Have you been watching the news recently? If yes, then you have probably heard about the riots in Ferguson and the US airstrikes against the extremist Islamic State in Iraq and Syria (ISIS). But what do these two conflict zones have in common? And what does the Market have to do with it?
The riots in Ferguson, Missouri, United States, started after the death of Michael Brown, 18, who was shot down by a Ferguson’s police officer on August 9th. People were brought on the streets by doubts that the killing was race related. Riots, looting and vandalism followed and are still present. In this article we will not try to find the truth about the shootings in Ferguson. We hope the authorities find it. But we want you to pay attention to the date – August 9th.
The other conflict zone, which has something to do with the USA is Iraq. On August 8th the US military began a series of unmanned airstrikes against ISIS’ radical Islamists in northern Iraq. The military operations still continue, but keep in mind the starting date – August 8th.
Now, why remember 8th and 9th of August? According to the science of Socionomics, real-life events are not the cause, but the result of collective social mood. The best illustration of social mood is the price charts of the major stock market indices. Prices going up means positive social mood, while market declines suggest for a negative social mood. That is why riots, wars and other types of conflicts tend to occur near market bottoms, since social mood is highly negative at that time. In addition, the larger the degree of decline, the bigger the conflict. Following this chain of thought, let’s take a daily candlestick chart of the Dow Jones Industrial Average index and see if there is a connection between the market on one hand and Ferguson and Iraq on the other.
As you can see, DJIA finished its 900-point decline from 17 148 to 16 261 on August 8th. The US airstrikes in Iraq started on the exact same day. The riots in Ferguson began on the very next day. “What a coincidence” some might say. No. It is the natural result of collective human social mood. In the market, negative psychology causes sell-offs. In real life – violence. There is always a concrete reason, of course, but whether people will react to it or not, depends entirely on the current phase of social mood. Could these phases be predicted? Yes, by using the Elliott Wave Principle.
Sources: www.cbsnews.com; www.economist.com
Images by: www.pamelageller.com; www.cfr.org