Greece is in trouble. The biggest trouble in its financial history. The country just missed a payment to the International Monetary Fund and is now asking its people whether to continue paying its debts or not. The banks will not open for a second consecutive week, because, as “The Telegraph” claims, they are down to their last 500 million euro. A liquidity crisis at its worst. The complete default of Greece seems inevitable. The Greek stock market only adds to the dark picture. In September 1999 the Athens Stock Market General index reached an all-time high of 6355 index points. Today, while the index is trading around the 800 mark, those levels are hard to imagine. But wait for a minute. Think about this: in 1999, levels around 800 seemed unreal as well. In October 2007, the year the Great Recession started, the Greek general stock market index reached 5334 and everyone was expecting the rally to continue. Instead, prices began declining. And just like nobody was expecting a sell-off in 1999 and 2007, nobody is expecting a recovery now. Well, the Elliott Wave Principle suggests we should be. The chart below explains why.
In theory, each bear market is nothing more than a large correction of the larger uptrend. In terms of the Wave Principle, each correction (except for triangles) consists of three-waves, labeled A-B-C. Once the correction is over, the larger uptrend resumes. Keep that in mind and take a look at the chart again. It appears that the correction in the Greek stock market, which started in September 1999 and is still in progress, is an A-B-C zig-zag pattern, where wave C is in its final stages. So, following the same logic, it turns out that once wave 5 of C is over, the Athens Stock Market General index should start rising, despite all the problems Greece has to take care of.
As John D. Rockefeller once put it, “the way to make money is to buy, when blood is running in the streets.” Of course it is a metaphor. We hope there will not be blood running in Greece’s streets. What Rockefeller meant is that we should stay positive, when the situation looks so hopeless that no-one else is. Because no trend lasts forever.