Friday, February 25, 2011

[Video] Bob Prechter of Elliot Wave Defiant, Continues to Call for a Retest (and Break) of 2009 Lows

After some impressive calls in 2008 and 2009 (including one to get out of shorts and go long as sentiment had gone extremely poor in February 2009), Bob Prechter of Elliot Wave fame has had a more difficult time of it of late.  That said, he is not the only one because the only working strategy for most of the past 2 years has been "buy in the morning, buy in the afternoon, and buy some more".  While I respect someone who has a disciplined system and sticks to it (which I think is the only way you survive in the long run in the market), as I've been saying for a few years this market does not act like it used to.  So adjustments are necessary.   Respect the trend...until it ends.   The trend right now is "massive pain for those who bet against The Bernank".  Maybe in the "long long long" run Prechter will be proved correct, but can we ever imagine a real serious correction ever again?  The Fed will come in with multi trillion QEs as managing the stock market is now apparently a new mission for the institution....

For those interested, he is even bearish on commodities and his only favorable long idea is the U.S. dollar since sentiment is so strongly against it. 

p.s. I do agree that sentiment is off the chart, but we've been talking about that for weeks (if not months) and it has not mattered.

  • Investors have gotten wildly bullish of late, as the bull market that started in early 2009 keeps driving stocks to new highs.  But the pigs are about to get slaughtered, says Bob Prechter, president of Elliott Wave International and editor of the Elliott Wave Theorist.  
  • Prechter still thinks the new bull market is just a cyclical "retracement" of some of the bear market losses that we've had since the market crashed in 2008.  Prechter expected this retracement to drive stocks 50% above the market lows, but stocks have since soared 30% higher than than he expected.  
  • So when the day of reckoning comes, Prechter thinks, it will be even more startling.  And Prechter still thinks that stocks will eventually crash to new bear-market lows (read: below 6,800 on the DOW). 
  • What makes Prechter think this day of reckoning may come sooner rather than later?  Sentiment indicators and other technical analysis. 
  • Investor bullishness has now gotten so extreme, Prechter says, that it has exceeded the levels in 2008 before the market crashed.  Investors could still get even more bullish, of course, but eventually they'll pay for this optimism. 
  • And Prechter's not just bearish on stocks: He thinks oil, silver, and other commodities are absurdly overvalued, too.  The only thing he's bullish on is the dollar. 
  • And lest he be dismissed as a perma-bear, Bob Prechter is quick to add that he hopes there will come a day when he can come on the show and tell everyone that stocks are finally so crushed and hated that it's a historic opportunity to buy them. 

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