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14 March 2015

Here's What Stock Market Bulls Might Be Overlooking
A growing economy is not necessarily bullish -- see for yourself

By Elliott Wave International

Editor's note: You'll find a text version of this story below the video.
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On Friday (Feb. 27), the 4th quarter U.S. GDP was revised downward to 2.2% from the original 2.6%.
"U.S. stock markets shrugged off the revision," wrote Fox Business. And why wouldn't they -- after all, the conventional wisdom says that as long as the economy is growing, so is the stock market.
Except, it's not exactly true.
See, if that notion were true, then you'd have to assume that the U.S. economy was in a bad shape in 2007, when the stock market began its biggest decline since the Great Depression. But the facts show the opposite.
When the Dow topped in October 2007, key economic measures were indeed strong:
  • In the quarter preceding the market peak, GDP expanded at 2.7%
  • Unemployment in 2007 was 4.6%
  • Consumer confidence was very strong, too (top red circle; chart: Bloomberg)
If a strong economy means a strong stock market, then stocks should have continued higher. They didn't. The Dow fell more than 50% over the next year and a half:
If you think that's counterintuitive, then fast forward to early 2009. That's when we saw the opposite economic picture:
  • Consumer confidence fell to an all-time low (the second red circle on the blue chart)
  • GDP growth fell to a negative 5.4%
  • Unemployment rate more than doubled to almost 10%
Because of such terrible economic data, few mainstream economists were optimistic in early 2009. And yet the stock market bottomed in March of that year.
This reminds me of a quote from our monthly Elliott Wave Theorist:
"Suppose you were to possess perfect knowledge that next quarter's GDP will be the strongest rising quarter for a span of 15 years, guaranteed.
"Would you buy stocks?
"Had you anticipated precisely this event for 4Q 1987, you would have owned stocks for the biggest stock market crash since 1929.
"GDP was positive every quarter for 20 straight quarters before the 1987 crash -- and for 10 quarters thereafter.
"But the market crashed anyway."

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10 March 2015

Forex Traders: The Only Question You Should Be Asking
Elliott wave analysis foresaw the USDJPY's recent rally. Find out what else we're expecting for the world's leading forex markets (plus stocks, gold, oil and bonds) -- absolutely FREE

By Elliott Wave International

I can't help it. Whenever I read the mainstream financial news, I feel like I'm eavesdropping on a job interview at Microsoft.
In case you don't remember -- Microsoft was made famous, in part, for asking prospective employees one single question: Why is a manhole cover round?
They wanted to assess how a person approaches a question that has many answers. And, many answers are what they got, from the most practical (i.e. "Because a manhole is round") to the most philosophical (i.e. "The circle is the most aesthetically pleasing shape for the human eye.")
I'll now take you back to the world of mainstream finance where those in charge are regularly asked to answer this basic question: Why did market "X" move this way today? And, many answers are what they give.
Take, for a real-world example the March 9-10 upsurge to a 7-and-1/2 year high in the Dollar/Yen currency exchange pair. As for why the USDJPY rallied, the experts offered up these (and many more) explanations:
  • A February 6 robust U.S. jobs report
  • A February 9 hawkish speech by outgoing Dallas Federal Reserve President
  • A February 9 triple-digit rally in U.S. stocks
  • A February 8 government report showing Japan's fourth-quarter GDP was lower-than-expected
The truth is, anyone can come up with endless reasons to explain market action -- after the fact.
But what about anticipating the market's next move -- before it occurs? That is a question only EWI's Currency Pro Service is equipped to answer. Case in point: At 9:44 a.m. on March 9, Currency Pro Service posted intraday analysis for USDJPY that identified a bullish contracting triangle on the pair's 15-minute price chart.
For newbies, an Elliott wave contracting triangle is a sideways pattern comprised of 5 waves, A-B-C-D-E. They most commonly form in 4th wave or B wave position. And when one ends, the resolution is usually sharp and swift. Here is an idealized diagram:
The March 9 Currency Pro Service pinpointed the contracting triangle on the USDJPY chart and set the stage for a powerful near-term rise:
"The pattern can be counted complete, which suggest USDJPY will thrust higher toward the 121.84 high established in early December."
The next chart shows you how the post-triangle thrust propelled prices right into the cited upside target at 121.84.
The mainstream experts always give you plenty of reasons why a certain market did what it did.
But EWI's renowned Currency Pro Service analysts enable you to anticipate what a certain market likely will do in the coming hours, days, weeks and more.
And, there's no better time to experience the incredible resource first hand. Why? Because for the second-time only, EWI has launched a Pro Service Open House event. Open, as in you get complete, no-cost access to Pro Service's premier forecasts for not only Forex -- which Investopedia calls "the most traded market in the world" -- but also the world's leading energy, metals, interest rates, and stocks.
This amazing one-week opportunity begins on Tuesday, March 10. Find out what's in store for the markets you follow, free! Simply join the thousands of Club EWI members already taking part in the Pro Service Open House as we speak.

This article was syndicated by Elliott Wave International and was originally published under the headline Forex Traders: The Only Question You Should Be Asking. 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.