"If anti-terrorist forces were to find bin Laden with the market still rising, it would be the kind of 'news hook' that caps advances."
Robert Prechter, Elliott Wave Theorist, December 2001
Re-read that quote and then fast forward a decade: The stock market has indeed trended mostly lower since the death of Osama bin Laden. Is this a coincidence?
Fascinating question, but a debate about the answer can miss the larger issue. Most investors would expect the market to go higher on such news; so why did EWI's Robert Prechter say news of this magnitude might cap a rally and signal lower prices ahead?
To understand the answer, consider Paul Montgomery's "magazine cover" indicator. When a company's CEO appears on the cover of a mainstream magazine, it often means the company's share prices have topped, with a decline to follow. Why? Because by the time it comes to the public's attention, that company's appeal has run out.
This indicator also applies to social trends. When the latest fad hits the magazine covers, its popularity has been growing for some time; a trend change is nigh. Remember all the magazine covers about real estate in 2006 -- just as home prices peaked?
So you see how financial and social trends can change when most people least expect it.
In fact, the same psychology that governs stock prices also determines the character and intensity of many social activities -- including, perhaps, even the effort to capture or kill enemy number one:
"The assassination of Osama bin Laden on May 1 is a result not only of years of efforts to find him but also of the positive mood trend underlying one of the strongest global stock market rallies in decades. Bin Laden had been fighting two social trends that are the inverse of each other: the increasing focus of the intelligence analysts pursuing him and the decreasing focus of his own followers."
“Bin Laden Exits near a Top,” The Socionomist, May 2011
But what about the psychology that drives a market downtrend? How do we expect that to play out in society and in the Middle East?
Allow me to recommend a monthly publication which just celebrated its second birthday: The Socionomist.
The Socionomist helps you anticipate and prepare for changes in social mood that most people never see coming. The latest issue contains a socionomic analysis of bin Laden's death, the Tea Party, Glenn Beck, the Arab Spring, the future of radical Islam, and more.