Video: Prechter On Market Rally
(Note: This interview was originally recorded on September 20, 2010)
In the video below, Robert Prechter talks to Yahoo! Finance Tech Ticker host Aaron Task and Henry Blodget about extreme readings in various indicators that confirm his bear-market forecast.
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21 comments:
Sounds like a good setup as Q3 ends. Thanks for the info.
Prechter has lost all credibility. Its one thing to be wrong on a call, what is unforgivable is that when he has been wrong (for the last year) he has never reassessed his view. It is a classic case of an analyst starting with an opinion and then collecting evidence to support his opinion. He never shows evidence that does not support his view. Lets not forget that he advises people to trade without stops!!! And also that he advised going leveraged short with no stops last year.
Conclusion, hes a muppet, and Elliot Wave Theory suffers from having him as a posterboy.
I don't think he has lost ALL credibility. Yes, he is viewed as an maverick by the mainstream media but I, for one, find his longer term forecasts very credible. In fact, I am staking my financial future on what he has to say. Stockmarkets have been around in one form or another for almost 300 years, so I don't view it as a disaster for a forecast to be out by a year or so. Considering the state of the US and global economy I am prepared to wait for the market to come back to me.
Primary wave 1 down was quite ideal and fell well within what was forecast from Prechter and company. But since the second half of primary wave 2, I do agree that Prechter's calls have been far from stellar. But don't forget, Prechter says this bear market will probably last until 2016, and it will take a long time for prices and social mood to rollover to the targets he cites. Also, I think he's now up to recommending 2:1 leverage on the short side, which he established a year or so ago, but that wasn't that far off from current levels so it's not like he's deep in the red yet.
I think I agree with what Tom said in that his long term forecasts have been quite accurate, it's just that many of us don't want to wait 6 years to make a profit, we want it now, so we trade the short term and so some of us are feeling some pain.
At least that's just how I see it...........for now anyway.
Thanks for the comment.
Hey Tom, I agree that Prechter is more of a long term guy and I feel he's been quite accurate. Some of my friends and family's retirements were shifted to short term treasuries, with the fierce resistance of their financial managers, back when the Dow was breaking through 12,000. So they are still doing better now than if they held stocks through that time. And they were able to earn a very modest gain with zero risk by hold the risk-free rate T-Bills.
And like you said, these things take time, so I too am waiting for the market to play itself out and work its way into what has been forecast.
I think you misunderstand. I'm not attacking EWT, which I trade with everyday and love. I'm attacking HIM, and his long standing practice of making a long term call then adjusting ALL CALLS, short and long term to fit in with this view.
Its simply bad analysis to keep sticking with a view when the facts change, and he has done this time and time again. For example when calling the bottom in the USD in June 09, and then continuously in the STU (any day now) until the actual bottom in Dec 09. He has had the nerve to crow about his "accurate call" since then, when its simply a case of the stopped clock being right twice a day. More recently over the last few weeks STU has ignored the obvious bearish potential of the DX/bullish potential of the euro as again it short squeezes bears in concert with the equities rally.
Its insignificant to be wrong on any number of calls in a row, what I find unforgivable is *never* to admit that the markets are doing something different. For example in the current situation, once the SPX breached 1130 it became obvious that the highest probability was for a short squeeze which would bring in fresh bulls from the sidelines, and the counts at this point had a number of possibilities.
In the STU NONE of those possibilities were mentioned ever since spx 1130. Basically Hochberg repeats the mantra "wave 2 is about to end any second now, and then P3 will start"
Its plain to anyone with any sort of TA skills that while the markets could snap and reverse right now, it would take a miracle. The highest probability is a test of 1170 spx, which if it fails, *could* have sentiment at the right place to set off p3, or if it passes, would see an assault/test of the old April highs. Whether or not this would be a game changer, bringing in fresh bulls from the sidelines, remains to be seen.
Whilst there is obvious bearish potential in the charts atm, the *failure* of bulls to close the deal on many consecutive occassions has called into question the whole bearish thesis.
To cling blindly to a prediction because HE IS FAMOUS FOR THAT PREDICTION AND CANNOT CHANGE IT WITHOUT EMBARRASMENT is, frankly, disgraceful.
I'm not talking about the mainstream media. I'm talking about his misapplication of EWT, his consistent expectancy bias (accumulating evidence for his previous calls rather than examining what is happening now objectively)
There are many better EWT forecasts available for free on the web, this site, for one, Danerics for another.
How do you feel about his forecasts in Gold, in which he has called a top consistently, any day now its about to top, since below $1000?
Its not that its a bad call, which is fine... its bad forecasting to be painted into a corner where all you can do is stick with a previous call when the facts have changed.
I feel you on your frustration with Prechter and the STU. I have my own beefs with them at times, and some of those beefs are similar to what you've mentioned here but not quite as severe. But I do understand where you're coming from. For instance, they have both been absolutely horribly wrong on precious metals for a long time and I've been blasted out of the water on them so many times I just stopped trading them other than an option position here and there.
I like Prechter and EWI for their "opinions" and their technical and fundamental data that I don't have access to. I don't follow them like a religion, and at times I am skeptical and don't follow them. I treat them as an opinion piece, or like a technical indicator so to speak, i.e. they are not all knowing but offer helpful info to add another piece to the puzzle.
So how do you feel about the markets and count right now? Do you think primary 3 down will occur? If so, what levels and time frame are you looking?
Thanks Scott, I appreciate that. I hope the website can serve as a place to offer a perspective that can perhaps help folks and stimulate dialogue amongst traders so we can all help each other.
I'm the last to defend Prechter on precious metals. I've been butchered by precious metals and following their analysis so many times in the past that I very rarely even trade metals at all anymore. I actually think EWP needs to have its own separate analysis, methods and rules specifically for pecious metals independently, because they don't seem to follow EWP very well. My opinion. But with that said, I have heard Prechter numerous times admit the times he's been wrong on gold during interviews, and I think even in this recent Theorist he just said he was wrong about how much metals would hold up. I'm not sure that does anybody any good, but he I do know he occasionally owns up to it.
I think wondering about p3 invokes a philosphical weakness with EWT. What I mean is that whatever advantage is gained by having a roadmap of the future (or different roadmaps of different futures) from using EWT is partially negated by the bias inducing process of making predictions.
The second you make a prediction about whether P3 is on/off, soon/never, your subconscious attaches ego to the outcome and to avoid emotional pain starts blocking information from the market which could negate your "view". In other words, you start the process of becoming like Prechter. It was quite obvious as the spx fell towards 1040 last month on decreasing breadth that that was NOT indicative of a one in 200 year decline. And yet how many elliott wave practicioners noticed it? Everybody was too hung up in "thank god, its finally here!" mode to notice that the present didnt match the wrapping paper.
EWT is wonderful, but I believe that it does not explain all price action all the time. There are certain things about price action which are demonstrably true, including but not limited to
- markets are fractal
- impulse waves take a different form than corrective waves
- fib relationships between waves are common
- sometimes EWT can be used to predict like a crystal ball.
However taking these things which are true about EWT and using them to say "EWT predicts and explains all price action all the time" is false IMO.
My opinion is that the repeated failure of bears to seal the deal at the several *perfect* technical points for P3 to start does more than just delay P3 by a few weeks/month. In my view the bears failures here actually change the game since they have completed bullish setups and this will bring in fresh bulls from the sidelines.
To me the failure to explain the positive feedback loop when a correct wave count does not play out, and bears are forced to cover, attracting fresh bulls, is a major hole in ewt.
My gut call is that the highest probability is for at least a little more strength, then the bears will have yet another chance to kick off a significant decline. If they fumble that one, new yearly highs are probably in order.
I mean it, this is a very good wave theory blog :-)
If he owned up to it none of this has trickled down to Hochberg, who has called a gold top continously for over a year now.
Metals and commodities do have a different set of wave principles. Their wave form is that of "contained waves" and do not need to necessarily build to loftier heights the way stocks do. Their charts are inverted to that of stocks as well, commodity tops look like stock bottom. Because of this they meander on the bottom and don't build to heights as noted above. Also commodities can be subject to outside forces like rain, drought, shortages, supply disruptions, war, etc. so you cannot apply traditional wave principle to metals or commodities.
Metals and commodities are also subject to traditional supply and demand forces like normal economics whereas stock prices are a psychological function so again the wave patterns are much different.
In asking your thoughts on P3 I was just curious if you were following the same count or if you had another one, perhaps a bullish one. EWP is definitely not perfect nor does it explain all price action. But if applied properly and objectively, it provides enough explanation to give you an advantage in the markets. My opinion. The main thing that ruins the trade or analysis is, like you said, yourself........your ego and emotions. Geting rid of those is much easier said that done, but it's a fact nonetheless. A new high on the year would mean serious reconsideration of the P3 count altogether in my view, but until then I have to throw in with Precther because to me, his case is still compelling. And with a clear 5 waves down from the all time high to 666, it tells me that at least 666 will be broken, in whatever kind of wave, before a new all time high is registered.
Yeah you're right, I pretty much skim or skip through the metals analysis at this point. Been dead wrong too long like you said.
Hey you have good insight, you should chime in on the forum with these comments on Prechter and EWP. I'm sure a lot of people could benefit from the discussion. Maybe you, or I with your permission, can paste some of your comments here on Prechter to the forum so other folks can comment and learn from what you say. Here's the link if you're interested: http://principleanalysis.blogspot.com/p/elliott-wave-forum.html
Bingo!
Sure, go ahead :) I will have a look at the forum too.
I'm not being facetious. Basically I use EWT a lot differently than most people.
To me the biggest hole of a number of holes in wave theory is the failure to explain positive feedback loops (and several other things). The theory is beautiful, but its from the 1930s and it needs an update, badly.
Basically I think at various points Prechters uber-bear count has been ABSOLUTELY correct. But I also think that the failure of that count to play out is a failure of PREDICTIONS not of the count. EWT tells us to look for an alternate count, whereas I believe that when EWT works, it works like a magic trick.
When it works it looks like a print it out, stick it on your wall, textbook type wave. Its the type of action that counts perfectly time after time. Compare it with the action in equities right now, which doesnt count adequately at all, for a long time.
When it starts to go wrong, it most often engenders a positive feedback loop where it stays wrong for a while, bringing in fresh participants from the sidelines, and the alternate counts also get screwy. Looking for alternate counts at this point without taking into account where capitulation and where accumulation is occurring is very risky IMO.
The very nature of making predictions ensures that those making them get hoisted on the petard of their own convictions. I use EWT, which is a predictive theory, but I never use it to make predictions.
I simply trade the tape as it appears, long or short with no bias as much as I am able.
Does that make sense?
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