is still a consistent gainer. Like Cylinder said uncharted. The population as a whole loves gambling, underdogs, favorites, dark horses, golden boys, and the list goes on. People are always trying to increase their fortunes so get to investing. That said I throw my extra investing money into things I like and know.

[bogie]

I'm just gonna go ahead and say that you can throw everything you think you know about technical analysis when it comes to this market. We are officially in completely uncharted waters and assuming models from the 40's isn't going to help you. Are we do for a correction? Yes. Are we due for a market collapse? Don't think so.

I don't "think I know" anything, which is why I posted this. I found it interesting that the old model from the 40s seems to fit well to the current upswing. You don't, which is fine. Thanks for your feedback.

[20X11]

There is 30-35% more upside potential...the Bernanke asset bubble has created tremendous corporate wealth and as long as the Fed keeps interest rates at these historic lows, there is no end in sight to the bubble. Add to that the fact that within 5 years the US will be a net exporter of energy, allowing us to reduce the 19 Trillion dollar debt to somewhat reasonable levels, and the upside potential far outweighs the downside risk. Bonds will cintinue to SUCK, equities will continue to boom. These factors haven't existed in the history of the markets, and certainly not in the data your referenced model was based on. Lots of people are afraid of a big drop...another reason to be bullish, as the markets tend to be contrary to sentiment. The time to get out is when EVERYONE says its time to get in.