Elliott Wave Courses | by ForexCycle.com | Sunday, 04 October 2015 05:21 UTC
By Elliott Wave International
We've seen it time and again: The investment crowd often hops aboard a financial trend just as it's about to end.
Government itself is actually a case in point. Here's what the August 2007 Elliott Wave Financial Forecast said:
[In July], The Elliott Wave Financial Forecast discussed governments' knack for committing to a trend when it is finally ending. A front page article in the July 24 issue of The Wall Street Journal titled, "Governments Get Bolder in Buying Equity Stakes," confirms the strength of this very dependable sell signal.
Just two months later (October 2007), the stock market registered its historic high.
Overseas buyers are another major chunk of the investment crowd. That group was also ramping up their purchases of U.S. stocks back in late 2007.
Corporations are likewise part of the herd.
Let's fast forward to 2015, and read what our August 14 Short Term Update had to say just before the worst part of the recent selloff:
Selling pressure was exhausted on Wednesday (Aug. 12), when stocks declined sharply early in the session but rallied to erase all or most of the early-day losses. The most astounding aspect of that day was [that] much of the stock being bought was not by individual investors or by institutions, but by companies themselves. A unit of Goldman Sachs that executes share buybacks for clients had its busiest day since 2011. ... Companies are bad market timers.
Indeed, our independent analysis indicated that the stock market rally was ending. Here's a chart that the August 14 Short Term Update showed [wave labels available to subscribers]:
By the end of the week that followed, the Dow and S&P were down nearly 6%, while the NASDAQ was down nearly 7%.
Here's a weekly S&P 500 chart from August 21:
But even as the selloff was underway, still another group was hopping aboard what they thought would be a continued uptrend.
As we know, the market timing of these millionaires could not have been worse.
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