Falling Markets Cause Rising Tensions

The disappearance and possible murder of Washington Post reporter Jamal Khashoggi is dominating the recent news cycle. But the resulting U.S. – Saudi Arabia tensions did not cause the collapse in Saudi equities nor any move in crude oil. As is usually the case, it’s the other way around.

Recent headlines reflect conventional thinking: “U.S.-Saudi Tensions Pushing Stocks Lower” and “Oil Prices Waver On U.S.-Saudi Tensions.” The mainstream default position is that “news” or “events” cause markets to move. Prechter’s Socionomic Theory of Finance, however, clearly proves that news has no bearing at all on markets. In fact, the social actions that cause news stories tend to come after markets have already moved.

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Oil prices have been rising for months. The Saudi Arabian Tadawul All-Share index most recently topped out in July, but it was already down 60% from its peak twelve years ago. We warned readers on 8 October that another declining wave in the Saudi Arabian index was probably starting. And, we anticipate a continued decline in the weeks ahead, regardless of the outcome of the situation with the missing journalist.

Stock markets reflect social mood; declining stock markets reflect negative mood. Increasing tensions in relations, be they political, commercial or personal, are symptoms of this negative trend in mood, not the cause.

Declining Stock Markets




About the Author

Murray Gunn
Murray Gunn is Head of Research for Elliott Wave International's Global Market Perspective, a monthly summary of the firm’s 25 analysts’ views on every major freely-traded market in the world. After earning his Master of Arts (Honors) degree in Economics from the University of Dundee in Scotland in 1991, Gunn went into fund management. He quickly realized that textbook descriptions don’t apply to real-world markets, which in turn led him to technical analysis and the Elliott Wave Principle. He worked as a fund manager in global bonds, currencies and stocks, including long posts at Standard Life Investments and a five-year stint in the Middle East at the Abu Dhabi Investment Authority. Gunn then joined HSBC as Head of Technical Analysis. He has served on the board of the Society of Technical Analysts and delivered lectures on the Elliott Wave Principle to students at The London School of Economics, Queen Mary University and Kings College London. You can read Gunn's commentary in Elliott Wave International’s Global Market Perspective, Interest Rates and Currency Pro Services, and on deflation.com.