Yes, in many cases, the Elliott wave structure suggests that the investor should take a position “against the crowd” or, in other words, be a supporter of the opposite opinion. Striking examples are at the bottom and top of the market. However, remember this from the classic Global Market Perspective: “Strict adherence to the wave pattern usually puts wave analysts where they need to be: against the market crowd. But not always. At certain points in the wave structure of the market, wave analysts run with it. “
A prime example of when Elliott Wave practitioners have a large company is the harshest part of the bear market. At times like these, the Elliott Wave pattern suggests that there is likely to be an even bigger dip ahead, and the crowd is also fully aware that the market is in the grip of a ferocious bear. The same is true for the strongest part of the bull market.
So, following the Elliott Wave Pattern and a consistent counter-trend are not the same thing. Indeed, read this quote from our just published January Global Market Perspective: “The blind counter-trend failed in 2020 because some of the world’s most influential benchmarks — the DJIA in the United States, DAX in Europe, and the Shenzhen Composite in China — have done most of the years, moving upward in the third wave of a small degree.
This issue of the Global Market Perspective showed this chart and said:It turns out that 2020 wasn’t just a bad year for counter-trend investing, it was the worst year for this strategy in history. The best years of the counter-trend strategy are also indicative. This technique yielded 80% profit when the first tech bubble burst in 2000, and 60% in 2009 when stocks rallied after the 2008-09 financial crisis. 2016 was also a good year for counter-trend players who believed cyclical stocks would benefit the most from economic growth.
What about the major global markets in 2021? Will countertrend investing be successful for the market or markets you are interested in? In other words, should you sell when others buy and vice versa? We can help you with this answer right now. One thing is clear to our 25+ global market strategists: 2021 will be a milestone for many of the world’s financial markets.
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