Every Big Bear Grew From a Cub
May 26, 2010
By Elliott Wave International
The famous "10% correction" that market pundits talk about sounds so nice and tidy, so predictable and tolerable. It's as if this "cute little correction" came neatly wrapped, looked like an M&M candy character, and smiled at you and your family after you open the box.
If only it were so.
"If all the market ever did on the downside was dip 10% once every two years, then investing would be easier than shooting fish in a barrel. Obviously, this is not the case. The fact is that the stock market's movements are a fractal. Declines come in widely varying sizes." - The Elliott Wave Theorist, December 2001
There is no way to know in advance whether a particular market downturn will fall 11%, 35% or 89%. Even the Wave Principle only forecasts probabilities -- not certainties.
Read Part One of Robert Prechter's Latest Two-Part, April-May Theorists FREE
The April-May Theorist series entitled "Deadly Bearish Big Picture" reveals a lucid picture for 2010-2016. It's the flipside of Robert Prechter's February
2009 Forecast for a 'Sharp and Scary' Rally. Click here to download the 10-page part one for FREE now.
One thing that is certain -- every bear market reached a 10% drop before prices fell even further.
And another near-certainty is that too many money managers will use the phrase "buying weakness" when the market falls 10%. On May 7, after the Dow Jones had fallen several hundred points in a few days, two money managers being interviewed side by side said in effect, "Buy." Not a word was said about caution. Not a word was offered about even the possibility of a major trend change in the market.
On the other hand, it was refreshing to hear a representative of a fund family say, "I don't know why anyone needs to be a hero, and try to catch the bottom."
You may be tempted to jump back in because the market has recently "corrected." Yet consider what EWI's Short Term Update subscribers read on May 7 -- ". . .we would caution that some of history's largest stock declines have occurred only after stocks were deeply oversold."
Two key features of the Elliott Wave Principle is its ability to establish a price target for the current trend, and a time range.
In his latest Elliott Wave Theorist (a two-part April-May issue), Robert Prechter tells why market participants should look far beyond a mere 10%-15% move in the now-unfolding trend.
Read Part One of Robert Prechter's Latest Two-Part, April-May Theorists FREE
The April-May Theorist series entitled "Deadly Bearish Big Picture" reveals a lucid picture for 2010-2016. It's the flipside of Robert Prechter's February
2009 Forecast for a 'Sharp and Scary' Rally. Click here to download the 10-page part one for FREE now.
Wednesday, May 26, 2010
Saturday, May 22, 2010
The Federal Reserve Does NOT Control the Market
FREE eBook reveals why the Fed is powerless to change the economic course
By Elliott Wave International
As the world's leading stock markets continue to play stomach-hockey with investors via one triple-digit turn after another, the mainstream community takes solace in this core belief: No matter how uncertain things become, the Federal Reserve can at any moment swoop in to set the economy right.
In reality -- the Fed has no such power. This is the revelation of Elliott Wave International's newest complimentary resource from Club EWI: the 35-page eBook titled "Understanding the Fed." Including excerpts from the selected works of EWI President Robert Prechter -- including his 2002 book "Conquer the Crash" and several past "Elliott Wave Theorist" publications -- this riveting report exposes once and for all the most dangerous myths about the Federal Reserve.
Chapter 3 (of the 8-chapter anthology) attends to the "Potent Directors Fallacy" -- i.e., the false notion that the central bank is in control of the U.S.'s money, market, and economy -- and offers this "Conquer the Crash" insight:
"For recent examples of the failure of the idea of efficacious economic directors, just look around. Since Japan's boom ended, its regulators have been using every presumed macroeconomic 'tool' to get the Land of the Sinking Sun rising again, as yet to no avail. The World Bank, the IMF, local central banks, and government officials were 'wisely managing' South East Asia's boom until it collapsed spectacularly in 1997. In America, the Federal Reserve has lowered its discount rate from 6% to 1.25%, an unprecedented amount in such a short time... What will it do if the economy resumes its contraction; lower rates to zero?"
Note: The underlined sentence above was written in 2002. Today, that forecast has come to fruition after the Fed's rate-slashing campaign since September 2008 has brought rates to the zero level.
Chapter 3 then goes on to explain WHY the Fed's monetary policy failed to lift the hot-air balloon of the economy out of the violent credit and housing downdraft. Here, the eBook writes:
"The Fed's ultimate goal is to influence public borrowing from banks. During economic contractions, banks become fearful. At such times, low Fed-influenced rates cannot overcome creditors' disinclination to lend and/or customers' unwillingness or inability to borrow. Thus, regardless of assertions to the contrary, the Fed's purported 'control' of borrowing, lending, and interest rates ultimately depends upon an accommodating market psychology and cannot be set by decree."
Once again, flash ahead to today and the disintegration of optimism and shift toward conservation can be seen in the following data from February 2010:
Year-over-year bank credit was (negative) - 6.8% vs. 10% in 2007
Loan availability to small businesses plunged to the lowest level since interest rate crisis of 1980, thus drying up a major means of debt repayment.
The number of banks tightening their lending standards has soared, while consumer credit and tax revenue is plunging.
And, residential and commercial mortgages are plunging, as more and more home/business owners are walking away from their leases.
In Bob Prechter's own words: Once you can assimilate the truths contained in this eBook, "you will have knowledge of the banking system that one person in 10,000 has."
Do you want to really understand the Fed? Then keep reading this free eBook, "Understanding the Fed", as soon as you become a free member of Club EWI.
By Elliott Wave International
As the world's leading stock markets continue to play stomach-hockey with investors via one triple-digit turn after another, the mainstream community takes solace in this core belief: No matter how uncertain things become, the Federal Reserve can at any moment swoop in to set the economy right.
In reality -- the Fed has no such power. This is the revelation of Elliott Wave International's newest complimentary resource from Club EWI: the 35-page eBook titled "Understanding the Fed." Including excerpts from the selected works of EWI President Robert Prechter -- including his 2002 book "Conquer the Crash" and several past "Elliott Wave Theorist" publications -- this riveting report exposes once and for all the most dangerous myths about the Federal Reserve.
Chapter 3 (of the 8-chapter anthology) attends to the "Potent Directors Fallacy" -- i.e., the false notion that the central bank is in control of the U.S.'s money, market, and economy -- and offers this "Conquer the Crash" insight:
"For recent examples of the failure of the idea of efficacious economic directors, just look around. Since Japan's boom ended, its regulators have been using every presumed macroeconomic 'tool' to get the Land of the Sinking Sun rising again, as yet to no avail. The World Bank, the IMF, local central banks, and government officials were 'wisely managing' South East Asia's boom until it collapsed spectacularly in 1997. In America, the Federal Reserve has lowered its discount rate from 6% to 1.25%, an unprecedented amount in such a short time... What will it do if the economy resumes its contraction; lower rates to zero?"
Note: The underlined sentence above was written in 2002. Today, that forecast has come to fruition after the Fed's rate-slashing campaign since September 2008 has brought rates to the zero level.
Chapter 3 then goes on to explain WHY the Fed's monetary policy failed to lift the hot-air balloon of the economy out of the violent credit and housing downdraft. Here, the eBook writes:
"The Fed's ultimate goal is to influence public borrowing from banks. During economic contractions, banks become fearful. At such times, low Fed-influenced rates cannot overcome creditors' disinclination to lend and/or customers' unwillingness or inability to borrow. Thus, regardless of assertions to the contrary, the Fed's purported 'control' of borrowing, lending, and interest rates ultimately depends upon an accommodating market psychology and cannot be set by decree."
Once again, flash ahead to today and the disintegration of optimism and shift toward conservation can be seen in the following data from February 2010:
Year-over-year bank credit was (negative) - 6.8% vs. 10% in 2007
Loan availability to small businesses plunged to the lowest level since interest rate crisis of 1980, thus drying up a major means of debt repayment.
The number of banks tightening their lending standards has soared, while consumer credit and tax revenue is plunging.
And, residential and commercial mortgages are plunging, as more and more home/business owners are walking away from their leases.
In Bob Prechter's own words: Once you can assimilate the truths contained in this eBook, "you will have knowledge of the banking system that one person in 10,000 has."
Do you want to really understand the Fed? Then keep reading this free eBook, "Understanding the Fed", as soon as you become a free member of Club EWI.
Friday, May 14, 2010
Wednesday, May 12, 2010
Looking for a new low.
I am still looking for a new low below 1.4474. Nothing in the movment sicne 5/7/2010 negates that outlook. The whole move up was corrective. The cable is still under pressure.
Prechter Describes The "Stunning Long-Term Elliott Wave Picture"
By Robert Folsom, Elliott Wave International
Please join me to consider a time in the stock market that lasted just under three years: 32 months, to be precise.
During this period a series of powerful rallies stand out clearly on a price chart. The shortest of these rallies was four weeks, the longest more than five months.
I can even list seven of these rally episodes, with the number of calendar days and percentage gains.
1. 152 days +52%
2. 28 days +11%
3. 77 days +19%
4. 69 days +27%
5. 31 days +30%
6. 35 days +39%
7. 28 days +27%
Get Robert Prechter's Latest Analysis -- Click Here to Download His 10-Page Market Letter FREE
For a limited-time, you can download Robert Prechter's April 2010 Elliott Wave Theorist, the first in a two-part series entitled "Deadly Bearish Big Picture," for FREE! Click here to learn more and download your free Theorist.
This information obviously seems to paint a bullish picture: The stock market was in double-digit rally mode during 43% of the total calendar days in question.
But in fact, those rallies were the days when the bear was catching his breath. The market was the Dow Jones Industrials; the overall period was from November 1929 to July 1932. It devastated investors. The Dow lost 80% of its value. Yes, that includes the rallies listed above.
I said that these rallies stand out on a price chart, and indeed they do -- it's just that the declines stand out even more. There's virtually no "sideways" action. Prices moved rapidly in one direction or the other.
You can see the chart for yourself in the first issue (April issue, page 4) of the two-part series Bob Prechter has published in The Elliott Wave Theorist. Part One was in April, "A Deadly Bearish Big Picture." The final sentence of that issue said Part Two "will update the stunning long-term Elliott wave picture."
Bob just published Part Two. It completes the "Big Picture" he has now delivered to subscribers.
The past doesn't "define" the present or the future, but it sure does provide context. No analyst alive today understands this better than Bob Prechter.
Believe me when I say that the charts and analysis in this two-issue series are unique. The word "stunning" only begins to describe what you'll read
Please join me to consider a time in the stock market that lasted just under three years: 32 months, to be precise.
During this period a series of powerful rallies stand out clearly on a price chart. The shortest of these rallies was four weeks, the longest more than five months.
I can even list seven of these rally episodes, with the number of calendar days and percentage gains.
1. 152 days +52%
2. 28 days +11%
3. 77 days +19%
4. 69 days +27%
5. 31 days +30%
6. 35 days +39%
7. 28 days +27%
Get Robert Prechter's Latest Analysis -- Click Here to Download His 10-Page Market Letter FREE
For a limited-time, you can download Robert Prechter's April 2010 Elliott Wave Theorist, the first in a two-part series entitled "Deadly Bearish Big Picture," for FREE! Click here to learn more and download your free Theorist.
This information obviously seems to paint a bullish picture: The stock market was in double-digit rally mode during 43% of the total calendar days in question.
But in fact, those rallies were the days when the bear was catching his breath. The market was the Dow Jones Industrials; the overall period was from November 1929 to July 1932. It devastated investors. The Dow lost 80% of its value. Yes, that includes the rallies listed above.
I said that these rallies stand out on a price chart, and indeed they do -- it's just that the declines stand out even more. There's virtually no "sideways" action. Prices moved rapidly in one direction or the other.
You can see the chart for yourself in the first issue (April issue, page 4) of the two-part series Bob Prechter has published in The Elliott Wave Theorist. Part One was in April, "A Deadly Bearish Big Picture." The final sentence of that issue said Part Two "will update the stunning long-term Elliott wave picture."
Bob just published Part Two. It completes the "Big Picture" he has now delivered to subscribers.
The past doesn't "define" the present or the future, but it sure does provide context. No analyst alive today understands this better than Bob Prechter.
Believe me when I say that the charts and analysis in this two-issue series are unique. The word "stunning" only begins to describe what you'll read
Thursday, May 6, 2010
Elliott Wave Financial Forecast
Get a free copy of the Elliott Wave Financial forecast by visiting my website
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