20 Questions with Robert Prechter: Long Decline Ahead
July 2, 2010
By Elliott Wave International
The following article is an excerpt from Elliott Wave International’s
free report, 20
Questions With Deflationist Robert Prechter. It has been
adapted from Prechter’s June 19 appearance on Jim Puplava’s
Financial Sense Newshour.
Jim Puplava: I want to come back to government
spending, but first I want to move onto the stock market. In
your last two Elliott Wave Theorist issues, you laid
out a scenario that would put the Dow and S&P, which in your
opinion may have peaked on April 26, as the top from here. You
feel that this top is the biggest top formation of all time,
a multi-century top and we could head straight down in a six-year
collapse that would end in 2016 that could see a substantial
portion of the S&P and the Dow wiped out in a similar way
that we saw between 1929 and 1933. Let’s talk about that and
the reasoning behind it.Editor’s Note: The article you are reading is just
one small excerpt from Elliott Wave International’s FREE
report, 20
Questions With Deflationist Robert Prechter. The full 20-page
report includes even more of Prechter’s insightful analysis
on fiat currency, gold, the Fed, the Great Depression, financial
bubbles, and government intervention. You’ll learn how
to protect your money — and even profit — in today’s environment.
Read ALL of Prechter’s candid answers for FREE now. Access
the free 20-page report here.RP: Yes, you’re exactly right. I did a lot
of work on technical forms, cycle forms and Elliott wave forms
in April and May and put them in a double issue. Let’s
talk about the cycles first.The 7¼-year cycle has been quite regular since the first
bottom in 1980. The next bottom was at the crash in October 1987.
The next one was November 1994, which is when the economy went
through four years with lots of layoffs; it was a recessionary
period throughout until that cycle bottomed. The next one was
between September 2001, which was the 9/11 attack, and the October
2002 bottom. And the latest one was at the low in March 2009.
All those periods are 7¼ years apart, so we are in the
uptrend portion of the 7¼-year cycle.However, notice for example that in 1987, the market went
up until August of that year and then bottomed in October,
just a couple of months later. So the decline occurred very,
very late in the cycle. This time it occurred a little bit
earlier in the cycle, topping in ’07 and bottoming in ’09.
In the current cycle, prices should peak the earliest of all
of them. It’s what we in the cycle prediction business call “left-hand translation.” The
market’s already gone up for about a year, and I think
that’s just about enough. I think we’re going to spend most of
the cycle going down. But the important thing to note is that
the next bottom is due in 2016. That means I think we’re going
to have a repeat of what happened between 1930—which was
the top of the rally following the 1929 crash—and the
July 1932 low. Instead of taking two years, it’s going to take
about six years.It’s going to be a very long decline. It’s going to be interrupted
by many, many rallies, just as the decline from 1930 to 1932
was. And every time it bottoms and rallies, people are going
to say “OK, that’s enough; it’s over.” But it won’t
be over. It’s just going to be a long, long process. I think
you and I will probably be talking a few times during this
period. One of the interesting aspects of this process is that
optimism should actually remain dominant through the first
three years of the cycle. That will carry us into 2012. Even
though prices will be edging lower, most people are going to
think it’s a buy, and you shouldn’t get out of your stocks,
and recovery is just around the corner, probably for the next
three years. And then, for the final half of the cycle, the
final three years, that’s when you’ll get the capitulation
phase when everyone finally gives up.Editor’s Note: The article you are reading is just
one small excerpt from Elliott Wave International’s FREE
report, 20
Questions With Deflationist Robert Prechter. The full 20-page
report includes even more of Prechter’s insightful analysis
on fiat currency, gold, the Fed, the Great Depression, financial
bubbles, and government intervention. You’ll learn how
to protect your money — and even profit — in today’s environment.
Read ALL of Prechter’s candid answers for FREE now. Access
the free 20-page report here.
This
article, 20 Questions with Robert Prechter: Long Decline Ahead,was syndicated by Elliott Wave International. EWI
is the world’s largest market forecasting firm. Its staff
of full-time analysts lead by Chartered Market Technician Robert
Prechter provides 24-hour-a-day market analysis to institutional
and private investors around the world.
