We have had the market rally since March 2009. Elliott Wave International suggested closing short positions back in February 2009 and predicted a multi month rally back in March. In June the prediction was a correction followed by the second leg of the rally. Prechter turned bearish starting August, suggested moving out of stocks. Shorts were recommended first at 50%, then 100% and then leveraged 200% short by January 14 2010. Why so bearish? What is the market forecast for 2010? Let us find out now.
March 4 Update:
Is 2010 Going to be a Bear Market?
A repeat of Great Depression? Primary Degree Wave 3 decline has started. Recommendation is to hold short. When will the short term bounce come? Will March lows hold? Subscribe to Short Term Update at Elliottwave International for frequent analysis of the markets, or the monthly Financial Forecast and Elliott Wave Theorist for the big picture. Learn what drives the market lower.
The view from the top:
As seen in the above weekly chart, S&P 500 index has retraced 50% of the initial decline since 2007 top. After a classic 1-2-3-4-5 decline, an a-b-c counter trend move has formed according to Elliott Wave Theory. Meanwhile, accumulation distribution index once again is going down while the prices are going higher. Same happened at 2007 top. Bullish sentiment is at record highs. Back in March it was 3% bulls and it was time to buy. Now we have back to back days of 90%+ bulls. The cash mutual funds hold are at record lows. People have once again threw caution to the wind and they positioned themselves in stocks to sell to the greater fool at a higher price.
Check out the stock market crash that happened after DOW retraced 50% of the decline in 1930.
What does the Old Fox Think for 2010?
Prechter’s Stock Market Bottom Call - February 2009
Prechter’s Stock Market Top Call - October 2007
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New Year: New Economic Boom? Why 2010 Should Be One to Remember
January 19, 2010
Elliott Wave International's latest free report puts 2010 into perspective like no other. The Most Important Investment Report You'll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.
By Nico Isaac
In the realm of market psychology, there's a big difference between optimism and extreme optimism. The first is seeing the glass half full. The second is seeing the glass half full deep in the heart of a bone-dry desert. In finance, it's what we call "Buying the Dip" mentality -- when all outcomes, even losses, are cause for celebration.
We are there now.
To wit: With a new year upon us, the mainstream has already come up with a fresh tagline to define the next 360-or so days. It even rhymes: The Bull Runs Again In 2010. This projection is in no way "in spite of" the fact that the U.S. stock market just finished its first decade of negative returns since the Great Depression; it's because of that fact. See, according to the mainstream experts, this "Lost Decade" of abysmal stock performance (in which the Dow ended 9% in the red, the S&P 500 - 24%, and the NASDAQ Composite - 44%) is the very foundation on which a new bull market will apparently be born. One economic scholar recently coined the phenomenon the "Slingshot Effect" -- the more severe the downturn, the faster the recovery. (Associated Press)
Adding to the upbeat chorus are these recent news items:
"The horrible decade has wiped out all the excesses of the previous two decades and put us back on track for more normal returns." (USA Today) -- AND -- "It may be the best of all possible worlds." (Business News)
Back in the late 1990s, when the "unstoppable" NASDAQ began to experience regular days of double-digit drops, it was "Buy-the-Dip." Now, it's "buy the entire lost decade." And, as the Dec.31, 2009 Elliott Wave Financial ForecastShort Term Update reveals -- current sentiment readings "continue to show that stock market bears have packed up and moved to Florida for the winter."
The Dec. 31 Short Term Update also reveals two mind-blowing charts of the S&P 500 versus Investor Intelligence Advisors Survey Percentage of Bears -- AND, the S&P 500 versus the percentage of "Fully Committed" bullish advisors since 2000. The current reading is the lowest bearish percentage in 22 years.
Take one look at the evidence, and you'll see that a defining pattern emerges: Low levels of bearishness have consistently coincided with one kind of market move. Combine this picture with the other measures of investor sentiment like momentum, volume and Elliott wave structure, and the evidence tilts overwhelmingly in favor of an unforgettable year.
Elliott Wave International's latest free report puts 2010 into perspective like no other. The Most Important Investment Report You'll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.
Nico Isaac writes for Elliott Wave International, a market forecasting and technical analysis firm.
