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Socionomics Reverses the Thinking Process Relating Markets and Events

While knowledge of current events and extramarket conditions has almost no value in predicting the stock market, knowledge about the position of the market can help predict changes in outside conditions. The Wave Principle provides a basis for speculating upon upcoming changes in market trends and therefore the events that result from the social psychology that the trend changes represent. This ability provides an opportunity to prepare for the coming character of events, and sometimes even actual events, before they are realized. It is worth knowing, for instance, that banks were closed by government decree in 1933 shortly after the low of Supercycle wave (IV) and that most of the banks in the country closed in 1857 as well, at the end of Supercycle wave (II). It is unlikely, therefore, that with regard to bank health, the next bear market of Supercycle or larger degree will fail to produce similar results. Most analysts work the other way around. For example, they wait until they have observed widespread bank failures and then declare their bearish meaning for the stock market, which is precisely the opposite of their true implication. With the Wave Principle, we have a tool that allows us to use the pattern of social mood objectively and properly rather than let it bend us to its design.

A conventional analyst asks, 'What will the Fed's actions do for, or to, the stock and bond markets? The Socionomist asks, 'What will stock and bond market action do for (or to) the reputation of the Fed?'

A conventional analyst sees a country's prime minister as standing 'at the helm of the economy'. The Socionomist sees social mood, and thus the market, and thus the economy, as standing at the helm of the prime minister's reputation. A conventional analyst asks how bills in congress (our case, parliament) will affect the stock market. The Socionomist asks what the stock market says about the kinds of bills that will be introduced and whether they will be passed. A conventional analyst points out that an election was divisive. The Socionomist says it was divided. A conventional analyst says that the outbreak of war will make people fearful and angry. The Socionomist says that angry and fearful people are prone to engaging in war. A conventional analyst asks how a federal government tax surplus will help the country. The Socionomist asks when it is in the wave progression of social mood that budget surpluses typically occur and forecasts the surplus. A conventional analyst asks what the impact of revised corporate earnings estimates will be on the stock market. The Socionomist watches the trend of stock prices and predicts in what direction analysts will revise their earnings estimates. Let us explore some concrete examples of this reversal of roles.

Throughout the 1950s, people built bomb shelters. They were responding to events that had already happened, in essence preparing for 1945 a decade late. In 1994, the Smithsonian Institution placed a bomb shelter in its collection as a relic. Observers, conventional analysts all hailed it as reflecting the beginning of a new era of peace for mankind. What is the true importance of that occurrence as a reflection of social mood? It reflects a complacency common to developing major social mood tops. It suggests to a socionomist that the long-term positive mood trend is nearing an extreme and that worries about warfare will probably soon begin waxing again. Conventional thinkers waste time building shelters when they are unnecessary and then have no shelters when they need them the most. Socionomists do the opposite.

Here is another example. Major market uptrends eventually bring into fashion the recurring belief that market timing is passe and useless, if not counterproductive: "All one needs is good stock selection. Just stay in good stocks, and you will make money and be safe." When have we seen this sentiment widely expressed? Answer: 1928, 1968 and 1998. Few made this case in June 1984. No one made this in 1932, 1942, 1859 or 1842. What socionomic conclusion can you draw when this opinion is pervasive? It is a symptom of complacency about the trend of the overall market, a complacency that people express only very late in uptrends. Now contemplate the kind of irony that we continually observe when thinking socionomically. It is precisely the position of the stock market in its overall trend that induces people to say that the position of the stock market in its overall trend is irrelevant. At the bottom of a bear market, timing becomes the new philosophy, which assumes its place on the pedestal just when it is actually time to concentrate on holding and selecting stocks. Socionomists can observe and profit from such irony in the marketplace very day; conventional analysts produce irony every day without knowing it.

Are we likely to get a female Central Bank Governor this time? Women usually get the mantle in bear markets.

Which, I as a socionomist, expect. This is because your 'decision' (in parenthesis because it is not a decision per se) to express doubt comes from the limbic part of your brain. The limbic system, which is faster than the rational part of your brain is responsible for action that does not require 'thinking'. E.g the herding impulse in animals protects the herd i.e safety in numbers. The same way if a bomb goes off nearby you will immediately flee.

The limbic system, which part of brain develops before the rational brain part, is designed to enhance life. E.g it is safer for wild animals to graze in a group rather than alone in which case the danger of being killed increases.

For human beings, in a situation in which they are unsure of what to do e.g whether to buy or sell a stock, they will tend to seek the opinion of others (albeit unconsciously) and thus herd. This fact explains why 95% of investors/traders fail.

So, in our case, you feel that a female Central bank governor cannot be chosen presently. Worse, if I ask ask you why
that should be so that is when you will start to rationalize the reasons.

NB: Pls don't take my comments above in a negative light. I was just trying to drive home a point.

Also, most people in this forum do not and will not agree with me for as long as they are human beings because the pre-rational part of their brains has already determined that. All these relates to social mood and hence the Wave Principle.

I think we should have coffee.

Strong rejection @5500 level as expected. Still a solid multi year barrier with NSE20 now clocking a 5 week losing streak enroute to test the 5000 handle. Waiting to see if former multi-year resistance will offer support. Support buffer is cluster between 4900 - 5050 level. Below there down to 4700.

When the 4yr rising wedge is broken downwards, bears will be in the driving seat.