The date was March of 2009, the mood was decidedly bearish, Robert Prechter seemed like the lone Bull calling for a rally from that point. And that is precisely what we got.
In April 2010 the mood had changed, the media was Bullish but Bob turned Bearish. In his issue of his Elliott Wave Theorist he says conditions have changed and he is once again sounding prophetic. This is extremely important, the media would have you believe that this is an ordinary 10% correction. Prechter says it is imperative that you act now to protect yourself.
The following article is courtesy of Elliott Wave International. Tim McMahon, Editor
Bigger Than A “10% Correction”?
Every Big Bear Grew From a Cub
By Elliottwave International Editorial Staff
May 19, 2010
The famous “10% correction” that market pundits talk about sounds so nice and tidy, so predictable and tolerable. It’s as if this “cute little correction” came neatly wrapped, looked like an M&M candy character, and smiled at you and your family after you open the box.
If only it were so.
“If all the market ever did on the downside was dip 10% once every two years, then investing would be easier than shooting fish in a barrel. Obviously, this is not the case. The fact is that the stock market’s movements are a fractal. Declines come in widely varying sizes.”
Elliott Wave Theorist, December 2001
There is no way to know in advance whether a particular market downturn will fall 11%, 35%, or 89%. Even the Wave Principle only forecasts probabilities — not certainties.
One thing that is certain — every bear market reached a 10% drop before prices fell even further.
And another near-certainty is that too many money managers will use the phrase “buying weakness” when the market falls 10%. On May 7, after the Dow Jones had fallen several hundred points in a few days, two money managers being interviewed side by side said in effect, “Buy.” Not a word was said about caution. Not a word was offered about even the possibility of a major trend change in the market.
On the other hand, it was refreshing to hear a representative of a fund family say, “I don’t know why anyone needs to be a hero, and try to catch the bottom.”
You may be tempted to jump back in because the market has recently “corrected.” Yet consider what EWI’s Short Term Update subscribers read on May 7 — “. . .we would caution that some of history’s largest stock declines have occurred only after stocks were deeply oversold.”
Two key features of the Elliott Wave Principle is its ability to establish a price target for the current trend, and a time range.
In his latest Elliott Wave Theorist (May issue), Robert Prechter tellswhy market participants should look far beyond a mere 10%-15% move in the now-unfolding trend.
For more market analysis and forecasts from Robert Prechter, download the full text of this 10-page issue of the Elliott Wave Theorist free from Elliott Wave International. Learn more here.
Robert Prechter, Chartered Market Technician, is the world’s foremost expert on and proponent of the deflationary scenario. Prechter is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.
