The Dow slumped to a Cycle degree bottom at the still-unbroken low of 1942 (#5), and the number of pro basketball teams hit a simultaneous 54-year low of four. In 1946, the Dow hit another important peak, and basketball owners bought in at the top. The number of major league basketball teams increased to a new high of 22 with the formation of a rival league, the Basketball Association of America (#6). After the 1948-49 season, the owners of the two leagues consolidated to form the National Basketball Association (#7). Again, pro basketball reflected the correction in social mood perfectly, as this retrenchment came at a major bottom. In fact, on an inflation-adjusted basis, it was the end of a Supercycle correction from 1929 (see dashed lines in Figure 2). This bottom led directly to the relentless third wave rise in stock prices and the games revolution from an elbows out, feet-on-the-floor game to the high-scoring, high-flying affair we know today.

After further consolidation in the early 1950s, the eight-team NBA enjoyed an era of unprecedented stability. The next expansion didnt come until 1961, when a minor rival league was formed. The American Basketball League (#8) concluded its first and last season with the Dow at all-time highs. The following autumn brought the Cuban Missile Crisis low in stocks and, apparently, enough of a washout in bullish sentiment to ground the ABL (#9).

Figure 2

The larger degree of the Cycle degree top of 1966 was reflected by the ebullient mood of pro basketball owners. Starting with the Bulls in 1966, the NBA added 8 teams through 1971. The expansion mirrored the big top in stocks, as the Dow got within 5% of 1000 five times during that span. In 1968, at a major speculative peak in stock prices, the American Basketball Association (#10) was launched. Initially, the ABA expressed the festive mood of the time. With it came a red, white and blue ball and a wide-open offensive game that featured the three-point shot. It was the only serious challenge to the NBA. Ultimately, the ABA came to be viewed as a negative influence on the game. The new league divided fan loyalties while creating a fierce competition for talent that drove up team cost structures. By 1974, the expansion had diluted the overall level of play and fostered a style that focused more on individuals than the team game that characterized the Boston Celtics of the 1950s and 1960s and the Minneapolis Lakers before them. Unlike its predecessors, the ABA actually survived the bear market of 1974, but not by much. News articles later revealed that even established NBA teams were losing money by 1974. The ABA was consolidating by 1974 and finally shut down in 1976. Four of its teams survived in the NBA.

Despite the box office rebound in the 1980s, the NBA was hesitant to add new franchises, just as it was in its initial heyday, the late 1950s and early 1960s. By 1987, however, owners could not contain their optimism. They were confident enough to schedule the addition of four franchises. Two were added for the 1988-89 season and two more for the 1989-90 season, in time to catch the correction of 1990 (which featured a deep decline in the Value Line index and a 50% drop in the Dow Jones Transports) and the games own recession in 1990. The last two teams were added in 1995-96 to create a record total of 29 major league basketball franchises. Like the most recent leg of the bull market, pro basketballs current expansion lacks the breadth of its predecessors, but it is unprecedented in terms of duration. Just as there has been no bear market in stocks since 1974, the number of major league basketball teams has not declined since 1976. Also, two new leagues of professional women players have been formed. The American Basketball League started in October 1996 and the Womens NBA will initiate play in 1997.

The Rules and Mores
Another big clue to the bullish essence of basketball has been the century-long evolution in how the game is played. Early on, the character and rules of the game had more bear-market characteristics. The tempo was slow. A score of 20-15 would be considered a fantastic total. In its earliest days, basketball was referred to as basket football or football in a gym. A goal was called a touchdown, and players wore padded clothing that resembled early football uniforms. When young children play basketball, observers have noted the resemblance to a rugby scrum. Photos of the early game played on dirt fields suggest that this may be a fair approximation of what basketball was like initially. The amount of physical contact was clearly closer to hockey or rugby than a modern NBA game. By Rule 5 of Naismiths original 13 Rules of Basketball, contact was not actually allowed, but referees seldom blew the whistle.

When you were fouled, it was a real one, remembered Joe Lapchick, an early pro. With only one referee, the guy who did the fouling usually got away with it. So you belted him back. Players practically tore their opponents shorts and pants off when playing defense. Players were geared for almost any indignity. Not just from the opposing team. Fans favored form of expression was open hostility. Spectators invariably got into the act, Lapchick added. A common annoyance in highly industrialized cities was the practice of fans who would flip stove bolts at the out-of-towners.

Also missing from the modern game: the cage. Originally, pro basketball was played behind a wire enclosure. The cages came down in 1929, the year the Dow hit its great peak of 381. A second referee was also added that year.

After pro basketball crashed with the market, its first step toward rebuilding came in 1932, which is the same year the Dow hit its low of 41. One of the games big problems was that instead of advancing toward the goal, outmanned teams would simply use the whole length of the court to keep the ball out of the other teams hands. The 10-second rule was established to prevent this stalling. Although the pro game was still unable to organize effectively, there were some signs of underlying strength. From 1932 to 1937, the market rallied and, as it did, the faster, cleaner amateur game swept the nation. By 1937, Madison Square Garden was featuring regular, highly popular college double headers and tournaments. The greatest year for rule changes was 1937, the year of the Dows recovery high and the return of the pro game. The changes emphasized offense. They included the elimination of the center jump after each basket, the legalization of the laceless ball and a rule making it illegal for defensive players to touch the ball when it was on the rim of the basket.

The college game continued to flourish in the 1940s. Pro basketball gained momentum after the 1942 low, but it would not shed its image as a slow sluggish sport until the 1950s, which is when the stock market emerged from its slow, sluggish sideways correction of the 1940s. Until that decade, fans still wanted a game that was more like a bear market sport, hockey. In fact, pro hockey at the time was a more established sport that served as a model for pro basketball owners. The National Hockey League was established 10 years before the first pro basketball league, and it survived the Depression when pro basketball fell into chaos. Owners knew from their experience with hockey that a little fight now and then was good for business. Rough stuff was quietly encouraged. Fights were still common in the first half of the 1950s, and into the later half of the decade many teams still employed enforcers, tough, lesser talents who were used to intimidate opponents, as is common in hockey.

The basketball establishment has generally displayed a willingness to experiment at the outset of a big move in the Dow. At the beginning of Cycle wave III, pro basketball really began to change following a 19-18 game in November 1950, the lowest scoring game in NBA history, one year after the end of a 20-year correction and two years after the smallest DJIA annual range in history up to that time. After this game, stalling, once again, came to be viewed as a problem, particularly in the fourth quarter, when fouling was also common. Teams would get a small lead, foul, get the ball back and play keep away until the final buzzer. A series of rule changes followed. Among the remedies attempted was a jump ball after every foul shot in the last 10 minutes. But this backfired when teams contrived ways to get their best leapers in on the jump ball.

The speed and scoring that typify the modern game came in 1954 as the 24-second clock was adopted. The shot clock, which was instituted at the top of Intermediate (3) of Primary 3 of Cycle III, the powerful midpoint of the Supercycle from 1932, accelerated the energy and excitement of the game by forcing teams to shoot the ball within 24 seconds of taking possession. In this third-of-a-third wave up, the shot clock did for basketball what the electric guitar did for popular music, and at the same time.

Rule changes since the 1950s have all been minor by comparison. Perhaps the most significant were the addition of a third referee and the three-point shot. Both continued the long tradition of reducing the level of physical contact and opening the game up for more offense. They came in the late 1970s, when the Dow had put in its lows and was slowly building a base for the bull market of the 1980s and 1990s. Perhaps the most significant change was to the tone of the game, in the late 1950s and early 1960s. The trademark soaring of Michael Jordan would never have happened if certain conventions restricting the defender from undercutting opponents near the basket did not become standard operating procedure during this period. Basketball is still a contact sport, but nothing like the early game or even that of the early NBA. Crowds dont throw things at players, fights are rare and the game basically moves too fast for lead-footed bruisers to keep up. These days touch fouls are called frequently, especially if the person being touched is one of the leagues stars.

The Dynasties, the Heroes and Their Magic
To an amazing degree, pro basketball has greeted every major stock market advance since the 1920s with blue chip talents. In the 1920s, the original Celtics were the first heroes of the hardwood. Like all the great bull market basketball powers, the Celtics took the game to a new level with a series of innovations. The original Celtics introduced the give-and-go, switching man-to-man defense, and the pivot play. In the pivot play, the ball is thrown to a taller post player who turns and shoots or passes it to an open man cutting to the basket. The Celtics effective introduction of the play foreshadowed the era of the great centers in Cycle wave III of the next Supercycle. In fact, it wasnt until the 1920s that height was even considered an important trait in players. The first tall talent was Francis Meehan, 6-foot-7 center who came into the game in 1919 as the Dow was nearing its run to 381 in 1929. Meehan earned the fantastic total of $100 a game in the 1920s. Joe Lapchick was considered the best of the new breed. At 6-foot-6, the Celtics star said he was considered something of a freak.

In the early 1930s, when the Dow collapsed, the pro game fell so hard that there were no champions during that decade. Still, the amateur game prospered. On the court, the big breakthrough was the one-handed shot. Hank Luseitti of Stanford University first awed the Madison Square Garden crowd at the stock market high in 1937. Joe Fulks introduced the jump shot at the next stock market high, in 1946. Fulks led his Philadelphia team to a title with a scoring average of 23.2 points per game. With this new weapon, opponents considered Fulks unstoppable. But Fulks performance was only a glimpse of the talent to come. At .305, Fulks shooting percentage was half that of modern-day league leaders.

From the low of 1949 until 1954, George Mikan and the Lakers won five out of six championships. At 6-foot-10, Mikan was the first to approach the height of modern-day big men and became the NBAs first great center of attention. After his retirement in 1954, both the league and the stock market hit a four-year plateau. From the spring of 1955 to 1958, four different teams won the NBA title. Over the same span, the Dow gained just 30 points, a cumulative gain of 6% in a decade of otherwise steady advances. From 1958 to the Cycle wave III high in 1966, the Dow doubled and the Boston Celtics owned the NBA, with eight straight championships. In keeping with the markets move to a higher plane, the Celtics raised the skills of the game to a whole new level. They brought a combination of size, speed, dribbling ability and shooting that was previously unknown to the NBA.

Their perfection of the fast break helped lift scoring leaguewide. Scoring averages rose from 79 to a league record of 107 in the early 1960s. The introduction of a shot clock was only one reason for the scoring outburst. Others ranged from better shoes and balls to the jump shots replacement of the two-hand set shot as the standard method of scoring from the outside. The Celtics star was Bill Russell, the first in a long line of athletic giants that would become the leagues hallmark. Wilt Chamberlain followed Russell by three years. Chamberlain was the first 7-footer, and, by many accounts, the greatest player ever to play the game. Clearly, Chamberlain delivered the games greatest all-around individual performances. All of them came during the stock markets waves 4 and 5, ending at Dow 1000. From 1959 to 1966, Chamberlain won seven straight scoring titles (1959-66). He also hauled in most of his record total of 24,000 rebounds. In 1961-62, he averaged 25.7 rebounds and 50.4 points per game. On March 2, 1962, at a major psychological peak in the stock market immediately preceding the 1962 crash, Chamberlain scored 100 points in a single game.

More than any other event, Chamberlains rivalry with Russell and the Celtics drove the NBA to its new standing as the most popular winter sport. The clashes continued until Russells retirement in 1969, five months after a 13-year high in the Value Line Composite index. The year also marked the official end of the Celtics glory years, as the Russell-coached Celtics won just one more title.

On the court and in the market, the 1970s were a mixed bag. While basketballs talent pool was as deep as ever, the bear market in social mood manifested itself in another period of shifting fortunes at the top. During the decade, not one NBA champion team managed to defend its title successfully. After the arrival of Kareem Abdul Jabbar in 1969, 7-footers became more routine and overall player heights approached their peak. In 1968, the former Celtic and pro coach, Joe Lapchick, noted that players had nearly perfected the required skills.

By the most definitive measure, higher stock prices, the fifth and final wave of the Supercycle bull market began in December 1974. The fifth- wave character of the advance manifested itself as more of a refinement in the style of play than the introduction of any fundamentally different skills or techniques. All it took was a liberation of sentiment for the game to literally take off near the lows of 1974. The high-flying slam dunks of Julius Erving revealed the new mood. My game is in the air, Erving said. Or, as one of his first coaches said, Erving was the first to fly; he did things with a basketball nobody else had ever done.

Few of the earliest players were even capable of dunking the ball. In the 1940s, many were able, but few did. Back then it was showing a guy up, explained Alex Hannum, a player and coach who came into pro ball in 1948. Today its showtime. The dunk shot was popular in the 1950s and 1960s, but until Erving came along, it was an efficient way to score rather than a gravity-defying display. In the 1960s, players never took to the air with abandon. That eras greatest play maker, Oscar Robertson, displayed a more cautious approach. He urged players never to go up in the air unless they knew what they were going to do with the ball.

In the later part of 1970s, however, a basketball writer noted that more and more young players were choosing the pleasure and uncertainty of going up in the air to create a situation, deciding what to do when in full flight. After outlawing the dunk in 1967, the college game permitted it again in 1976.

As the constant-dollar Dow approached a 16-year low in 1982, basketball hit some rough spots. Basketball purists did not embrace the new freer style. The new trend toward slam dunking, for instance, was considered a side effect of the consolidation with the ABA and not a particularly positive influence. Although it showcased a players pure athletic skill and made for some great highlight film clips, this wide-open individual play was antithetical to the structured team play that had characterized the great teams of the past. A 1978 headline in a Sports Illustrated read, Theres An Ill Wind Blowing For the NBA. Television had focused attention on spectacular slam dunks, the epitome of playground ball, running replay after replay of them and eschewing explanations of the intricacies of team play. In Professional Sports Team Histories, the second half of the 1970s is recorded as a period of serious trouble for the NBA. The problems were classic cultural manifestations of a bear market: rampant selfishness, violence and drugs. In 1980-81, 16 of 23 NBA teams lost money, and attendance fell by 1 million.

Julius Ervings rise as a basketball icon personified the slow emergence of the bull market. He entered pro ball during the 1971-72 season with a relatively obscure Virginia franchise in the less established ABA. 1972 was the year the Dow closed above 1000 for the first time. In 1976, when the Dow surpassed 1000 for the second time, Erving won a title for the ABAs New York franchise and then raised his profile to a higher orbit with the NBA/ABA merger and a move to the Philadelphia 76ers, an established NBA franchise. We got the Babe Ruth of basketball, said the 76ers general manager. During the entire 1980-81 season, the Dow moved back and forth across the 1000 barrier and Erving won his first and only NBA MVP award. At the outset of the 1982-83 season, the Dow penetrated 1000 for good and Erving went on to his first and last NBA championship.

The dominance of the two major stars of the 1980s, by contrast, was apparent from the start, just like the bull market. Larry Bird and Magic Johnson graduated to the pros in 1979. While their rivalry never approached Russell/Chamberlain for intensity and ferociousness, it is sometimes credited with saving the NBA. Here again, however, it seems to have taken a clear uptrend in social mood, as reflected in stock prices, to get momentum really going on the court. Three months after the Dow touched a low of 729 in March 1980, which is still intact, the Johnson-led L.A. Lakers won their first title. Birds Celtics won in 1981. After the Lakers won again in early 1982, Erving had his title. On the professional level, the Bird-Johnson rivalry was not officially consummated until the conclusion of the 1983-84 season, when the Lakers and Celtics, the two powers of the 1950s and 1960s, met in the finals for the first time since the glory days of the Celtics. The initial big-league showdown between Larry Bird and Magic Johnson drew the largest television audience in NBA history and defined the game in the 1980s. At 6-foot-10 and 6-foot-8, respectively, Bird and Johnson were the best passing big men in the history of the game. One of the reasons Bird and Magic made such a difference to the league was the breadth of their abilities. They could score as well as dish the ball in ways once done only by the Harlem Globetrotters against patsy teams in exhibitions. From 1980 to 1988, the Lakers and Celtics won 8 titles (3 by Boston, 5 by the Lakers). The Lakers ultimately emerged as the team of the decade when they defeated the Celtics in the 1987 finals. Thats when the showtime game hit its peak, with the Lakers playing the finest example of fast-paced Western Conference basketball the league had ever seen, according to Team Histories.

The stock market crash of 1987 was coincident with the emergence of a new force in the league, the Bad Boys of Detroit. The Pistons played a rough physical game of basketball that harkened back to the old days. Team Histories describes a contrast in play that was as stark as the difference in the Dow in the five years before August 1987 and the three-and-a-quarter years thereafter (a 250% rise versus a 15% decline). This rivalry between Magic and Bird and their teams had revitalized the game. Never ugly or bitter, the two teams battled with skill and brilliance and consistently displayed the sport at its best. The Pistons, however, displayed, to many, the sport at its worst. In 1988, Los Angeles beat the Pistons by three points in the final game of a grueling seven-game series. The following year, the Laker reign ended as the team fell in four straight. The Bad Boys ruled through the stock market correction of that year with another championship in 1990. The Pistons reign effectively ended with the bottom in October.

The rising star of the Chicago Bulls eclipsed all others at the outset of the 1990-91 season. The Bulls finished the year 10 games ahead of Detroit and then swept to a 4-0 victory in the playoffs. In 1991, 1992 and 1993, the Bulls won all three championships, the first team to win three in a row since the Celtics string of eight through 1966. (The only other team to win three championships was the Minneapolis Lakers. Their streak was through 1954, the year the Dow finally surpassed the 1929 high.) In the spring of 1996, the Bulls seemed to match the Dow point for point as they won at a record rate and ended the season with 72 victories, the most ever. The old record of 69 was set by the Lakers in 1972, also a year leading to new highs for the Dow.

For whatever reason, in every period of substantial and continuous new highs in the Dow, there has been a pro basketball power that has thrived on the high ebb of social mood. The Bulls reign in the last great wave of the Supercycle degree bull market from 1932 shows how deep the link between basketball and the stock market goes. The very name, which has caused big red snorting bulls to be stamped on caps, t-shirts and bumpers across America, is a vibrant and ubiquitous symbol of the connection. Skeptics may say it is just another coincidence, but the history of pro basketball in Chicago suggests more than an arbitrary symbol. In the early 1960s, Chicagos NBA franchise was called the Packers. The team struggled, and the owners tried to repair fan apathy with a new name. The Zephyrs didnt last a season. In 1966, the year of the great Dow peak, the NBA returned to Chicago. As the Bulls, pro basketball finally survived there. Few, if any, fans see any relationship between their devotion to both the Bulls and their mutual fund portfolios. This is how it is with a collective psychological state: too pervasive perhaps even poetic to be recognized by most people.

Michael in Microcosm
To put an even finer point on the athletic expression of social mood, consider the professional history of Michael Jordan. Jordan first entered the cultural consciousness in 1982, the year of the bull markets blast-off. As a freshman at North Carolina, he hit a shot in the last 16 seconds to win the NCAA college championship. In 1984, he joined the Bulls and was named Rookie of the Year. In 1987, the year of a substantial Dow high at 2723, he won his first MVP award and had a single-season scoring average of 37 points per game, which remains the highest since Wilt Chamberlain. His lifetime scoring average of just over 30 points per game is the highest ever.

As the highest-paid athlete in the world and Madison Avenues most prolific endorser, Jordans image is also locked to the stock market. In Figure 3, notice how the two fortunes expand and recede together. Plagued by gambling accusations and the death of his father, Jordan retired before the 1993-94 season. The sabbatical coincided perfectly with a correction in the market. Jordan came out of retirement in March 1995 and accompanied the Dow past 5000. The stinging personal attacks that drove Jordan from the game two years ago have all but disappeared. Its not that Jordan is perfect; hes still accused of various shortcomings, but criticism of Jordan doesnt stick, Sports Illustrated noted in a recent profile.

Figure 3

Why? Because Jordan enjoys a devotion that criticism cant touch. In the fall of 1996, as the Dow pushed past 6000 in a relentless succession of new highs, Jordan drove the Bulls to their best start ever, unveiled a new perfume and premiered as the star in a feature film that The Wall Street Journal calls the ultimate commercial movie. Michael is superman, plain and simple, concludes Sports Illustrated. Dab on a little Michael Jordan and youre dabbing on the scent of success, claims a news article headlined Smell Like Mike. Smell like a sweaty athlete? Only the hero factor can explain the depth of Jordans popularity. The Elliott Wave Theorist has observed a cultural preference for heroes in bull markets. As the games greatest hero, Jordan personifies the happiness and energy of the bull market just as George Mikan did in the early 1950s, Bill Russell in the 1960s and Magic Johnson in the 1980s, bull markets all.

Waves and Means
How does a wave of mass emotion express itself in the performance of a single individual? As the center for the Boston Celtics in the 1960s, Bill Russell was the most valuable player on the best team in basketball history. In his autobiography, he offers some observations that might explain how a bull market game might manifest itself in the actions of solitary participants. He describes the atmosphere of a big game as a kind of spell that surrounded fans, coaches, opposing players and even the referees. To me, the key was that both teams had to be playing at their peaks, and they had to be competitive. The Celtics could not do it alone...That mystical feeling usually came with the better teams in the league that were challenging us for the championship...It usually began when three or four of the ten guys on the floor would heat up; they would be catalysts, and they were almost always the stars in the league. If we were playing the Lakers, for example, (Jerry) West and (Elgin) Baylor and (Bob) Cousy or Sam (Jones) and I would be enough. The feeling would spread to the other guys and wed all levitate. Then the game would just take off, and thered be a natural ebb and flow that reminded you how rhythmic and musical basketball is supposed to be.

Russell says he never admitted it to his teammates, but, at such times, winning itself didnt matter to him as much as reaching that higher plane. On the five or ten occasions when the game ended at that special level, I literally did not care who had won.

Players at substantially lower levels of play have reported similar sensations. Essayist and schoolyard ballplayer John Boe wrote, It is popular to talk about rhythm and flow in basketball. And when playing basketball, you indeed feel the rhythm, flow with the group mind. I play basketball in order to experience those moments when I feel in rhythm, and it is more a matter of the rhythm having me than of my having the rhythm.

The structure of the game produces a dance of ascendancy, wrote George Kovacs in Hoops Zen. The obvious advantages of basketball over other sports as a medium of spiritual self-development is the idea the ideal of upward striving...(an) unrestrained yet disciplined challenge of the mortal entity against gravity and other oppressive earthbound limitations. James Naismiths notion of hanging a peach basket 10 feet off the ground to taunt and tantalize athletic pretenders was a stroke of genius in forcing hoopsters to elevate their endeavors and objectives as well. Thanks in considerable measure to upward striving, no other sport, no other athletic activity perhaps no other human activity allows, encourages, enhances, necessitates the poetry, the poetic movement of the human body like hoops. That ideal of upward striving, we contend, derives from social mood and is manifest also in rising stock prices.

Another element in basketballs bullish essence may be the central importance of the ball. Boe once noted how newspaper photos of basketball games capture the ball frozen above the rim with the eyes of players and fans fixed upon it. When the game is on TV, there are millions of eyes focused upon the same ball. This is a collective spiritual experience; the group consciousness is united by a single thing, the ball. The ball acts like the mandala of Tibetan systems of concentration and meditation, focusing the psyche of the individual, uniting the consciousness of the group.

According to the Wave Principle, weve been in a bull market at Grand Supercycle degree for more than 200 years, so its hard to imagine what a bear market sport would be like. We envision something along the lines of boxing, where its man against man. There is no ball to displace mans natural aggression and no hoop to make us focus on any loftier ambition than survival. As Russell tells us, basketball at its highest level doesnt pit men against each other. Its about technique and intelligence and working together to place a rubber ball through a round goal that is out of reach. Of a true bear market game, we suspect that it could never be said that winning didnt matter, as Russell said of his sport at its peak. Ball games have had their place in North American culture since before Columbus arrived. Various tribes played different games with round rubber balls. Black Elk, an Ogala Sioux priest, described a rite called The Throwing of the Ball. He says it was born when a sacred ball was offered to the six directions North, South, East, West, Up and Down. The ball is a spirit that is at every direction and is everywhere in the world. A buffalo calf then nudged the ball to a man and said, This universe really belongs to the two leggeds, for we four legged people cannot play with a ball...It is the two legged men alone who, if they purify and humiliate themselves, may become one with or may know the ball.

The Bottom Line
One of the great benefits of the Wave Principle is that it inspires such universal questions. Another is that none of them have to be answered for the speculator to take advantage of changes in social mood.

In November 1992, for instance, The Elliott Wave Theorist illustrated how cultural studies can be profitably pursued with the help of the Wave Principle, saying, There is reason to believe that [baseball card] prices have just made a spike top along with fans emotions. Within three months, shares of The Topps Co., a producer of baseball cards, were halved, and the great baseball card bust of the 1990s was on. A July 1996 Sports Illustrated report on the card market described a textbook investment bubble. On the way up there was this notion that sports cards were scarce, the secondary market exploded and demand appeared insatiable. Next, dozens of manufacturers sprouted, and hobby shops spread like pollen. A combination of oversupply, Wall Street hype and greed by the leagues are said to have pushed the market over the edge. Eventually, there came a selling frenzy and a shake-out of dealers across the country. Crash is not too strong a word to describe what has happened.

This article and others through the fall of 1996 contend that baseball and the card market are bouncing back. They cite a rebound in baseball attendance, a new all-time high contract amount for a baseball player, the record purchase of a baseball card for $645,000 and a new labor agreement for Major League Baseball. While these items do reflect the continuing influence of the bull market, the top is behind us in the big picture. The November issue of The Elliott Wave Theorist noted that 1996 baseball attendance was still 14% lower than the all time high of 1993. In 1993, we showed a 90-year chart of baseball attendance and noted the completion of a clear five-wave structure. This pattern means that baseballs three-year-old high in popularity will not be exceeded by any substantial margin. Basketballs bull market, on the other hand, is still in force. Sports Illustrateds anticipation of a turnaround in the card market was based partially on the fact that basketball cards are the fastest growing sector. The evidence in this report suggests the opposite of the articles implication. Basketball, not the market for trading cards, is likely to reverse course, and in the other direction.

To paraphrase our advice to baseball interests in November 1992: If youre an investor, take profits on basketball cards. If youre a player, sign a long term contract. If youre an owner, sell your club. If youre a fan, prepare to gripe increasingly about the game of basketball after the stock market reverses to the downside.

The NBAs expansion to an all-time high of 29 teams, the addition of two new professional leagues, the total dominance and worldwide popularity of the Olympic Dream Team, the Bulls settlement of a suit with the NBA that will make record numbers of Bulls games available on free television, the inauguration of a womens NBA, the likelihood of a long term peak in stock prices and the overall euphoria for the sport all say that a peak in basketball is at hand.

The elation surrounding basketballs brightest star is particularly telling. Last May, the aura of giddy excitement that encircled Jordan as the Bulls completed the greatest season in basketball history and sailed through the playoffs was exceeded only by that surrounding a small selection of NASDAQ stocks. A June 19 USA Today article was headlined Michael Jordans bigger than basketball: hes a pop icon. A sports sociologist said fans worship Michael Jordan with much the same intensity as they worship religious figures. Another author invoked the name of the hero of Cycle wave III, calling Jordan a black Elvis with wings. In the past, The Elliott Wave Theorist has successfully used milestone contracts (like Michael Jacksons March 1991 deal with Sony) to pinpoint a major trend change in the recipients popularity. Jordans $30 million contract for 1996 is the highest ever. Jordan negotiated the deal over the phone in a half hour. It pays him $5.8 million more than other teams are allowed to pay all their players and 10,417 times the original good-player scale of $1 per minute. Throw in $40 million more in endorsements, his top billing (over Bugs Bunny) in a $95 million movie and a $20 million investment in the new Michael Jordan aroma, and the unrivaled extreme in popularity that Jordan represents is unmistakable and historic. Two other players recently signed long-term contracts valued at more than $100 million. History suggests that pro basketballs next consolidation could lag a Dow decline, but not by much. Salaries, attendance and the number of teams will unquestionably accompany the market down as peoples attention moves away from this bull market sport and toward more violent fare.

This report on basketball is valuable from another perspective: Throughout this century, when enthusiasm for the sport has been unbridled, the stock market has fallen on hard times. Top signals in the sport are top signals for stocks.

As in the stock market, the euphoric sentiment for the sport masks signs of underlying fundamental weakness. They include the aging of the leagues stars, a sudden decline in scoring and a crash in shooting percentages to 44.4% for so far this year, the lowest total in at least eight years. In another development that has baffled long-time observers, NBA referees are suddenly making the traveling call. A player travels by taking more than one step without dribbling. For years, traveling in the NBA was like jaywalking illegal but generally accepted. Not anymore. ...Even the unwritten rule that allowed superstars more liberty in regard to traveling no longer exists. The enforcement of this original rule is a subtle but profound change from the trend that began with the 10-second rule in 1932. It violates the long tradition of opening the game up by restricting rather than abetting the scorer. Others have observed a decline in the level of play. Expansion and the entry of players at younger and younger ages have thinned the talent pool appreciably. As one star, Charles Barkley, said recently, There are only five good teams in the league. The rest are terrible. Finally, there has been a decline of gate receipts through the first 22 games of the 1996 season.

Non-fans should not dismiss these developments as trivial. The bull market in stocks has run so long that there are many outward examples of basketballs and the stock markets co-dependence on a rising social mood. One example was an editorial in Pension & Investment magazine urging Jordan to endorse a family of mutual funds that teaches kids how to invest in stocks. P&I suggested that Jordan entice children into the market by explaining that they could use the proceeds from their stock investments to purchase Nike sneakers. This spoon-feeding of the mania for stocks with the mania of basketball is based on the mistaken belief that the rising mood is a permanent fact of life. Fortunately for investors, it is so deeply entrenched that it has provided the means to profit by taking the hints of basketballs coming decline. First, it is a signal that an overall bear market in stock prices is not far off, a warning that could prove very valuable. More specifically, one might consider the implication for shares of Nike Inc. The firm recently paid $40 million for the rights to rookie golfer, Tiger Woods. It did so after a decade-long increase of more than 50 fold in its stock price, an increase that was built on the exploits of Jordan and other heroes of the bull market. Woods contract represents an unprecedented willingness to speculate on the next bull market hero. Air Nike is a fiscal incorporation of the psychology of expanding expectations. When the bubble breaks, the next big profit will fall to the Nike short sellers.

The Coming Changes in Trend
The Grand Supercycle degree of the current trend change in social mood suggests a big retracement in basketball. The game will probably survive the bear market, but not without regressing back toward its roots. The first and most noticeable sign of the trend change will occur when Michael Jordan and a host of other longtime stars retire or become less effective. Based on The Elliott Wave Theorists observation of a rising demand for anti-heroes in bear markets, Dennis Rodman rather than Jordan is the role model for the NBAs immediate future. Rodman is not a scorer. His special talent is getting fouled by his opponents as they try to score. He sports fluorescent hair, tattoos and a penchant for cross-dressing and antagonizing opponents. Whereas Michael Jordan saves the NBA with teamwork in his new cartoon movie, Rodmans credo is that individuality is the most important thing in life. After this season, clean-cut team players will be remembered as the heroes of a bygone era. Shortly thereafter, football, hockey, soccer or some other rough game will replace basketball as the No. 1 sport. Eventually, fans will turn hostile, and fights will be common. Ultimately, salaries will crash and player heights will fall. Finally, when the new leagues have consolidated or shut down and falling attendance and TV ratings have caused several NBA owners to fold or move, Michael Jordans true heir will appear. As he rises, history says, the stock market wont be far behind.

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