Friday, April 16, 2010

Why Economic Forecasts Often Fail

Linear thinking often utterly misses the mark in financial forecasting.
Let's begin with a paradox -- the one constant in our society is dramatic change. This is the main reason why projecting present conditions into the future often fails.

The "rare wave formation" described in January Theorist: Did it give a false alarm?
The Januray EW Theorist said: "he third zigzag, wave (Z), is ending with a contracting triangle and a diagonal, as shown in Fig 1. A triangle always precedes the final wave in a sequence, and a diagonal is always an ending wave. It is a rare pleasure to find these two forms adjacent to each other. The EWT documented this occurrence only once before, at smaller degree, in June 1986." With the S&P now at 1173 and Dow at 10,895, what is Bob Prechter's take on this formation. Did it give a false alarm? It would be helpful to get his insight on this.

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