Elliot Wave predicts triple-digit Dow in 2016 (If you think things are bad now....)

Marketwatch ^ | 06/17/2010 | Peter Brimelow

[SeekAndFind]

An investment letter that called the Crash of 2008 said that this would be a bad year -- and it now says it will get worse.

A whole generation of investors think that Robert Prechter and his Elliott Wave Theory letters, Elliott Wave Financial Forecasts and Elliott Wave Theorist, are permabears. And they've certainly seemed that way for the last decade -- although it should be noted that the stock market is now roughly back where it started. ( See April 26, 2002 column. )

But Prechter was very bullish after the 1974 low and, briefly, after being one of the very few services to make money in 2008. Then he announced that "2010 is the year when the bear market in stocks returns in full force." ( See Jan. 22 column. )

Elliott Wave Financial Forecasts (EWFF) makes recommendations specific enough to be tracked by the Hulbert Financial Digest. (The Elliott Wave Theorist is too, well, theoretical.)

Over the year to date, EWFF is up just 0.4% by Hulbert Financial Digest count through May vs. negative 0.3% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.

Over the past 12 months, its bearishness did cause it to gain just 4.75% compared to 22.89% for the total return Wilshire 5000. But over the past three years, the letter's bearishness paid off handsomely. It's up an annualized 5.25% against negative 8.12% annualized for the total return Wilshire 5000.

And even over the past 10 years, so badly damaged have stocks been that the letter was up an annualized 1.05%, outperforming a mere 0.22% annualized gain for the Wilshire 5000.

The EWFF issue published in early May said flatly: "The topping process is over for the countertrend rally that started in the first quarter of 2009.

[babble-on]

Wow, he’s never been wrong. (But then why does he have to hawk newsletters?)

[kingu]

Figures I can’t find my link to the old DJIA priced in gold ounces. It makes a pretty dramatic statement, demonstrating that the industrial average has been in a constant slump since the dot com boom era.

[markomalley]

That is particularly bad considering the hyperinflation we will likely start to see in the not-too-distant future due to the inevitable increase in the money supply that will be needed to finance our debt. (In other words, if he’s right, we’re looking at penny stocks)

[ILS21R]

Yeah...by that time the DOW will be down to 5 companies.

[Publius]

Back when this bear market began, I said the Dow would eventually bottom at 400.

I got laughed at. I'm glad to see someone agrees with me.

[SeekAndFind]

Since 2000, as illustrated in Exhibit 1 [below], movements in the U.S. stock market have been remarkably similar to the trend of weekly reported initial unemployment insurance claims. This chart suggests the fate of the stock market during the balance of this year may be tied to whether unemployment claims continue to trend sideways about the 450 thousand level (a result which would reinforce the trendless stock market which has existed since year-end), whether they surprisingly sustain a rise back toward 500 thousand (a meltdown scenario for the stock market which would heighten “double-dip” fears and keep vulnerability to any perceived Armageddon fears at a fever pitch) or whether they soon resume a declining trend towards the 400 thousand level (a move which could spark a fresh rally in the stock market probably carrying the S&P 500 to new cycle recovery highs before year-end).

[Pearls Before Swine]

Back when this bear market began, I said the Dow would eventually bottom at 400.

In inflation adjusted dollars, or in the dollar of the day?

[Genoa]

Exactly. I never pay attention to anyone who makes his living telling people how to get rich.

[blam]

Now Stocks Are 48% Overvalued, Says Smithers

Henry Blodget
Jun. 17, 2010, 7:04 AM

We've been pointing out for a while that, based on a cyclically adjusted PE ratio, the stock market is significantly overvalued--say, 20% or so.

To arrive at this view, we use a "fair value" estimate for the S&P 500 of about 900, which is close to the one used by fund manager Jeremy Grantham, fund manager John Hussman, and others. This compares to the S&P's current level of about 1100.

But now Andrew Smithers, an excellent economist based in London, is telling us that we're way too optimistic, that fair value for the S&P 500 is actually in the 700-750 range. Smithers, therefore, thinks the stock market is about 50% overvalued.

Smithers constructs his estimate in two ways: 1) the same cyclically adjusted PE ratio that we use, and 2) something called "Tobin's Q," which is a measure of replacement value. Like Yale professor Robert Shiller, Smithers charts these valuation measures for the last century, which provides some context for where we are today:

[snip]

The DJIA is down 16 as I post.

[sarasota]

Good point.

[downwdims]

Stocks that halve, will halve again. I’m not thinking 3200, but a visit to 6400 again could be in the cards again.

[Publius]

Dollar of the day.

[Pearls Before Swine]

Dollar of the day.

Since I expect some inflation.... ouch!

I'm bearish, but not that bearish!

[dangus]

Never? My understanding is that he insisted that the 2001 “recession” marked the beginning of the Elliot Wave Grand Decline, and simply kept denying throughout the entire Bush years that the economic growth simply wasn’t really happening. Meanwhile, those years marked a boom of economic growth in the third world on such a grand scale we still can’t quite figure out what happened.

[FewsOrange]

Robert Prechter has been predicting a triple digit Dow for quite some time now. Here is a 2002 FR thread

[PGR88]

Wow, he’s never been wrong. (But then why does he have to hawk newsletters?)

---

He was wrong in the 1990’s. Prechter was predicting a crash from the early 1990’s when the Dow was at 3000 and missed the rally (bubble?) all the way up to 2000.

[blam]

Feeling Bearish About U.S. Stocks? So Is Everyone

[Publius]

Let me explain what happened 30 years ago. We credit Paul Volcker with crushing inflation, but he merely moved it. Inflation had been moving into commodities driving up oil and gold. By raising interest rates through the roof, Volcker moved the inflation into financial instruments, setting off the bull market in stocks that began in 1982. The spigot of liqudity was never turned off. Instead, Reagan increased the flow through the spigot to win the Cold War. The bull market has always been driven by liquidity.

That bull market ended in 2007 if measured in curent dollars. If measured against gold, the bull market ended in 2000.

The flow through the spigot has increased, but the flow -- temporarily dammed in the banks -- is moving out of financial instruments and back into commodities. This will set off hyperinflation for things that you absolutely need (oil and food), but deflation for things you can live without (real estate).

The net result will see a bear market bottom around 400. Housing will bottom when a typical piece of real estate has lost 95% of its 2007 value, much the way it did during the Great Depression.

[Buckeye McFrog]

Presumably under a Global Communist regime the Dow would be at zero?