Stock Market Cliffhanger: 5 Historic Measures Point to ONE Direction

 

Options trading is HUGE these days, and you may be in that camp, too -- so, we think you'll find this story very interesting.

When we look at things like total volume of equity puts and calls, or call buying versus put buying, what can we learn about investor psychology and the market's overall trend?

Our friends at Elliott Wave International have some eye-opening answers for you in a free excerpt from their new monthly Financial Forecast publication.

FREE, read now: "Stock Market Cliffhanger: 5 Historic Measures Point to ONE Direction" ($49 value) >>

Whether you're a bull or a bear (are there any bears left?), it's a message you want to hear.

Insights into a “Remarkable” NASDAQ Development

 

Here’s what usually happens in the stock market when “the troops abandon the generals”

by Bob Stokes
Updated: December 06, 2021

You've probably heard the phrase: "Appearances can be deceiving."

In other words, it's usually wise to "take a closer look" because the truth may not be obvious.

This applies to various circumstances of life -- even the stock market.

For example, consider this Nov. 19 Reuters headline:

Nasdaq hits fresh record peak...

Of course, the headline appears to support a bullish outlook on the tech-heavy index.

However, after the market close that day, our U.S. Short Term Update showed this chart and said:

This remarkable chart encapsulates the current state of affairs. The top graph is the NASDAQ Composite from December 2020 and the bottom graph is the daily number of new 52-week lows for the index. Normally, as one would expect, when the NASDAQ declines, the daily number of members that make new 52-week lows increases. Yet, as the NASDAQ was making a new all-time high yesterday (NDX), the number of new 52-week lows surged to 425. This is the highest number of daily new lows since the market meltdown of February-March 2020. It vividly shows how concentrated the stock market rally is, with only a select number of issues pushing the NASDAQ higher. When the troops abandon the generals in the charge up the hill, retreat usually follows. [emphasis added]

 

 

TESLA punp & dump

 

Has Crypto-Mania Finally Run Its Course?

Here's a high-profile parallel between tech- and crypto-mania

By Elliott Wave International

When a company that's part of a major financial trend buys the naming rights to a professional sports stadium or arena, watch out!

History suggests that such a prominent move might be a sign that the fortunes of that company are about to dramatically change.

For instance, back in 1999-2000, technology shares were all the rage and one of the "highest of the dot-com high flyers," as the Wall Street Journal put it, was CMGI. It was the best performing U.S. stock from 1995 to 1999.

Well, in 2000, the firm bought the naming rights to the stadium of a major league football team.

The December 2021 Elliott Wave Financial Forecast, a monthly publication which provides coverage of major U.S. financial markets, showed this chart and elaborated:

The chart shows the stock market performance of CMGI, which is now known as Steel Connect. In August 2000, the company bought the naming rights to the home stadium of the New England Patriots for 15 years. Just two years later, in the wake of the dot.com bust, they were forced to relinquish their agreement.

 

 

Junk Bonds Are Sending a Signal to Stock Investors

 

Something happened just before the historic 2007 stock market top -- and it's happening again

By Elliott Wave International

It's generally known that stocks are risky. It all hinges on how "hungry" investors are.

So, if investors' appetite for risk starts to diminish, it stands to reason that this is not a positive development for stocks.

But is there a way to gauge investors' risk tolerance so as to get an early warning sign before stocks start to tank?

Yes, keep your eye on the junk bond market.

You see, junk bonds also carry a great deal of risk because they're issued by companies with the weakest balance sheets. Investors' claim on assets in case of bankruptcy is usually next to the bottom rung, just one notch above equity holders. Hence, the trend in junk bonds often aligns with the trend in equities.

Here's the important point: When the trends of stocks and junk bonds diverge, with stocks holding up as the value of junk debt declines, it's usually a sign of impending trouble for stocks.

A past Elliott Wave Financial Forecast, a monthly publication which provides coverage of major U.S. financial markets, showed a historical example of such a divergence and said:

A countertrend rally high in prices for high-yield bonds occurred in February 2007, three months before the intraday extreme in the financials, five months before a top in the Dow Jones Composite Average and eight months before a top in the Dow Industrials. All stock indexes then crashed into the first quarter of 2009.