How to Use “Ecstatic” Investor Psychology to Your Advantage – Elliott Wave International

Free stock trading apps like Robinhood have proliferated beyond the U.S.

They’re available in the U.K. and Europe — for instance.

In December, our Global Market Perspective mentioned one such app in Turkey and then offered this analysis:

The Midas app is aiming to be the most-digitalized trading venue among Turkish stock brokers. From our point of view, zero-cost trades in a peak mood environment will probably do something far more damaging: They will coax ever-more amateur investors into a wildly overpriced market.

Well, this assessment proved to be timely.

Our April Global Market Perspective provided an update with this chart and commentary:

BorsaIstanbul100

Within a month [of our December analysis], Turkey’s Borsa Istanbul 100 Index peaked near 1600 and fell 10% in five days. Prices vacillated in January and February before eking out a new all-time high of 1589 on March 17. Then, the bottom fell out on Monday, March 22, as the [index] dropped nearly 8% and registered its biggest single-day decline since 2013. Shares plunged another 9% when the exchange opened on March 23, marking the index’s worst two-day slump since the global financial crisis in 2008.

Fundamental analysts searched for an “external cause” for the decline.

For example, this is from a March 22 Marketwatch article:

Turkey’s currency and stocks collapsed after the abrupt termination of its central bank head…

Sounds like a plausible reason, however, this was the third such change at Turkey’s central bank in just the past three years. Neither of the previous two changes resulted in steep
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