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New York Pops Its Cork, Again

New York City is a social mood lightning rod. One way or another, a new direction in the trend always finds a way to express itself – usually quite immediately and forcefully – in the Big Apple. Remember the New Millennium celebration of December 31, 1999 when a global fireworks display circled the planet and culminated on Times Square? NASDAQ added its giant flashing market billboard to the square a few days before. It took the Dow just two weeks to put in a high that remains its all-time high. The World Trade Center tragedy of 9/11, the end of a major bear market leg in 200, is a classic example of the a bear market result expressing itself quite dramatically on the opposite side a social mood swing. 

Despite the tragedy, the 2000-2005 period will probably be remembered as THE golden era in NYC history; a period in which the irrepressible energy of the city carried inhabitants on an endless run of cultural high points. Anyone who caught the spectacular fireworks show that took place over the East River on the July 4 knows what I mean. Just like the financial markets over the last five years, the skies over Manhattan seemed to light up for the duration of the event. It was one continuous finale. The historic relationship is clearly in place as the  S&P is at a new post-peak high and the restaurants and shows in and around Times Square are packed, once again. As was the case in 1966-1968, however, this chart shows a glaring divergence:

In the late 1960s, gross sales of Broadway tickets held up with the Value Line, but total tickets were down. The chart shows that the same discrepency is in place now. Ticket sales were up last year, but they were actually down slightly from for the latest season, which ended in June. This divergence is a telling one. Like so many other cultural trend indicators, like baseball and movie attendance, they've been hanging in there near highs established at the great social mood peak of 2000, but they are losing their grip.

The “Now Go Home” in today’s Bloomberg headline hints at the potential for a big reversal. It's an odd kicker because there is nothing in the story suggesting any local animosity toward visitors. For all we know, it expresses the desire of a lone headline writer, but when stocks start down, tourists might want to consider a trip to the country instead of the big city. The bear market may well trigger a wave of old-time, New York City surliness. In the next phase of a bear market, tourists will take the hint and stay away in droves.

EWFF, May 2000
Show Me a Sign
Speaking of surreal, did you see the glazed looks on the faces of New Yorkers as they gathered outside NASDAQ's market site in Times Square April 14? One NASDAQ commentator said that he didn't have to look at the tape. He could tell when the market hit an air-pocket by the level of shock staring back at him from the street. As the market tanked, the media zoomed in on those faces to articulate what its army of financial commentators were suddenly at a loss for words to express. A picture in Time magazine called it "Ground Zero" and said, "Even live from NASDAQ's own TV studio, it was hard to describe the action." Newsweek's April 24 weekly recap opened with this headline quoting a women "as she watched the NASDAQ signboard in Times Square:"

Oh my God, oh my God, oh my God! Agghhhhh!

If only someone had shown them a sign. Actually, all they had to do was take a few steps back and look up. A whole host of long-term sell signals would have literally flashed before their eyes. The biggest and most radiant is the new NASDAQ billboard they were standing under. It is on the left in this picture of Times Square. The $37 million stock market beacon was turned on within days of the January peak in the Dow. It is now the largest, most technologically advanced and most expensive display in Times Square. The sign beams NASDAQ prices out on Broadway in more than 16.7 million distinct colors to elicit "wonder and amazement, from tourists and denizens alike." As we showed in last month's Cultural Trends section, this stretch of Broadway historically has been tuned to the stock market to a surprising extent. This history dates all the way back to the turn of the century, when a bull market raged and the area emerged as New York City's theater district. It became known as the Great White Way because of the brilliant white sign lights that appeared at that time. In the bull market of the 1920s, the same streets exploded in color as neon signs were popularized. The finishing touch was a giant Warner Brothers sign that was "reputed to be the largest electrical advertisement in the world." The sign was going up as the market was crashing in 1929. The latest, all-time greatest Times Square sign is of even greater weight as a signal of a peak stock market experience because this time, it is actually firing out market information. "Its purpose is a garish display, adding to the bright lights and scrolling news zippers blanketing Broadway and grabbing the attention of tourists likely to walk away with a NASDAQ key chain or coffee mug." With this display, the stock market is beyond popular. It's the 8th wonder of the world.

The NASDAQ board is just one piece of a wide panorama. As the picture shows, it is located directly across from the Dow Jones zipper, which is right above Pokemon's tribute to price bubbles as a popular form of public recreation (see the November EWFF). The Dow zipper went up last year, replacing the original, which was first erected in 1928, one year before the crash. On the jumbo TV screen shown above the zipper, CNBC appears through most of the market day. As Business Week said recently, these days, "CNBC is more than popular it has become a cultural phenomenon." In Times Square, you can watch commuters coming up out of the subway look up and lock onto the network's giant talking heads. Also visible from the spot where this picture was taken are the new Reuters financial tower, a blinking Bloomberg sign and a new "Disneyesque" visitor's center that is being added to the NASDAQ site. Turning north, Morgan Stanley Dean Witter's rapid-fire streamer flickers out stock prices at the far end of the square. Another unmistakable sign of how the financial markets have subsumed the world's most famous entertainment district is the fact that many big brokerage firms have abandoned downtown Manhattan and even Wall Street itself for this part of town.

In 1983, The Elliott Wave Theorist identified the drive "to clean up 42nd Street" as a sign that the bull market was in its early stages. From pickpockets and porn in 1980 to a financial phantasmagoria in 2000 may not necessarily constitute a cleansing, but, by capturing the dazzling glow of Broadway, Times Square's financial makeover certainly exceeds the ebullience achieved during any prior stock market advance. When the surviving brokers have shuffled back to Wall Street, the NASDAQ's sign has gone dark and the underworld has reclaimed Times Square, that will be a lasting bottom and truly a great time to buy the pullback. How many will be positioned to do it? We hope that you, as a reader of EWFF, will be among them.

EWFF, April 2000
The following chart of annual gross revenues for Broadway theaters paints a revealing portrait of the correlation between a rising social mood and the demand for popular stage shows. Over the last half century, Broadway's box office performance has ebbed and flowed with the Cycle trends in the stock market. Just like stocks, ticket sales had a long rise to a double top in 1966 and 1968 (attendance topped in 1966 and revenues in 1968), a major bottom in 1974 and another long advance through the end of the 1990s. Broadway's recent take suggests that a trend change is at hand. Projections for the year ending May 31 call for little more than a slight increase of $1 million. This slowing would fit our Elliott wave case for stock market downturn of at least Cycle degree.

Lending support to this quantitative assessment is the more qualitative analysis that appeared in the August 1997 issue of The Elliott Wave Theorist. A study of New York City's theater district at past peaks revealed a clear tendency to finish long advances with a flourish of activity and showmanship. "Entertainment industry histories covering the Supercycle peaks of 1835 and 1929 show that flashy but shallow drama is a recurrent theme in fifth waves of Cycle degree." The same word, "spectacles," continually surfaces in descriptions of Broadway's earlier fifth wave peaks and its latest era. "You have two kinds of shows on Broadway revivals and the same kind of musicals over and over again, all spectacles," laments Stephen Sondheim, who was recently tabbed "the Broadway musical's last great artist." "Broadway today is more than ever about spectacle than real drama or real emotions, more about giving audiences an ‘experience.'" Like the figures for Broadway ticket sales, this more subjective confirmation of a fifth wave also carries a clear sign its impending demise. "Cats, the longest running production in Broadway history will close June 25," says The New York Times. "Cats fundamentally reshaped the Broadway landscape by ushering in the era of the megamusicals: big flashy spectacles that required little theatrical sophistication or knowledge of the English language to appreciate." Cats came to Broadway on October 7, 1982, a few weeks after the stock market's upside explosion of August 1982. When the curtain falls June 25, Cats' many critics will undoubtedly applaud, but probably not for long. "In 1930," Times Square, a history of the NYC district notes, "the frivolity of the 1920s gave way to a serious, if not grim tone." By 1932 only six shows were playing on Broadway. That compares to an all-time high in 1928 of 294! The show will go on, but not without drastic changes in tone and reductions in number.