By Elliott Wave International
Elliott Wave International's analysts track dozens of indicators, and our U.S. Short Term Update pays particular attention to those which may offer clues about the near-term.
Consider this analysis from the Sept. 26 U.S. Short Term Update, a thrice weekly Elliott Wave International publication which provides analysis of near-term trends of major U.S. financial markets:
Short term measures of investor sentiment indicate excess pessimism. ... Stocks should start a countertrend rally to relieve the downside compression.
No analytical method can guarantee an exact day and time a forecast will be fulfilled -- if it's fulfilled at all. However, some 13 trading days later, the Dow did hit a low. By Nov. 30, the senior index was more than 5,000 points higher. Excess pessimism had morphed into excess optimism. Fear had morphed into complacency.
Indeed, the November Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and major cultural trends, noted:
By several measures, optimism at the current time is equal to or greater than that which held sway at the broad market's all-time high in November 2021 and at the blue chips' all-time high in January 2022!
The stock market pendulum usually starts to swing the other way when an extreme is reached -- in this case, extreme optimism. So, it hasn't been surprising that prices have mainly trended lower since around the beginning of December -- at least, so far.
So, are investors forever locked in to short-term swings between optimism and pessimism?
We all know the answer is "no" from looking at historic stock market charts. We see that short-term trends are part of intermediate term tends, which, in turn, are part of even larger trends and so on. In other words, the stock market is a fractal.
Here's an illustration and commentary from Robert Prechter's book, Last Call:
