Aug 19

Stock Market in Free Fall

Posted in Economy, Stock Market

Mainstream media is trying to rationalize the stock market decline tying it to the economic woes, news and events. But have not have these problems for some years now? Why rally for years on the same news and then suddenly turn south losing 500 points a day every other day? Could the reason fo market decline be something else? Something subtle yet obvious to the alert eyes? Something that mainstream media does not want to say? In the May 2008 issue of his monthly Elliott Wave Theorist, Robert Prechter showed this chart of the Dow Jones Industrials. As you can see, prices go back to the 1970s.

Please note that on the day this chart published (May 16), the Dow closed at 12,987 — barely eight percent below the Dow’s all-time high of the previous October.

Yet, as you can also clearly see, Prechter labeled the white space below the May 2008 price level as “Free Fall Territory.”

At the time, no one else dared to publish such a bearish forecast. This was before the Lehman bankruptcy, the bailout binge, the home foreclosure crisis, and certainly before the worst of the stock market collapse.

In his June 2011 Theorist, Prechter published an update to the chart above, and here’s the major difference: The updated chart “telescopes out” by one full degree of trend. Prices go back to the 1930s. The scale of the white space surrounding this chart’s “free fall territory” label will show you what Prechter truly means.

His commentary in that issue also observed that

“the March-April [2011] rally was one of the most passionate bouts of stock buying I have ever witnessed.”

Bob Prechter made this observation not in admiration, but as a warning.

In the past three weeks, the Dow Industrials have plummeted nearly 2,000 points. Most investors are confused and scared. How far down will the decline travel? Will it end tomorrow or go on for years?

The answers to these questions are crucial to your financial health. You can still get ahead of the trend, but only if you prepare now. Read EWI’s long and near-term forecast. Get it in one comprehensive package — and stay ahead of the crowd.

And — get Bob Prechter’s August Elliott Wave Theorist. It includes “many dozens” of charts. Bob will also record this Theorist as a rare “video issue” — you’ll be able to watch and listen as Prechter himself presents all the content.

Also — as part of the same package, you get the August issue of our Elliott Wave Financial Forecast — you’ll see and read about the latest big picture in stocks, dollar, gold and more.

SAVE 57% with this LIMITED-TIME OFFER: See what we see next for the markets now via this instant-access discount subscription offer.


The Dow has plummeted over 2000 points in the past weeks and it seems like volatility is here to stay.

Yet, market volatility doesn’t have to bring confusion and fear when you’re prepared with the necessary market analysis. For example, here’s what Robert Prechter had to say about market volatility in his May 2009 Elliott Wave Theorist market letter:

Market volatility makes most investors less certain about market trends. Elliott waves, however, become clearer the more intense the market’s behavior.

When social mood is changing dramatically, non-mood-related short-term noise has a minimal impact, so even waves of small degree adhere more closely to textbook forms. The five-wave decline from October 2007 to March 2009 was quite beautiful, as were most of its sub-waves.

It is an ironic aspect of wave application that when others are more confused wave analysts tend to be less so.

Get a glimpse into Robert Prechter’s current outlook on these volatile markets when you read his recently released FREE report. It includes an 84-year study of stock values that will help you understand and prepare for today’s critical market juncture.

Read your FREE report now.

But hurry, this report is only available until August 22.

We are in a Depression

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Aug 11

Rare Stock Market Opportunity

Posted in Economy, Stock Market

Prechter describes the once in a lifetime stock market opportunity that is ahead of us. He is expecting a major crash that is a great short opportunity. According to Prechter, the bottom of the deflationary depression will be the greatest buying opportunity of a life time if you can hold cash until then.

Robert Prechter Discusses Market Forecasts on CNBC Closing Bell

“The problem is deeper than just a minor recovery
or a minor recession.”

Robert Prechter joins CNBC hosts Bill Griffeth and Maria Bartiromo on Closing
Bell to talk about the still-unfolding forecasts presented in his New York
Times bestseller Conquer the Crash.

We invite you to watch the interview below. Then download Prechter’s
free report
that uses an 84-year study of stock market values to help
you prepare for and understand today’s critical market juncture.

Download Robert Prechter’s Free Report To Discover How You Can
Prepare For Today’s Critical Market Juncture

we’re sure you’re reading countless articles and analysis about the market’s
recent volatility, if you’re not reading what EWI’s subscribers read, you’re
missing the valuable, prescient perspective contained in each issue of Robert
Prechter’s market letter, The Elliott Wave Theorist.

Access Robert Prechter’s free report and read in-depth analysis — including
an 84-year study of stock values — that will help you prepare for and understand
today’s critical market juncture.

Robert Prechter’s Free Report

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Aug 9

Why is the Stock Market Crashing?

Free Stock Market Report

Should Stock Market Investors “Fret Over the Economy”? No ! See Chart to Understand Why
The idea that the economy leads the stock market is false

As the DJIA fell 2% to close below 12,000 on August 2, 2011, one theme rang across major financial websites. This CNN headline summarizes it:

Stocks sink as investors fret over the economy (Aug. 2)

The belief that the economy drives the stock market is common knowledge; it’s Investing 101; the idea gets pounded into investors’ heads, over and over again, by various pundits, daily.

But please allow us to suggest this: Belief that the GDP and other economic measures drive stock market trends is completely and utterly false.

The strength or weakness of the economy does not lead the stock market higher or lower. The economy follows the stock market.

“Stocks lead the economy, normally by months,” writes EWI president Robert Prechter; he has studied this subject in-depth. Here’s an excerpt from our Club EWI resource, the free 50-page 2011 Independent Investor eBook, which quotes one of Prechter’s research papers.

The Independent Investor eBook, 2011 Edition
(excerpt; get full eBook here, free)

Suppose that you had perfect foreknowledge that over the next 3¾ years GDP would be positive every single quarter and that one of those quarters would surprise economists in being the strongest quarterly rise in a half-century span. Would you buy stocks?

If you had acted on such knowledge in March 1976, you would have owned stocks for four years in which the DJIA fell 22%. If at the end of Q1 1980 you figured out that the quarter would be negative and would be followed by yet another negative quarter, you would have sold out at the bottom.

Suppose you were to possess perfect knowledge that next quarter’s GDP will be the strongest rising quarter for a span of 15 years, guaranteed. Would you buy stocks?

Had you anticipated precisely this event for 4Q 1987, you would have owned stocks for the biggest stock market crash since 1929. GDP was positive every quarter for 20 straight quarters before the crash and for 10 quarters thereafter.

But the market crashed anyway. Three years after the start of 4Q 1987, stock prices were still below their level of that time despite 30 uninterrupted quarters of rising GDP. Figure 10 shows these two events.

It seems that there is something wrong with the idea that investors rationally value stocks according to growth or contraction in GDP. (…continued)


If you found this insight eye-opening, keep reading the2011 Independent Investor eBook, an educational, powerful and FREE 50-page eBook to help you think independently.Thousands of investors have downloaded the Independent Investor eBook, and it has changed the way they think forever. Now YOU can get this important eBook packed with insightful analysis from 2010 and 2011 Elliott Wave Theorist and Elliott Wave Financial Forecast. — all you need is a free Club EWI password.
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Aug 2

Elliott Wave Principle in R.N. Elliott’s Own Words

Posted in Technical Analysis

The Basis of the Wave Principle
by R. N. Elliott
First published on October 1, 1940

Civilization rests upon change. This change is cyclical in origin and characteristics. A rhythmic series of extreme changes constitutes a cycle. When a cycle has been completed, another cycle is started. The rhythm of the new cycle will be the same as that of the previous cycle, although the extent and duration may vary. The cycle progresses in accordance with the natural law of movement.

The behavior of cycles has been studied extensively by puzzled economists, bankers and businessmen. In this connection, the conservative London Economist in a recent issue, commenting upon the results of a long study of trade cycles made by Sir William Beveridge, the noted British economist, said:

Sir William’s researches have emphasized once again that the more the trade cycle is studied, the more it seems to follow the pressure of forces which, if they are not wholly beyond the reach of human control, have at least enough of the inexorable in their nature to make the policies of governments resemble the struggles of fish caught in the tides. Sir William pointed out that the trade cycle ignores politics; he might have added that it overrides economic policies.

The causes of these cyclical changes seem clearly to have their origin in the immutable natural law that governs all things, including the various moods of human behavior. Causes, therefore, tend to become relatively unimportant in the long term progress of the cycle. This fundamental law cannot be subverted or set aside by statutes or restrictions. Current news and political developments are of only incidental importance, soon forgotten; their presumed influence on market trends is not as weighty as is commonly believed.

This law of natural change is inevitable, and applies to the seasons and the movements of the tides and planets. It has truly been said that change is the only “immutable thing in life.” Being a natural phenomenon, it necessarily governs all human activities, even the relatively static sciences of biology and botany. Even time and mathematics appear to be amenable to the application of this law of rhythm from the small unit of hours to the great intervals of decades, centuries and millennia. Measuring the behavior of cycles should therefore offer a reliable means of forecasting changes, regardless of the cause, and thus yield handsome profits.

In an independent study of the available data, extending over a period of many years, the writer has observed certain recurring behavior of change in movement. Apparently these changes follow a natural law that inevitably influences the mass. Finally there evolved certain principles, which were carefully tested back over a long period of years.

By 1934, I was able to resolve the various trends of changes in stock prices to a rhythmic series of component waves, which I called a “cycle.” This cyclical rhythm has occurred regularly and repeatedly not only in the available records of the various stock exchanges, but also in commodities, industrial production, temperature, music, variation in color, electric output, population movements to and from cities, etc. In fact, it is manifest so widely, not only in human activities but also in the working of nature itself, that I have termed this discovery “The Wave Principle.”

Understanding of this law enables the close student to forecast the terminations of cycles by means of the market itself. The Wave Principle is not a “market” system or theory. The forecasting principle involved goes far beyond the concept of any known formula….

Learn more about the Elliott Wave Principle and how applying it to your market analysis can improve your investing and trading. Take the entire online course — The Elliott Wave Tutorial: 10 Lessons on the Wave Principle — FREE!

Click here to access the 10 Lessons

This article was syndicated by Elliott Wave International and was originally published under the headline Read About the Elliott Wave Principle in R.N. Elliott’s Own Words on his Birthday. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

July 28 would have been Ralph N. Elliott’s 140th birthday, so it’s a fitting time to post an excerpt from his essay, “The Basis of the Wave Principle.” There’s nothing like reading for yourself what the discoverer of the Wave Principle wrote about how it works. This essay is taken from the book, R.N. Elliott’s Masterworks. It’s the definitive collection that Robert Prechter collected and published in 1994.

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