Prepare For Large Decline In Stocks, Next Year?
With the bulls and bears playing tug-of-war in an effort to control the market, we thought this might be a good time to talk with celebrated technical analyst Robert Prechter -- Elliot Wave International President - about what he sees in the charts.
And what he sees is alarming, to say the least.
Prechter tells Fast Money, "we’re at a critical juncture of price and time," and all the bells are ringing on the negative side.
Big Declines Ahead
"I think we’re in for a very large decline in the S&P in 2010. I think it’s going to be at least as what we saw in 2008."
That very bearish prediction is because so very many investors have turned bullish.
"In the first quarter only 2% of traders were bullish and now we've got over 90% bullish," he says.
But why is that concerning? Because during the 8 months of rally, "there's been a real contraction in momentum. There's been a decline in the Advance/Decline ratios that have been going up as well as a decline in volume."
"And that signals a combination of extremely bullish players along with waning momentum," he says. Not a good combination.
"That's the exact opposite of what we had at the March low." As a result he tells the desk, "I recommend people get as safe as they possibly can."
"And that signals a combination of extremely bullish players along with waning momentum," he says.
Not a good combination.
"That's the exact opposite of what we had at the March low." As a result he tells the desk, "I recommend people get as safe as they possibly can."
The Trade
How should you trade? You might find it goes against your instincts but Prechter has a dollar trade for you.
"I’m bullish on the dollar," he reveals. "We’ve got something like 97% of traders bullish in the gold market and only 3% - 8% bullish on the dollar. To me this is a set-up."
In other words, he thinks the dollar is getting ready to turn.
"I can’t tell you the exact timing of the turn but this is the exact opposite from March when we had commodities bottoming and the dollar was topping."