Pundits and data junkies alike are predicting a win for Hillary Clinton in November. But one of of looking at the race might make you think differently.
There are public opinion polls, PACs, Super PACs, online betting platforms, and even Las Vegas handicappers all making predictions about who will win the upcoming presidential election in November -- and by how much. But there is another way that removes the ego, emotion and human judgement from the equation: Socionomics.
Socionomics is the concept of tracking the crowd's mood swings in the process of anticipating and predicting social action. Sound a bit Elliott Wave-ish? It should. Robert Prechter began developing socionomics in the '70's and '80's -- and he is also the guy credited with rescuing the Elliott Wave Theory from obscurity.
There are concepts that are similar to socionomics, like behaviorial finance. However the governing tenant of socionomics is that the mood of the crowd (society itself) determines what will happen in economies. This is the opposite of what we traditionally believe: That the economy determines what the mood will be, thus what will happen in society.
Let's compare the perspectives of each, in a very general way, and see which better reflects objective common sense (assuming we can get there from our subjective human perspective of needing straight-line explanations to order our world). Mainstream paradigmers believe that the economy is great because stocks are at all-time highs, so social mood is ebullient, and all is well. During these periods, governments tend to push their agendas while the crowd is anesthetized by rising markets, portfolios, and the ability to buy and do things that satisfy our ego needs.
Socionomics paradigmers believe that the ebullience of social mood is allowing markets to rise, as the structural troubles of the economies around the world are ignored, due to the anesthetizing effects of the manic phase of the mood pendulum. The mood pendulum swings regularly, at various degrees of trend (durations of time) from depression to mania, back to depression, then mania, etc.
Mainstreamers propose that since markets are at all-time highs, the status quo will be maintained, and Clinton will win the presidency. In other words, if it ain't broke, don't change it. Socionomists propose that this level of ebullience, mania, and complacency can only be manifested at the termination point of a long term trend, which, at this extreme in mood, portends a looming reversal in society's awareness of the actual conditions in which we live. Again, these are very general perspectives, to set up an objective counter-forecast to the current mainstream's assumption that prices only rise, the Fed is in control, and in this TINA (there is no alternative) environment, stocks are the only place to have money, as nothing else earns or grows. This assumption can only be made with years of pump-priming stimulus has created such complacency that risk is no longer even considered when exposing capital to the market.
Some mainstreamers are having trouble fathoming how Trump, with his extreme views, can have made it to on GOP's ticket. Socionomists explain that only at a cresting of a multi-decade tidal wave of social complacency could society attach itself to a platform of ideas like Trump represents. On the other hand, while mainstreamers relate to the apparently gentler Clinton, socionomists warn that the reversal that has begun in social mood, allowing Trump to become the GOP's flag-bearer, suggests a coming change in American lifestyle unlike anything seen in decades, if not centuries. Further, these diametrically opposed candidates are so far apart due to the size of the shift that is due, which will also be measured in decades, and that since America has experienced a period of prosperity not seen since at least the rise of the British Empire, a dark period (a Winter Season, according to Kondratieff theorists) is next.
The next president should then represent the coming mood of darkness, and walk society back to darker days, away from the enlightenment we all feel we represent. Where we have become about inclusion, the global village, and just getting along, we will move toward exclusion, border and trade barriers, and war rather than love.
So, which candidate represents where we've come from in the past few decades vs. which represents our recently (multi decade/century) anesthetized primal/survival instincts, which bubble up from our collective unconscious to conscious in times of stress? We all will get the chance to vote our opinion in a couple months, and live with the result.
The technical picture of the market itself, as measured by the S&P 500 has arrived at a very scary position; perhaps the crest of the tidal wave of price, as considered above regarding social mood.Click here to see chart in a new window
As this monthly chart of the S&P 500 illustrates, there are some ominous comparisons currently manifesting to conditions that have led to market crashes in the past two decades. Among these, but not limited to those reflected on this chart, stochastics are back to extreme overbought levels, which don't guarantee immediate plunges in price, but no plunge in price has occurred without stochastics having reached these levels; strike one.
Not only are stochastics back at historically overbought extremes, but they are exhibiting lower highs as the price of the S&P 500 is making higher highs. This is known as a bearish divergence sell signal, and was a harbinger of dynamic selling at the 2007 and 2000, then all-time highs, too; strike 2.
The price pattern is now countable as a five wave rise from the 2009 low to these all-time highs. The last time this occurred was into the mania of 1999/2000, which witnessed the Dotcom Bomb, and bursting of the stock market bubble. If not fully completed yet, the pattern should do so within the blue box at the top of the chart, which is 2300 +/-100; strike three. As the yellow box at the right now notes, crash implied.
The minimum expectation for a decline of the magnitude implied by this objective perspective is back to 1500 +/-50, which was the previous peak/reversal zone of both the 2000 peak, as well as the 2007 peak. That involves approximately 33% in price damage. Due to the size of the wave of social mood that could be maturing here, the higher green box around 1100 +/-100 is probable; approximately 50% below current levels. The lower green box around 700 +/-100 is unable to be ruled out, which makes it theoretically possible, too; approximately 68% below today's pricing.
All of these would be devastating to our wealth, lifestyles, and American society, and imply social disorder unlike this country has ever seen. Socionomically, then, the darkening of mood that is on schedule for the next few years implies a dramatic change to the crowd's complacency, acceptance of the status quo, current administration, etc., which will move American culture from a position of teflon-like invincibility to one of vulnerability, which will create a "circle the wagons" mentality of "us versus them," and lead to a shaking off of the anesthetic of the past sixty years, causing withdrawal from public markets, leading to severe selling and disassociation from stocks.
There it is, an alternative perspective to the au currant paradigm. Whether you agree or not, perhaps just considering it will allow you to move to a less aggressive stance with your capital, and create the flexibility that could come in handy when conditions reach extremes like they have returned to here.
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