“We will now use the opportunity to warn you, that the fundamentals are likely to be suggesting an endless bear market and the conflict will probably be at its worst. Prices should start rising despite all that.” This excerpt is from an article called “You do not have to wait for Crimea”, which we published on March 13th 2014.
When that forecast was made, the chart of the Russian MICEX index looked like this:
Recommended reading: You do not have to wait for Crimea
A lot of things happened between Russia and Ukraine during the time after that forecast. Highlights by some of the largest media are given below to illustrate the seriousness of the situation.
“Russia called an emergency meeting of the U.N. Security Council because of the “serious escalation of violence” in Ukraine it said ruined any hope of upholding a truce reached in Geneva two weeks ago.” – USA Today, May 2nd 2014 –
“No evidence of Russia’s troops withdrawal claim. Russia has about 40,000 troops deployed near the border with Ukraine.” – USA Today, May 19th 2014 –
“Bloodiest day ever in Ukraine conflict as rebel missiles bring down military jet, killing 40 paratroopers and nine crew.” – The Guardian, June 14th 2014 –
Now, let’s see how the MICEX stock market index has been developing during the three and a half months since the forecast.
As visible, Russia’s MICEX index bottomed a little below the 1200 mark and began a strong rally, leading prices to 1500 so far. It turns out, that both the sell-off and the rally were accompanied by rising tension between Russia and Ukraine, just as we expected.
When MICEX was going down, the large media said it was because of the conflict between the two neighboring countries. It sounded like a logical statement. Well, logical does not mean true. Why is MICEX rising, while the civil war still persist? Why are there no mainstream media news about the stock market’s reaction to the conflict now? Because statement like “stocks are rising because of the war in Ukraine” makes no sense from human-logic point of view.
But it makes perfect sense from a socionomic point of view.The new science of Socionomics, founded by Robert Prechter in 1979, postulates that social mood drives financial, macroeconomic, POLITICAL AND SOCIAL behavior, in contrast to the conventional understanding that such events drive social mood. Social mood is best registered by price charts. Optimistic and happy people buy, while pessimistic, angry or afraid people sell. So each stock index chart is nothing more than an illustration of people’s subconscious attitude at the time. And guess what – it is not random or chaotic, it is patterned. If someone knows the whole pattern and is able to recognize which phase of the pattern is currently unfolding, he could be able to make a prediction about the next phase. He could be able to step out of the crowd and form an independent opinion. And that is just what we did on March 13th 2014.
Recommended reading: Elliott Wave Patterns
Real-life news and events lag the market. But the market has already turned up, which means that social mood is changing towards positive. Having that in mind, we will make one more socionomic prediction. We think that things should slowly start getting better between Russia and Ukraine. Time will tell.
Sources: www.usatoday.com ; www.theguardian.com
Russia and Ukraine flags image by www.bbc.com
