Tuesday, March 1, 2011

EWI: Social Mood Turns Negative: Markets Will Soon Follow, Robert Prechter Says

From the Mid-East to the American Midwest, constituents are rising up in protest against the government.  Not all these events are specifically linked but they do reflect a broader shift in human psychology that will have major ramifications on society, from politics to the markets. At least that's what Robert Prechter, the foremost follower and evangelist of the Elliott Wave Principle believes.

What's an Elliott Wave?

    "The Elliott Wave Principle is a detailed description of how groups of people behave. It reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific and measurable patterns," according to Prechter's website. In this case, we're witnessing "a change towards a negative social mood," says Prechter.  This shift has already manifested itself in a top in emerging markets, Prechter tells Aaron and Henry in this accompanying video.

Source Video:

BOB PRECHTER: We're Still In A Massive Bear Market And Stocks Will Crash To New Lows

Investors have gotten wildly bullish of late, as the bull market that started in early 2009 keeps driving stocks to new highs. But the pigs are about to get slaughtered, says Bob Prechter, president of Elliott Wave International and editor of the Elliott Wave Theorist.

Prechter still thinks the new bull market is just a cyclical "retracement" of some of the bear market losses that we've had since the market crashed in 2008.  Prechter expected this retracement to drive stocks 50% above the market lows, but stocks have since soared 30% higher than than he expected.  So when the day of reckoning comes, Prechter thinks, it will be even more startling.  And Prechter still thinks that stocks will eventually crash to new bear-market lows (read: below 6,800 on the DOW).

What makes Prechter think this day of reckoning may come sooner rather than later?

Source Video:

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