S&P 500: Why Didn't It Crash Further Last Week?
Bad U.S. jobs number, bad news from Europe… So why did stocks rally?
By Elliott Wave International
Think back to Friday, June 1. The DJIA closed down almost 300 points that day, and pundits blamed it on a bad U.S. employment report and even worse news from Europe.
The expectations for the next week were so bearish that CNBC held their Opening Bell segment on Sunday night (June 3) instead of Monday morning. (Robert Prechter was invited to speak; hope you got to see that interview.)
But the crash never showed up. "Fundamentally," nothing had changed — but stocks not only "refused" to fall further, they rose. Odd, right?
Not really — if you look at it from an Elliott wave perspective. This is an excellent example of how the news doesn't shape price trends — the market's collective psychology does. What's more, market mood will shift before the news, as in this case. Yet those shifts are not random — they unfold in Elliott wave patterns.
That's how our U.S. Intraday Stocks Specialty Service (FreeWeek starts June 14) knew of the week's rally ahead of time. Take a look at this S&P 500 chart the Service posted pre-open, at 9:11 AM, on June 5 — a day before the huge rally on June 6.
US Stocks Overview (Intraday)
Posted On: Jun 5 2012 9:11AM ET / Jun 5 2012 1:11PM GMTMarket Overview: Good morning. … the initial pressure should be on the downside for the indices. The Elliott wave interpretation remains that price action is in a 4th wave [rally] of a larger 5th [wave]. The immediate bullish alternate is that [the June 4] low completed the final 5 within a 5-wave decline.
As you can see, before the open on Tuesday, June 5, there were 2 two viable short-term Elliott wave counts for the S&P. The preferred forecast called for a rally in wave 4. The alternate (or less likely) forecast suggested that the 5-wave decline had already ended, and rally was due. Both agreed on one thing: a rally was next.
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This article was syndicated by Elliott Wave International and was originally published under the headline S&P 500: Why Didn't It Crash Further Last Week?. 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.
