US Stocks: Will The Bears Relinquish Control?
By Nico Isaac
In case you were hiding out Tiger Woods’ style far away from the mainstream media during the past month, let me be the first to say: January saw an abrupt end to the U.S. stock market’s record-setting winning streak. Last count, the Dow Jones Industrial Average plummeted 4% in its worst monthly loss in a year.
And, according to one Feb. 1, 2010, MarketWatch story, “The time to consider an exit strategy” has officially arrived. Here, the article captures the public’s astonishment turned acceptance of the Dow’s boom-to-gloom shift:
“The Dow has shocked the bulls out of their complacency. After all, analysts were looking for the bull market to last until at least the second half of the year. Investors were not prepared for such a sharp decline and now at least some of the chatter has gone from ‘how high will the market go?’ to ‘how low will it fall?’ [emphasis added]“
Let me get this straight. The powers that be say it’s time to “consider an exit strategy” — AFTER the Dow has already plunged 700-plus points to land at its lowest level in two months. That’s about as helpful as building a life raft AFTER your ship has begun to sink.
Let me get this straight. The powers that be say it’s time to “consider an exit strategy” — AFTER the Dow has already plunged 700-plus points to land at its lowest level in two months. That’s about as helpful as building a life raft AFTER your ship has begun to sink.
Then, those same sources go on to say investors were “not prepared” for the degree and depth of the stock market’s decline. This is only partly true. On Main Street, the early January flood of bull-is-back-type headlines gushed in and washed all the bears away.
Yet, on our “Elliott wave” Street, preparation for a “sharp” decline in the Dow was fast in place. One week before the market turned down from its Jan. 19 high, Elliott Wave International’s Short TermUpdate went on high bearish alert with this commanding insight:
“The Dow’s diagonal remains in tact and its form is clear. We will afford the pattern a bit of leeway over the next one-two days… but the structure is very late in development. That means a trend reversal is fast approaching. A potential stopping range is 10,725-10,740. A close beneath [critical support] will confirm that the diagonal is over and the market has started a down phase that should draw prices significantly lower. Once a diagonal is complete, prices swiftly retrace to near its origin, which in this case is 10,263.90, the very first downside target.” (Jan. 13 Short Term Update)
Soon after, the Dow peaked within four ticks of our cited upside target; next, it went on to fulfill the second part of its Elliott wave script with a staggering triple-digit slide to “near the origin” of the diagonal triangle pattern, and then some.
That leaves one question: Are the bears now ready to relinquish control of stocks? Don’t wait for the market action to “shock” you.
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Individual Investors Have Jumped Into Another Fire
Robert Prechter, CMT
The following article is an excerpt from Robert Prechter’s Elliott Wave Theorist.
First they bought into the “stocks for the long run” case and got killed. Then they jumped on the commodity bandwagon and got killed. Many investors are buying back into these very same markets, but others are running to what they perceive as safe “yields” in the municipal bond market. So far this year, individual investors have “poured a record $55 billion” (Bloomberg, 11/12) into muni bond funds, with the pace running $2b. per week in August and September; many other investors are buying munis outright. These must be the people who tell us that they can’t live without “yield” and also cannot imagine their city, county or state government going bust. But as Conquer the Crash warned and as The Elliott Wave Theorist has reiterated, the muni bond market is heading for disaster.
Municipalities have borrowed more than they can repay, they have pension liabilities that they cannot meet (up to a trillion dollars’ worth, according to Moody’s), and tax receipts are falling. The only reason that states haven’t failed yet is the so-called “stimulus package,” which took money from savers, investors and taxpayers—thereby impoverishing the people who live in the various states—and gave it to state governments to spend so they would not have to cease their profligate spending. But political pressures will eventually cut off this gravy train. In the 2010-2017 period, the muni bond market will become awash in defaults. The leap in optimism since March, which has shown up in every financial market, has fueled a retreat in muni bond yields to their lowest level since 1967 and narrowed the spread between muni bond yields and Treasuries.
This rush to buy municipal bonds is occurring right on the cusp of a dramatic decline in their values. While many individuals are loading up right at the peak so they can participate in the next major market disaster, smarter investors, such as insurance companies Allstate and Guardian Life, are getting out. Subscribers to our services, we trust, own not a single municipal IOU. Our recommendation for investors is 100 percent safety, and such a program does not include muni bonds. If you are a recent subscriber, please read the second half of Conquer the Crash as a manual on how to get your finances safe.
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Popular Culture and the Stock Market
By Robert Prechter, CMT
The following article is adapted from a special report on “Popular Culture and the Stock Market” published by Robert Prechter, founder and CEO of the technical analysis and research firm Elliott Wave International. Although originally published in 1985, “Popular Culture and the Stock Market” is so timeless and relevant that USA Today covered its insights in a recent Nov. 2009 article. For the rest of this revealing 50-page report, download it for free here.
Popular Culture and the Stock Market
Both a study of the stock market and a study of trends in popular attitudes support the conclusion that the movement of aggregate stock prices is a direct recording of mood and mood change within the investment community, and by extension, within the society at large. It is clear that extremes in popular cultural trends coincide with extremes in stock prices, since they peak and trough coincidentally in their reflection of the popular mood. The stock market is the best place to study mood change because it is the only field of mass behavior where specific, detailed, and voluminous numerical data exists. It was only with such data that R.N. Elliott was able to discover the Wave Principle, which reveals that mass mood changes are natural, rhythmic and precise. The stock market is literally a drawing of how the scales of mass mood are tipping. A decline indicates an increasing ‘negative’ mood on balance, and an advance indicates an increasing ‘positive’ mood on balance.
Trends in music, movies, fashion, literature, television, popular philosophy, sports, dance, mores, sexual identity, family life, campus activities, politics and poetry all reflect the prevailing mood, sometimes in subtle ways. Noticeable changes in slower-moving mediums such as the movie industry more readily reveal changes in larger degrees of trend, such as the Cycle. More sensitive mediums such as television change quickly enough to reflect changes in the Primary trends of popular mood. Intermediate and Minor trends are likely paralleled by current song hits, which can rush up and down the sales charts as people change moods. Of course, all of these media of expression are influenced by mood changes of all degrees. The net impression communicated is a result of the mix and dominance of the forces in all these areas at any given moment.
Fashion:
It has long been observed, casually, that the trends of hemlines and stock prices appear to be in lock step. Skirt heights rose to mini-skirt brevity in the 1920’s and in the 1960’s, peaking with stock prices both times. Floor length fashions appeared in the 1930’s and 1970’s (the Maxi), bottoming with stock prices. It is not unreasonable to hypothesize that a rise in both hemlines and stock prices reflects a general increase in friskiness and daring among the population, and a decline in both, a decrease. Because skirt lengths have limits (the floor and the upper thigh, respectively), the reaching of a limit would imply that a maximum of positive or negative mood had been achieved.
Movies:
Five classic horror films were all produced in less than three short years. ‘Frankenstein’ and ‘Dracula’ premiered in 1931, in the middle of the great bear market. ‘Dr. Jekyll and Mr. Hyde’ played in 1932, the bear market bottom year, and the only year that a horror film actor was ever granted an Oscar. ‘The Mummy’ and ‘King Kong’ hit the screen in 1933, on the double bottom. Ironically, Hollywood tried to introduce a new monster in 1935 during a bull market, but ‘Werewolf of London’ was a flop. When filmmakers tried again in 1941, in the depths of a bear market, ‘The Wolf Man’ was a smash hit. These are the classic horror films of all time, along with the new breed in the 1970’s, and they all sold big. The milder horror styles of bull market years and the extent of their popularity stand in stark contrast. Musicals, adventures, and comedies weave into the pattern as well.
Popular Music:
Pop music has been virtually in lock-step with the Dow Jones Industrial Average as well. The remainder of this report will focus on details of this phenomenon in order to clarify the extent to which the relationship (and, by extension, the others discussed above) exists.
As a 78-rpm record collector put it in a recent Wall Street Journal article, music reflects ‘every fiber of life’ in the U.S. The timing of the careers of dominant youth-oriented (since the young are quickest to adopt new fashions) pop musicians has been perfectly in line with the peaks and troughs in the stock market. At turns in prices (and therefore, mood), the dominant popular singers and groups have faded quickly into obscurity, to be replaced by styles which reflected the newly emerging mood.
The 1920’s bull market gave us hyper-fast dance music and jazz. The 1930’s bear years brought folk-music laments (’Buddy, Can You Spare a Dime?’), and mellow ballroom dance music. The 1932-1937 bull market brought lively ’swing’ music. 1937 ushered in the Andrews Sisters, who enjoyed their greatest success during the corrective years of 1937-1942 (’girl groups’ are a corrective wave phenomenon; more on that later). The 1940’s featured uptempo big band music which dominated until the market peaked in 1945-46. The ensuing late-1940’s stock market correction featured mellow love-ballad crooners, both male and female, whose style reflected the dampened public mood.
Learn what’s really behind trends in the stock market, music, fashion, movies and more… Read Robert Prechter’s Full 50-page Report, “Popular Culture and the Stock Market,” FREE.
Is Your Bank Safe?
By Gary Grimes
Please understand that this article is about more than safeguarding your money; it’s about saving you headache and heartache. It’s about giving you peace of mind.
Before I explain, please allow me to ask a few questions:
- Have you given much thought about the money in your banking accounts lately? Do you know if it’s safe?
- Have you thought about what might happen if your bank fails?
- Did you know you could be left in the lurch for days, weeks, even months before you get your money back from the FDIC?
- What happens if the FDIC can’t cover your funds?
- How do you find a safe bank to protect your deposits right now?
I hope you’ve given these questions some serious thought.
I have to be honest: These questions were about the farthest things from my mind until about a year ago, when I downloaded the free “Safe Banks” report from my colleagues at Elliott Wave International. At first, the report scared me: I thought, “Oh My Gosh! I could lose all of my money if my bank fails. What would I do?”
But as I read on, I figured out that the report was not only about making my money safe; it was about giving me peace of mind.
If you’ve read any of the following news items, perhaps you understand the fear of learning your money might not be safe. Here’s a recent story from Bloomberg:
Sept. 24 (Bloomberg) — In May, the FDIC said it was projecting $70 billion of losses during the next five years due to bank failures. The agency said it expects most of those collapses to occur in 2009 and 2010.
The FDIC’s problem is that it didn’t collect enough revenue over the years to cover today’s losses. The blame lies partly with Congress. Until the law was changed in 2006, the FDIC was barred from charging premiums to banks that it classified as well-capitalized and well-managed. Consequently, the vast majority of banks weren’t paying anything for deposit insurance.
Of course, we now know it means nothing when the FDIC or any other regulator labels a bank “well-capitalized.” Most banks that failed during this crisis were considered well-capitalized just before their failure.
By the end of 2009, more than 130 banks will have failed. Most depositors will have little clue their bank was even at risk. Worse yet, the string-pullers in Washington are doing everything in their power to hide information about the safety of your bank from you.
So far, the FDIC has had enough money to cover insured depositors. But that money is quickly running out.
Just last week, the FDIC voted to mandate early payment of insurance premiums to help cover at-risk banks. But only time will tell if this move will provide the funds needed in the years ahead. Here’s what the Associated Press reported on Thursday, Nov. 12:
WASHINGTON (AP) — U.S. banks will prepay about $45 billion in premiums to replenish a federal deposit insurance fund now in the red, under a plan adopted Thursday by federal regulators.
The Federal Deposit Insurance Corp. board voted to mandate the early payments of premiums for 2010 through 2012. Amid the struggling economy and rising loan defaults, 120 banks have failed so far this year, costing the insurance fund more than $28 billion.
Worse yet, three more banks failed the very next day, Friday, Nov. 13.
This is a very real problem and a direct threat to your money. It’s more important now than ever to personally ensure the safety of your bank. The free 10-page “Safe Banks” report can help. It includes the very latest bank safety ratings from the third quarter of 2009 to help you prepare for what’s still to come this year and next.
Inside the revealing free report, you’ll discover:
- The 100 Safest U.S. Banks (2 for each state)
- Where your money goes after you make a deposit
- How your fractional-reserve bank works
- What risks you might be taking by relying on the FDIC’s guarantee
Please protect your money. Download the free 10-page “Safe Banks” report now.
Learn more about the “Safe Banks” report, and download it for free here.
If Stocks Tank, Shouldn’t Gold Soar?
By Jeff Reckseit
The following article is provided courtesy of Elliott Wave International (EWI). For more insights that challenge conventional financial wisdom, download EWI’s free 118-page Independent Investor eBook.
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Large banks and more recently pension funds have suddenly become infatuated with gold. They chant the mantras that gold bugs have known for years: gold is a store of value; owning gold is financial insurance; an ounce of gold will always buy a good suit. The idea is that if the economy continues to weaken and share prices decline, a strategic allocation of the precious metal will hedge and offset some of the losses in the financial sector.
On the surface it seems to make sense and it’s hard to argue with the logic. Even so, logic can sometimes get twisted, whereas facts cannot. The evidence is found in the chart we describe as “All the Same Market.” Gold, stocks, currencies (versus the dollar), oil, grains, meats, softs, all decline in a deflationary environment. As liquidity dries up and credit contracts, people, businesses, and institutions sell everything to get dollars. Cash is once again king. This is bearish for gold.
Looked at another way: as the dollar advances from its lows, things denominated in dollars lose value against the dollar. As long as the dollar remains the global senior currency, assets will depreciate: not just stocks and commodities but residential and commercial property, works of art, collectible cars, pretty much everything. Of course, this outlook presumes a deflationary environment and that’s been our view for quite some time. But that’s another conversation. The topic here is stocks down/gold up – or not.
The long-time editor of the Elliott Wave Financial Forecast Short Term Update, Steven Hochberg summed it up succinctly in a recent issue:
“The other important aspect to a dollar bottom is the implication to all the other markets that have been moving opposite to this senior currency. The start of a major dollar rally should roughly coincide with a turn down in stocks, commodities, oil and the precious metals. So there are likely to be important trend reversals across nearly all major markets.”
Don’t fall into the trap of group-think. If investing was that easy we’d all have (insert your own private fantasy).
Black Monday: Ancient History Or Imminent Future?
By Nico Isaac
The following article includes analysis from Robert Prechter’s Elliott Wave Theorist. For more insights from Robert Prechter, download the 75-page eBook Independent Investor eBook. It’s a compilation of some of the New York Times bestselling author’s writings that challenge conventional financial market assumptions. Visit Elliott Wave International to download the eBook, free.
Once upon a time, the term “Black Monday” was to Wall Street what the name “Lord Voldemort” was to Hogwarts. It turned the air freezing cold and sent traders flinching around every corner in fear of a repeat of the October 19, 1987 or October 28, 1929 meltdown.
Case in point: The 2008 “Black Monday” anniversary. At the time, the U.S. stock market was locked in a ferocious downtrend that included regular, triple-digit daily declines of 400 points and more. Needless to say, when the final two Mondays of October arrived, the least superstitious investors surrounded their portfolios with more good-luck talismans than a Bingo player. See October 19, 2008 AP headline below:
“Black Monday: Stocks Sink As Gloom Seizes Wall Street. Prolonged Economic Turmoil” is seen.
That was then. Today, the usual dread surrounding the back-to-back string of “Black Mondays” is nowhere to be found. In its place, media reports abound of a new, global bull market “shrugging off,” “ignoring,” and “making a distant memory” of the event.
For one, “gloom” hasn’t “seized” the U.S. stock market in quite a while; from its March 2009 low, the Dow has risen more than 50% to above the psychologically important 10,000 level. For another, the mainstream experts insist that today’s financial animal is unrecognizable to that of 1987, and especially 1929. In their eyes, it’s a completely different — i.e. safer, smarter, and sounder system.
We beg to differ.
See, while the usual experts want to put as much mental distance between today’s market and those that facilitated the 1987 recession and 1929-1932 Great Depression — the physical similarities are impossible to ignore; more so, in fact, to the latter scenario.
Here, the October 2009 Elliott Wave Financial Forecast presents the following news clip from the October 25, 1929 New York Daily Investment News.
Now, take a look at these headlines from the week of October 12-17, 2009:
“The Great Recession Is Over.” (Reuters) — “80% of Economists Say The Worst Is Behind Us.” (CNN Money) — “The Bull Is Back” (AP) — “The Economic Recovery Is Well Underway” (Wall Street Journal)
They’re interchangeable — Eighty years later.
Along with a similar extreme in bullish sentiment, the performance of stocks between now and the 1929 situation is cut from the same cloth. After an initial plunge from August 1929 through late October 1929, the US stock market enjoyed a powerful rally well into the following year. NOW: After a steep freefall from its October 2007 peak, the US stock market is once again enjoying the fruits of a powerful rally back to new highs for the year.
Also, on closer examination, the October 19 Elliott Wave Theorist (EWT, for short) uncovers an even deeper parallel between the 2009 rally and the 1929-30 one. Here,EWT presents the following snapshot of the Dow during the Depression-era advance:
As Bob Prechter points out — in 1930, stocks rallied to the level of the preceding year’s gap. Bob then reveals that the same level has been reached now.
So, we all know how the 1930 rally ended. The question is whether the 2009 advance will experience the same fate. As Bob explains in the Theorist, the only way to know for certain is to “look at the reality of the situation.”
For more information, download Robert Prechter’s free Independent Investor eBook. The 75-page resource teaches investors to think independently by challenging conventional financial market assumptions.
Gold: What’s REALLY Behind the Record Rise, Bull or Bubble?
By Nico Isaac
When prices in a financial market go from Sea Level to Outer Space in a relatively brief time, two scenarios are at work — and they both start with the letters “B-U.”
When a precious metal goes from being a popular long-term investment of buy-and-holders to the quick, get-away “vehicle” of day-traders, two scenarios are at work — and they both start with letters “B-U.”
And when the majority of mainstream pundits see a “new paradigm” in which prices continue to rise indefinitely, two scenarios are at work – and, you guessed it, they both start with the letters “B-U.”
Enter: the recent Gold Rush of 2009, when ALL of the above conditions apply. Everyone from hedge funds to housewives now hustle to hitch their asset wagon to the rising gold star. Which begs this question: Which of the possible two scenarios are at work: B-U-ll
— Or B-U-bble?
Here’s the difference: A genuine bull market is driven by a self-sustaining internal dynamic that’s reflected by a host of technical indicators. A Bubble, on the other hand, is the result of untenable psychology that could shift at any moment and bring prices plummeting down.
It goes without saying into which category the mainstream experts put Gold: namely, a new bull market that has years, if not decades more to soar. “Gold Will Hit $2,000 an ounce,” reads an October 8 Market Watch. And — “Gold Has More Upside… The metal’s bull run is just getting started,” adds a same day Barron’s.
I found hundreds of news items which agree about the long-term potential for gold’s uptrend. But not a single one could tell me why the rally would continue, other than because the experts say so.
To know whether a diamond is real, it must cut glass. And, to know whether the bull market in gold is real, it must encompass at least one of these FOUR traits:
A surge in demand that outpaces supply
A falling stock market, which raises the “safe haven” appeal of precious metals.
A real (not imagined) threat of inflation
An increase in value relative to major foreign currencies
Right now, the Gold market can NOT check off a single one of these items. Case in point:
Supply: Demand for gold from jewelry makers – which comprises 60%-70% of the market – has plummeted to its lowest level in 20 years.
“Safe haven” appeal: From its March 2009 bottom, the U.S. stock market has soared 50% right alongside rallying gold prices.
Inflation: As the October 2009 Elliott Wave Financial Forecast (EWFF) notes: An increase in money supply is only inflationary if it is used to RAISE the total amount of credit. This is NOT happening, as both bank credit and consumer credit levels are contracting for the first time since World War II.
A gold rally in other currencies: Again, the October 2009 EWFF presents the following close-up of Spot Gold prices VERSUS Gold denominated in foreign currencies such as the Canadian dollar, the Australian dollar, the euro, franc, pound, and yen since 2007.
The major non-confirmation between these two markets is clear, as is the overlying message: IF demand for gold truly outweighed supply, then its value as measured in other currencies would increase.
The rise in gold is primarily the result of speculation and a falling U.S. dollar. These are exactly the “untenable” forces that contribute to a Bubble, not a genuine Bull market. The difference is only a matter of time.
For long-term forecasts and more in-depth, historical analysis for precious metals, download Prechter’s FREE 40-page eBook on Gold and Silver.
Drawing and Using Trendlines
By Jeffrey Kennedy
When I began my career as an analyst, I was lucky enough to have some time with a few old pros.
One in particular that I will always remember told me that a kid with a ruler could make a million dollars in the markets. He was talking about trendlines. I was sold.
I spent nearly three years drawing trendlines and all sorts of geometric shapes on price charts. And you know, that grizzled old trader was only half right.
Trendlines are one the most simple and dynamic tools an analyst can employ… but I have yet to make my million dollars, so he was wrong — or at least early — on that point.
Despite being extremely useful, trendlines are often overlooked. I guess it’s just human nature to discard the simple in favor of the complicated.
(Heaven knows, if they don’t understand it, it must work, right?)
In the chart above, I have drawn a trendline using two lows that occurred in early August and September of 2003.
As you can see, each time prices approached this line, they reversed course and advanced.
Sometimes, soybeans only fell to near this line before turning up.
Other times, prices broke through momentarily before resuming the larger uptrend.
What still amazes me is that two seemingly insignificant lows in 2002 pointed the direction of soybeans — and identified several potential buying opportunities — for the next six months!
Get more lessons like the one above in the free 50-page Ultimate Technical Analysis Handbook. Learn more and download your free copy here.
Five Tips for How To Trade Successfully
By Robert Prechter
Take it from the person who won the United States Trading Championship with profits of more than 440% in 1984 – there are five things that every successful trader needs to know how to do:
1. Have a method to trade.
2. Have the discipline to follow your method.
3. Get real trading experience, instead of only trading on paper.
4. Have the mental fortitude to accept the fact that losses are part of the game.
5. Have the mental fortitude to accept huge gains.
Bonus tip: Find a mentor.
That trader who won the championship in a record-breaking fashion is Robert Prechter, the founder and president of Elliott Wave International. Once you think you’ve mastered his 5 tips for how to trade successfully, then the best thing to do is to find a mentor. In this excerpt from the book, Prechter’s Perspective, Bob Prechter discusses how sitting at the elbow of a professional trader can make all the difference in learning the trade of trading.
(The following Q&A is excerpted from Prechter’s Perspective, revised 2004.)
Question: Has any specific trading experience decreased your trading success?
Bob Prechter: Yes. My first trade in 1973 was wildly successful, and I was hardly wrong in my first six years at it. Then I had a big trading loss in 1979, and that taught me more than the wins. The best way to develop an optimal state of mind for trading is to fail a few times first and understand why it happened. When you start, you’re better off speculating with small amounts of real money. Using larger amounts of money will bankrupt you early, which, while an excellent lesson, is rather painful. If you want to be a trader, it is good to start young. Then when you lose your first two bundles, you can gain some wisdom and rebound.
Q.: It sounds painful. Is there any way at least to reduce the hard knocks?
Bob Prechter: There is one shortcut to obtaining experience, and that is to find a mentor.
Q.: Did you have a mentor?
Bob Prechter: In 1979, I sat with a professional trader for about a year. The most important thing he taught me was to keep trades small relative to your capital. It reduces the emotional factor.
Q.: How would one select a mentor?
Bob Prechter: The best way to select one is to find a person who is doing exactly what you would like to do for a living, then get to know him well enough to ask if he will tutor you or at least let you watch while he works. Locate someone who has proved himself over the years to be a successful trader or investor, and go visit him. Listen to him. Sit down with him, if possible, for six months. Watch what he does. More important, watch what he doesn’t do. Finding a guy who knows what he is doing is the best lesson you could ever have. You will undoubtedly find that he is very friendly as well, since his runaway ego of yesteryear, which undoubtedly got him involved in the markets in the first place, has long since been humbled, matured by the experience of trading. He will usually welcome the opportunity to tell you what he knows.
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How A Bear Can Be Bullish And Still Be Right
By Nico Isaac
In recent months, Elliott Wave International President Bob Prechter has become something of a household name. In the final two days of August 2009 alone, Bob was mentioned by several news outlets from MarketWatch to the New York Times. The claim to his “fame” –
EWI was one of the only technical analysis firms to anticipate a sharp rally in U.S. stocks as they circled the drain of a 12-year low this spring, a feat made ever more exceptional considering the widespread image of Bob as being the ultimate “Big, Bad Bear.”
The lesson? Believe in the facts, not in the “widespread image.”
Bob Prechter has always said that successful forecasting should look to the current wave count (and various other technical measures) for direction. He has never permanently tied himself to the mast of definition — i.e. “bull” or “bear.”
For this reason, EWI’s team of analysts have been able to stay one step ahead of the biggest turning points in the Dow Jones Industrial Average, from the very start of the index’s historic 2007 reversal.
To wit: This two-year chart of the Dow incorporates several calls from our past publications as they coincided with the market’s most memorable peaks and troughs:
The chart above presents the abstract details of our past analysis. Here is the expanded version of those insights as they appeared in real-time:
July 17, 2007 TheElliott Wave Theorist:
“Aggressive speculators should return to a fully leveraged short position now. We may be early by a couple of weeks, but the market has traced out the minimum expected rise, and that’s enough to act on.”
Soon after, as the DJIA neared its own historic Oct. 11, 2007 apex, the Oct. 9 and 10 Short Term Update amped up the urgency of its analysis and wrote:
“Odds have increased that a market high is in place. The structure, coupled with turns in the other markets, suggests a top is in place. The potential, at the least, is four a large selloff… Watch Out! The market faces a stout correction.”
Before landing at its March 10, 2008 bottom, the March 5 Short Term Update afforded respect to a bullish alternate count and wrote: “Prices should carry above the wave a high (13165) before it ends.”
At its four-month high, the March 16 2008 Elliott Wave Theorist went on high, bearish alert and wrote: The DJIA is entering “Free Fall territory.”
One week before the U.S. stock market landed at its 12-year low of March 9, our Feb. 27, 2009 Short Term Update utilized a traditional turning pattern to outline a specific time window for the onset of a major upside reversal. In STU’s own words:
“By all indication, this pattern is back on track… the turn will come on or near March 10, 2009. Anywhere in this time period may mark a turn, which will obviously be a market low.”
Once the bullish winds of change had turned, the March 16 Short Term Update wrote:
“When the market speaks, it behooves us to listen. The implications of this are that the… major stock indexes are in the initial stages of a multi-month advance.”
Finally, the April 2009 Elliott Wave Financial Forecast calculated a specific target range for the Dow’s rally: the 9,000-10,000 level.
So, now that the upside objective is met, where are prices set to go next? For more analysis from Robert Prechter, download a free 10-page July issue of Prechter’s Elliott Wave Theorist.
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