A June 2015 profile of Robert Prechter, the world’s foremost proponent of Elliott Wave technical analysis, turned out to be the most popular investing story on MarketWatch for the week in which it was published.
One of the reasons is that, at the time, Prechter said the bull market in U.S. stocks was in a “precarious position” as a “mania” gripped investors, who pushed stocks to sky-high levels of overvaluation. The market has only risen since then, and it even got a bump from the November 2016 election of businessman Donald Trump as president.
I recently interviewed Prechter, who released a ground-breaking book, “The Socionomic Theory of Finance,” at the end of December. In the 813-page book, which took 13 years to write, he proposes a cohesive model that takes into account trends in sociology, psychology, politics, economics and finance. I highly recommend the book.
As I’ve explained here, Elliott Wave theory says public sentiment and mass psychology move in five waves within a primary trend, and three waves in a counter-trend. Once a five, or V, wave move (the waves are sometimes described in Roman numerals) in public sentiment is completed, it is time for the subconscious sentiment of the public to shift in the opposite direction, which is simply a natural cause of events in the human psyche, and not the operative effect from some form of “news.”
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