As managers of a pure active long/short portfolio, Idan and I frankly do not really worry about whether or not SP500 goes to 2000 or 200. Our proprietary fundamental/technical model used to run our FocalEquity Alerts & Analytics portfolio is great at finding the inefficiencies in stocks across all sectors and it can always accurately identify overvalued and undervalued stocks in any market environment with a long term success rate of over 60% . However, we understand that most people do worry about the overall direction the stock market, particularly the U.S. stock market. One of the people that we believe who is authoritative in terms of mapping out the big picture is Robert Prechter, CEO of Elliot Wave International.
Just before the rally started in early March of 2009, Prechter took the opposite side of the trade by emerging as a solitary bullish voice among overwhelming bearishness. He issued the following bullish warning to bears in late February of 2009:
“The market is compressed, and when it finds a bottom and rallies, it will be sharp and scary for anyone who is short.”
We all know that Prechter was only intermediate-term bullish. In Prechter’s eyes, the bear market is far from over. In fact, he clearly indicated that eventually the S&P500 would settle in the 400 range. The biggest reason is his forecast of a period of severe deflation. In this respect, Prechter is again one of the few such voices calling for deflation since most people are concerned about inflation at this point especially given the recent good numbers in various production, manufacturing and job indices combined with the continuous insane economic expansion of China. So I think it is worth your time to read Prechter’s 13-page report on this topic. We think this report is in a way eye opening to investors of all types. You can download this report by clicking on the following link:
Well,, didn’t Prechter get short a few months back…
Yes he wasn’t too far off as far as the bounce from 666,, but his warnings for the re-dip a while back would have broke any average retail investor…
Would be interesting to hear Woo’s thoughts on Prechter’s philosophy. The reason I like Woo’s interpretation of wave theory is because of his flexibility. There are no absolutes in any branch of TA. Woo’s analysis takes that into consideration,, as opposed to Daneric & Kenny. For some folks here,, Brian Shannon is also too vague.. I respect his vagueness and interpret it as flexibility. I personally aspire to be a market follower,, not a market dictator. The market can do whatever it wants.. Believe it .. trade accordingly.
Thanks oPtic,
Yea I do agree about the lack of success of his “re-dip” warning. The thing is that the ferocity of the rally really caught anyone by surprise. But simply looking at the retracement level, it actually is not that surprising considering the rally is simply getting to the golden ratio of 61.8% from the market’s all time high. The fact is no body thinks it would actually get there.
Yea Woo and Idan will definitely begin to post some charts for the public to see.
Well ya’ll best believe in the rally! Nothing is going to stop it so face it. The train to paradise just keeps a chugging and if you think it is going to be cut short think again. Futures up at 50 as I type and the government will do anything it has to to make all this crap look rosy. They sneaky bastids and don’t give a dam about nothing but making the TV president look like a savior. So make sure you are on the train to paradise up up and away!!
Hi, I view all your posts, keep them coming.
Awesome article as always, thanks for writing all this informative stuff on a regular basis.