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AdirondackFund (< 20)

Prechter Goes All-IN At 200% Short

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November 25, 2009 – Comments (6)

Today, around noontime, Robert Prechter announced he has moved to a 200% position short.  Here's the link to the article, it's pretty self explanatory. 

http://www.marketwatch.com/story/elliott-wave-adviser-now-aggressively-bearish-2009-11-25?siteid=YAHOOB

I've followed Prechter for a very long time and he has made some classic mistakes.  His biggest mistake so far was in 1988 when he stayed too Bearish for too long after the 1987 crash.  Even I knew he was wrong on that call and I was just learning about crashes for the first time.  This may be a repeat, but with Black Friday coming this Friday and the McClellan Oscillator acting very poorly, Prechter might just be right this time as there is plenty of evidence of technical deterioration in markets, not the least of which is the performance of the McClellan Summation Index, which looks absolutely sickly. 

People will always ask "What will be the catalyst".  It could be almost anything this time around.  It could be a very bad Black Friday, it could be a Bond Market reaction which raises interest rates, it could be a spike in the Dollar or a drop in the Gold Price.  It could be nearly anything at this point.  So why guess.  Most of what Prechter studies is wave forms and time cycles. Even wave forms are now pointing down as well.  I think the main point is to stay alert this week and next week and really pay attention.  We could even see some kind of contrived event (God Forbid), as we saw in 1987 when markets sold off on a bad Trade number, which later on turned out to be completely meaningless in the face of very good Q4 Earnings in 1987.  I've seen so many of these declines materialize out of thin air that I barely notice the alibi anymore.        

6 Comments – Post Your Own

#1) On November 25, 2009 at 4:55 AM, KamranatUCLA (29.03) wrote:

nice  +1

We need fundamental change in ths country and stupid Obama is too slow and has not delivered.

I hate to politisize this website, but it's all damn politiocs at this point.

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#2) On November 25, 2009 at 8:39 AM, Varchild2008 (85.24) wrote:

I think EURO/USD 1.55  is a catalyst for a downturn short term.

Reason for that is in 2008 the dollar was really really bad..tanking down more so than it has in 2009.

EURO/USD 1.54  has already happened.

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#3) On November 25, 2009 at 9:29 AM, russiangambit (29.14) wrote:

We are quickly approaching March 2010, when FED has to stop buying MBS. That will mean complete mortagage and housing market collapse.

The FED will have to put everything it got on the line and convince the Congress that MBS purchases have to continue because  there is nobody else to buy them. FED replaced the private banks completely in that area. or it must come up with something to make the banks purchase MBSs. I am looking forward to seeing these discussions on C-SPAN. How is it possible - 2 trillions later and the housing market is stillin danger of collapse?

Of course, all of this is still 4 months  away. But it will probably come t the forefront in the second half of January. Now it is still too early, most market participants have attention span of 2 weeks, at most.

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#4) On November 25, 2009 at 10:39 AM, AdirondackFund (< 20) wrote:

@ Gambit

This is the problem.  Is there no greater fool than the Government itself? 

@kamranatUCLA

In Depressions, money always becomes 'political', and Goldman Sachs knows this...that explaining a few things along the way.

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#5) On November 26, 2009 at 2:05 AM, EV38 (99.76) wrote:

I would guess the most likely catalyst for a huge tank in the US market is a huge tank in the USD of maybe 15% in a day. This would drive foreign investors out of the US markets as they finally had enough of the dollar eating into their Dow profits. Gold would ride up $100 or more.

How that would affect all markets? I'm not sure. I would guess it would be similar to Sept 17, 2001 - big drop in the market with an initial pop in gold and other commodity stocks, then they slowly decline to barely green as the rest of the market drops throughout the day.

 

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#6) On November 26, 2009 at 2:33 AM, starbucks4ever (97.44) wrote:

russiangambit, 

if there is one thing I don't worry about, it's the Fed stopping purchase of MBSs. It won't happen and I don't even think there is any trader who thinks otherwise. 

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