Thursday, January 21, 2010
Elliott Wave theorist Robert Prechter is back in the news today via this report by Peter Brimelow at MarketWatch in which he is once again calling for equity markets to crash. At the moment, that looks to be a pretty astute call.
Crash of 2008 winner says bear market is backAs this is written, the Dow Jones Industrial Average stands at 10,398 - Yikes!
Proponents of a weird investment theory say another crash is coming. Even weirder: they were right last time.
EWFF was one of the first letters to call for a stock market rebound. (See March 4, 2009 column.) In mid-summer, it argued that the Dow could reach 10,000 -- but that the bear market would then resume, ending in devastating deflation. (See June 29, 2009 column.)
Well, the Dow did reach 10,000. What now?
It says: "2010 is the year when the bear market in stocks returns in full force." It compares the situation to the short-lived rebound after the initial break in 1929, and says that "a meaningful close" below 10,489 should see a similar collapse to new bear market lows.
EWFF also expects the spread between high and low-grade bonds to experience "a record widening" and thinks gold will fall "below $680."
If not for his prediction years ago that gold would never top $400 and for what Brimelow calls Elliott Wave's "complex cycle theory -- which, however, is subject to readjustments and reinterpretation", it would be a lot easier to put some money where Bob's mouth is.