Prechter's case for a bear market...

Discussion in 'Trading' started by chasinfla, Jun 10, 2002.

  1. Looks like we could get a good bounce,even though QQQ, SPY are below almost all moving averages.

    Interesting headline on that link.[Prechter]


    Interesting, he writes about time first and more than chance.:)
  2. I'm not a devotee. I received this solicitation in my email and, having a few minutes, decided to watch it. He's very convincing. I almost bought the book. I decided to build a bomb shelter instead.:D
  3. trdrmac



    That was interesting, but does that mean it's time to buy? Precther got his followers out of stocks and short right at the start of the 80s bull market from what I remember. He was a hero in 73-74, kinda like Batapagilla and Cohen were in the late 90s.

  4. You mean fade him? I don't know. My thinking right now is that he was early...if that really is a wave 5 top, then the fun is only beginning BUT...what do I know? I could make a case for Dow 25000 too (but not as good a case as his for Dow 5000 or 500 or 5 or whatever he sees).

    Someone posted a link the other day about "90% days" (a Lowry's indicator of panic) which basically says that major bottoms have historically been accompanied by several of days - not necessarily back to back-- when 90% of the volume is down volume and 90% of the a-d that day is negative (followed by at least one day when 90% of the volume is up and 90% of the a-d is up as a confirmation of bottom). The study showed that there were no "90%" down days during the Sept. lows... that was thought provoking.

    Who knows if these indicators aren't skewed by the changing complexion of institutional ownership or some other stock demographics.

    Besides all this, I was bullish late last week...:confused:
  5. trdrmac



    I would not fade him, but I also don't buy into his overly bearish case. I too was a little too bullish, not just last week. The 90% indicator is interesting, I use TC-2000 plus some stuff from barrons to get daily and weekly opinions. At this point, I can't say as I am leaning either way.

    It does seem though that this is a mirror image of the type of scenario we were getting 2 years ago. I haven't followed Precter, but I get the impression from what I have read that he is more permanently bearish than most. And, you know what they say about broken clocks.

    With all that is going on, I would expect more of a choppy market than a waterfall decline. One thing that is curious in using charts is that a move from 1000-2000 looks less dramatic than an move from 4000-8000 even though they are both 100% moves.

    Good Trading
  6. It's possible to envision a day when the bear market of 2001- ? is as insignificant a blip on the charts as the crash of 1987. I hope the landscape in between then and now doesn't look like the Grand Canyon.

    I wish I could find that link...
  7. The best indicator is Wall Street sentiment itself.

    When all the bullish analysts are bearish, CNBC is out of business or close to it, and Joe Public would rather kick his dog than buy a single share of stock, THEN it's time to start putting it away in the retirement account.

    Bear markets don't go out with a bang, they slip quietly into the night. After years and years.
  8. I agree with your comments about Wall St/Joe Public sentiment being a solid indicator (contrarian). I'm not sure we can statement with absolute certainty that bear markets slip quietly out the back door though. I don't really think we've had enough of them to make a judgement as to their nature. How many "solid" bears have their been since, say, 1900? Would it be more than ten (I doubt it)? I'd say that's too few observations to be able to categorically state how this bear is going to end. (Personally, I have no idea how it might.)

  9. I wasn't making a dogmatic pronouncement, rather an offhand observation based more on common sense than historical correlations.

    How does an aircraft carrier turn around? Very slowly. By definition, sentiment is the most bullish at the top and the most bearish at the bottom. But things fall apart faster than they are built up. That is true across the board, a general truism for reality as a whole.

    Since it takes a drawn out series of events to solidify general sentiment, it will usually take another drawn out series of events to turn that sentiment around. And fundamentals work in the same way. When money supply is too big, it will take time to painfully contract. When too many companies are chasing too few dollars, it will take time for the dogs to be put out of their misery. When spending is at an all time high and saving at an all time low, it will take time for the cycle to reverse. And so on.

    Like Yogi Berra said, you can observe a lot just by watching.
    #10     Jun 11, 2002