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VIDEOThe Failure of Socionomics, Part 2
By
James Kostohryz
Aug 04, 2010 1:45 pm
Even when analyzed on its own terms, socionomics fails rather badly as a social theory and as a tool of stock market prediction.
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In part one of this article on the failure of socionomics, I analyzed some shortcomings of the theory as reflected in the article, Coming Soon: Bear Market TV by Robert Jay. However, I don't want readers to think that I've “cherry picked” this particular article to make a point.
I encourage readers sympathetic to the socionomics hypothesis to take a look at the very well produced video History's Hidden Engine. This is Elliot Wave International’s top promotional video. Among other things, this video goes over a series of cultural events and attempts to relate them to bull and bear markets.
I encourage readers to meticulously look up the dates for fashion, musical, cinematographic, and other events cited in the documentary and then carefully plot them on a stock chart. What they will find is two things:
First, the anecdotes selected are highly arbitrary: Why pick the cited song, movie, or fashion trend rather than another?
Second, when you plot these events carefully on the graphs, they just don’t add up. Given the timing of these events and their relation to the stock graphs, you can’t tell whether said events are leading, coincident, or lagging indicators of the stock market.
It seems strange, but it's nonetheless true, that having the propensity to cherry-pick events to fit their theory, proponents of socionomics cannot even seem to get their dates straight. This is just as true in the Jay's article as it is in the documentary film, History's Hidden Engine.
I'll let readers do most of the research. But here are a few highlights of the shoddy research and analysis featured in this film:
Women's Hemlines
The film parrots the popular legend about hemlines being predictive of stock prices. However, the only evidence for the so-called “hemline indicator” is selective anecdote. No reliable data set have been offered by proponents, and certainly not any socionomics researchers, that would allow analysts to replicate and verify this hypothesis.
Several analysts that have examined the matter have frowned on the theory. For example, fashion historians have shown that hemlines started to come down in 1927, right in the middle of the bull market, and more than two years before the 1929 crash. Want some more simple contrary examples? Miniskirts don’t get much shorter than the ones that Marcia Brady was wearing in 1973 and 1974, but that hardly heralded a bull market at that time.
How about more recent times? Super short miniskirts and stiletto heals were the hot trend according to market analyst Prieur du Plessis in June of 2008. Did that signal a bull market? Again, miniskirts where the hot item in spring collections for 2008 according to Catherine Valenti of ABC News, yet few would claim that these were go-go times in the economy or stock market.
No positions in stocks mentioned.
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