On The Problem of Getting It Right

“Is there anything I can do
to make myself enlightened?”

“As little as you can do to 
make the sun rise in the morning.”

“Then of what use are the spiritual
exercises you prescribe?”

“To make sure you are not asleep
when the sun begins to rise.”

–Zen master to his disciple

The US stock market continues to track the start of the previous Supercycle Bear Market, which occurred in the final two months of 1929. Looking ahead, I expect more high volatility in both directions until the first wave of primary degree of trend bottoms at around 15,000 in the Dow Jones Industrial Average, which should come in by mid January.

Now would be a good time to get a handle on why I was able to accurately convey the forecast for a severe collapse in the market when virtually every analyst in the financial services industry was bullish in the extreme. It was certainly not brilliance on my part. Rather, I rely on a method that, while challenging in it’s application, provides a genuine result because it is based on what influences investment behavior. Conventional market analysts attempt to assign exogenous causes for the direction of markets and are consistently wrong at major turning points. The result is that, sooner or later, they wreak havoc on the investment community by insisting on using bad science in their approach.

The primary task in  investing is to avoid being a sucker in uncertainty. We don’t know what is going to happen next in the market, so we seek the advice of “experts.” We do not, as a matter of rule, bother to check the error rate of an advisor’s method. The fellow wears a good suit, sounds plausible and, most importantly, we want to invest or we wouldn’t be in his office to start with.

There is a reason we want to invest: social mood is elevated. The more elevated, the more eager we are to invest without doing much in the way of due diligence. If the market has been going up for a few years the advisor’s results are good and his clients have no trouble recommending him when a friend inquires.

When the market turns, everyone, especially the advisor, is shocked. That’s the situation today. What will follow is an attempt on everyone’s part to justify not selling and to hang on until the losses get too much to bear. eventually the crowd sells and most will never want to invest again.

The long term forecast given by the Socionomic Theory of Finance is for the US stock market to whipsaw through several large swings over the next twenty years or so. When the first swing down bottoms, most likely in January 2019, a good, tradable countertrend rally should recover some of the loss and top some time in late spring or early summer. After the countertrend rally, a long, devastating resumption of the bear market should take the market down to an incredible low with the Dow bottoming around 3,000 sometime in 2021-21. From that point, a huge rally that may take stocks up as much as fifty to seventy percent of the total loss will provide us with the best opportunity those of us alive today will ever have to make money in stocks, because after that advance the market should turn back down to its ultimately low below Dow 1,000.

The next twenty years in the market will be bewildering to most advisors. They were exceedingly optimistic at the top we just past. They are now becoming bearish. When we hit the next low in a few weeks they will have turned very bearish just when Socionomics offers a good short term trade. Then, come summer, we will be selling our trading position just when they shift back to the bullish side, quite possibly even more bullish than they were at the all time top, only to be whipsawed again as the next most devastating decline completely destroys values.

To survive and thrive in the market between now and the time you hang it up as an investor you are going to need to separate yourself from conventional thinking. I had to do this fifty years ago. I suffered a great deal and so did my clients in the late sixties and early seventies when I was a young broker during a bear market of much smaller degree of trend than the one now underway.

An investor should take ownership of his own destiny by understanding how markets work and following the probabilistic forecasts of practitioners of the Socionomic Theory of Finance. The very best socionomists, in my view, are the developers of the theory, Robert Prechter and his associates at Elliott Wave International.

I began writing essays some time ago to provide my family and some friends a resource for their decision making. I will continue to do this, but I’ll be eighty in April. I don’t yet feel like I’ve lived past my sell-by date yet, but you never know. The best, and only advice I can give is that you give the folks at Elliott Wave International a call (800-336-1618) and get yourself a subscription to The Elliott Wave Financial Forecast.

A year or so ago I wrote an essay about the theory and its development. The folks at EWI edited it so I know I’m giving you good information. To read it, click on the link below.

Happy New Year,



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