By Elliott Wave International
In the world of investing, “complacency” is a potentially hazardous state of mind.
Consider that every year, September and October have often been rough on investors. But, in 2019, the S&P 500 had gained approximately 2% during each of those months.
Investors were comfortable with owning shares. Too comfortable.
That’s why in November 2019, the Elliott Wave Theorist discussed the U.S. stock market and said:
Complacency is widespread now.
Yes, that complacency actually extended well beyond the borders of the U.S.
Indeed, in 2019, investors were even pouring into some of the past decades worst-performing markets. As examples: Moscow’s main stock index spiked 29% and Italy’s MIB index rose 28%.
Even Greece, a nation that brings to mind headlines of financial woes, had its equity market as Europe’s top performer in 2019.
In fact, our January Global Market Perspective zeroed in on Greece specifically and showed this chart as an example of extreme complacency:
That complacency indeed marked a top in Greece’s ASE Index. Here’s an updated chart from our March Global Market Perspective, along with the commentary:
After prices briefly rose above the diagonal lines in a pattern that R.N. Elliott referred to as a “throwover,” the Athens Composite reversed course and plummeted 21%. Investors punished all stock markets in February, but they positively brutalized the markets they still perceive to be riskiest. As we have said before, it’s never wise to blindly jump into a market no matter how beaten down it has become. Likewise, even a quick consultation with the waves usually pays off in spades.
You see, in addition to the epic complacency, Elliott waves in the ASE Index also clearly indicated to our subscribers that a change in trend was at hand.
Now that a downturn has occurred in global equity markets, this is the time to learn about the Elliott wave method and get insights into how to apply it to your market analysis.
You can do so by reading the online version of Frost & Prechter’s Wall Street classic book, Elliott Wave Principle: Key to Market Behavior. Access is 100% free when you become a member of Club EWI. Membership is also free.
This article was syndicated by Elliott Wave International and was originally published under the headline Europe’s Best-Performing 2019 Market: a Harsh Lesson in Complacency. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.