Enviado: 25/8/2010 18:44The very center of the wave structure — the most volatile point in an impulse — should occur in 2010 when the market reaches wave iii of (iii) of 8 of 3 of (3) of 3. In a bull market, this point in the wave structure marks the time at which investors in the aggregate stop worrying about downside risk and begin projecting ever-higher levels (for example, by writing books about stocks for the long run and Dow 100,000).
In a declining impulse wave, such as the market is in now, the same point marks the time at which investors in the aggregate stop focusing on the market’s upside potential and start worrying about how far down it will go. This is a very rare event at Cycle degree, and its upcoming occurrence will be stunning enough to set records for financial panic.
I used to call this spot in the wave structure the “point of recognition,” but the Elliott wave model and socionomic theory make clear that investors in the aggregate never consciously recognize anything. It is more accurately described as the point of change in net social mood and directional rationalization.
That’s a mouthful, so I’m just adopting a vanity short-cut and calling it the “Prechter point.” Here is how it comes about: From the start of a bull market, investors become increasingly less pessimistic and therefore act to make stock prices go higher. The center of the wave is when optimism becomes the dominant expression of social mood. From the start of a bear market, investors become increasingly less optimistic and therefore act to make stock prices go lower. The center of the wave is when pessimism becomes the dominant expression of social mood. Thus, as prices rise in a bull market, most investors still worry about downside price potential until the “third of the third” wave occurs, after which they focus on — and rationalize — upside price potential.
Conversely, as prices fall in a bear market, most investors focus on upside price potential until the “third of the third” wave occurs, after which they focus on — and rationalize — downside price potential. Much academic literature equates such biases with levels of concern about “risk,” but investors in the aggregate never evaluate risk and never consciously take risk. Unconscious herding makes investors feel that they are taking non-risky actions, and rationalization comforts them with assurance that whatever action they take is the sensible thing to do….
As wave 3 of c passes its midpoint, expect very bad news to be rampant. Remember how you felt on 9/11? Remember how you felt in October 2008? Those were the centers of wave a and wave 1, respectively. The center of wave c will be scarier than they were.
In a declining impulse wave, such as the market is in now, the same point marks the time at which investors in the aggregate stop focusing on the market’s upside potential and start worrying about how far down it will go. This is a very rare event at Cycle degree, and its upcoming occurrence will be stunning enough to set records for financial panic.
I used to call this spot in the wave structure the “point of recognition,” but the Elliott wave model and socionomic theory make clear that investors in the aggregate never consciously recognize anything. It is more accurately described as the point of change in net social mood and directional rationalization.
That’s a mouthful, so I’m just adopting a vanity short-cut and calling it the “Prechter point.” Here is how it comes about: From the start of a bull market, investors become increasingly less pessimistic and therefore act to make stock prices go higher. The center of the wave is when optimism becomes the dominant expression of social mood. From the start of a bear market, investors become increasingly less optimistic and therefore act to make stock prices go lower. The center of the wave is when pessimism becomes the dominant expression of social mood. Thus, as prices rise in a bull market, most investors still worry about downside price potential until the “third of the third” wave occurs, after which they focus on — and rationalize — upside price potential.
Conversely, as prices fall in a bear market, most investors focus on upside price potential until the “third of the third” wave occurs, after which they focus on — and rationalize — downside price potential. Much academic literature equates such biases with levels of concern about “risk,” but investors in the aggregate never evaluate risk and never consciously take risk. Unconscious herding makes investors feel that they are taking non-risky actions, and rationalization comforts them with assurance that whatever action they take is the sensible thing to do….
As wave 3 of c passes its midpoint, expect very bad news to be rampant. Remember how you felt on 9/11? Remember how you felt in October 2008? Those were the centers of wave a and wave 1, respectively. The center of wave c will be scarier than they were.