How To Predict Market Behavior – At the Crest of the Tidal Wave by Robert R Prechter, Jr.
Would you like to know How To Predict Market Behavior? The book – At the Crest of the Tidal Wave by Robert R Prechter, Jr. – uses Elliot Wave Theory to make predictions on how market from stocks, to gold, to currency, will perform.
According to Elliot Wave Theory, the performance of the stock market is based largely on mass psychology. As people buying stocks in mass will bring prices up, and people selling stocks in mass will bring prices down.
The book, At the Crest of the Tidal Wave by Robert R Prechter, Jr., shows how they chart out the statistical likelihood of wave changes. It can actually quite technical and dry, and was definitely a difficult read in the early chapters.
However, after the technical analysis, it becomes much easier to read and the premise of the book is logical and sound.
They give a lot of examples of how they predicted the bull market of the 80’s and 90’s. In this book, the predict the bear market to follow. They also note the complicated derivatives with mortgage loans, futures, and also junk bonds as symptoms of a bull market that will collapse.
Their predictions turned accurate later on with the housing crisis. They further predict that the bear market will not end until later this century.
If their predictions are correct, then we are still in a bear market, with another large depression looming ahead.
5 Wave Supercycles
In the book, Prechter charts out supercycles of 5 waves (3 waves up and 2 waves down).
They have various charts in their book to support their 5 wave analysis, which is also called Elliot Wave Theory.
Climbing a Wall of Worry – Bull Market Psychology
In order to understand whether we are in a Bull Market, they discuss the psychology of the public attitude toward the stock market.
In a Bull Market, stocks are undervalued because no one is buying. The reason for this is because people don’t believe they will make money in the market.
That makes it the best time to buy.
According to the book, in a bull market, the public will go up a wall of worry. Every time the market goes up, the will worry that it’s only temporary, and it will soon crash again.
The Slope of Hope – Bear Market Psychology
The opposite is true of the bear market, where people will believe that every time the market goes down that it’s a blessing in disguise, and they buy more stocks! Thus the psychology is completely opposite.
Thus, the say the public goes down a slope of hope, and at the very bottom, when they finally lose hope, they will sell it all and take massive losses.
Conclusion
This book is a must read, and discusses various markets and how market psychology functions.
Though it is dated, it discusses the fundamental concepts thoroughly, and it also did correctly predict the housing crisis.
Only time will tell if the next great depression will hit us for the final wave in the supercycle of the bear market they have predicted.
About Mey Duldulao
Back in 2011 I had over $30,000 in credit card and line of credit debt, was living paycheck to paycheck and was stressed out over my lack of success in my financial life.
In April of 2016, I became debt free and had a monthly passive income stream. I quit my job on December 23, 2016, and started doing my dream work of mentoring others on what I did to create the freedom to quit my job.
In 2017 we bought our first condo in Waikiki, and we went on 5 weeks of vacation (including a 7 day cruise to the Mexican Riviera)!!!
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