Uncovering the Elliott Wave Secrets of the 2008 Financial Crisis
The Financial Crisis of 2008, a well-known calamity that shook the global economy, had distinct Elliott Wave characteristics. It was a natural correction in the wave cycle, following a complete five-wave impulse pattern. But what if we told you that the seeds of this disaster were planted much earlier?
The collapse of the Dot-com bubble in 2000 was the real beginning of the market correction, which later culminated in the 2008 Financial Crisis. These two meltdowns, along with the bull market in between, formed a textbook Elliott Wave pattern known as an expanding flat correction.
An expanding flat consists of three waves, marked A-B-C. Waves A and B have three-wave structures, while wave C is a five-wave impulse pattern. The correction began with the burst of the Dot-com bubble in March 2000. The bear market took the shape of a simple (a)-(b)-(c) zigzag correction, where waves (a) and (c) were clear impulses.
During the 2002-2007 bull market, the housing bubble fueled by low interest rates really took on a life of its own. The S&P 500 index recouped all the losses it suffered in the aftermath of the Dot-com bubble, but just barely. Not long after the market made a new all-time high in October 2007, the music stopped again.
The 2008-9 Financial Crisis eventually produced a textbook impulse pattern in wave C. The dot-com crash, the housing bubble, and its undoing formed a complete expanding flat correction spanning nine years. According to the Elliott Wave principle, once a correction is over, the preceding trend resumes.
The post-2009 bull market is a result of this complete expanding flat correction. What’s next for the market? Stay tuned for our Elliott Wave PRO analysis of the S&P 500 to find out.
In conclusion, understanding the Elliott Wave patterns and their implications on the financial markets can provide valuable insights for investors. By recognizing these patterns, individuals can make informed decisions about their investments and better navigate the ups and downs of the market.