http://www.nytimes.com/2010/07/04/yo...pagewanted=all
and
http://en.wikipedia.org/wiki/Elliott_wave_principle


New York Times

Strategies
A Market Forecast That Says ‘Take Cover’
By JEFF SOMMER
Published: July 2, 2010


WITH the stock market lurching again, plenty of investors are nervous, and some
are downright bearish. Then there’s Robert Prechter, the market forecaster and
social theorist, who is in another league entirely.

Mr. Prechter is convinced that we have entered a market decline of staggering
proportions — perhaps the biggest of the last 300 years.

In a series of phone conversations and e-mail exchanges last week, he said that
no other forecaster was likely to accept his reasoning, which is based on his
version of the Elliott Wave theory — a technical approach to market analysis
that he embraces with evangelical fervor.

Originating in the writings of Ralph Nelson Elliott, an obscure accountant who
found repetitive patterns, or “fractals,” in the stock market of the 1930s and
’40s, the theory suggests that an epic downswing is under way, Mr. Prechter
said. But he argued that even skeptical investors should take his advice seriously.

“I’m saying: ‘Winter is coming. Buy a coat,’ ” he said. “Other people are
advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong,
you’re dead. It’s pretty benign advice to opt for safety for a while.”

His advice: individual investors should move completely out of the market and
hold cash and cash equivalents, like Treasury bills, for years to come. (For
traders with a fair amount of skill and willingness to embrace risk, he suggests
other alternatives, like shorting the market or making bets on volatility.) But
ultimately, “the decline will lead to one of the best investment opportunities
ever,” he said.

Buy-and-hold stock investors will be devastated in a crash much worse than the
declines of 2008 and early 2009 or the worst years of the Great Depression or
the Panic of 1873, he predicted.

For a rough parallel, he said, go all the way back to England and the collapse
of the South Sea Bubble in 1720, a crash that deterred people “from buying
stocks for 100 years,” he said. This time, he said, “If I’m right, it will be
such a shock that people will be telling their grandkids many years from now,
‘Don’t touch stocks.’ ”

The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over
perhaps five or six years as a grand market cycle comes to an end, he said. That
unraveling, combined with a depression and deflation, will make anyone holding
cash “extremely grateful for their prudence.”


....

Mr. Prechter, 61, lives in Gainesville, Ga., where he runs Elliott Wave
International, a forecasting and publishing firm. He graduated from Yale as a
psychology major in 1971, dabbled as a singer, drummer and songwriter in a rock
band and became a technical analyst for Merrill Lynch.

Mr. Prechter, 61, lives in Gainesville, Ga., where he runs Elliott Wave
International, a forecasting and publishing firm. He graduated from Yale
as a psychology major in 1971, dabbled as a singer, drummer and
songwriter in a rock band and became a technical analyst for Merrill Lynch.

Never heard of the guy myself. But on a day when the market was up a
whopping 275 points to back over 10,000 it only makes his catastrophic
predictions sound like the work of a crackpot. I follow the market all
the time. I've never heard anyone predict it to go to 1,000. Of course,
I've never heard anyone predict the Dow at a million either. As with all
statistics you throw out all the outliers at both ends. So his
prediction makes a distinctive thunk as it hits the trash can.

Hawke