Russo on How Low Could We Go

This blog has shown historical comparisons for guidance, to 1938 in particular, with 1929=2000.  Another way to look at this is to consider the huge Auto Bubble in 1915-1919 as the analogue to the Dot-Com Bubble from 1995-2000.  The Dow fell 72% from 1919 into the early '20s before we ran up in the second bubble to 1929, on a similar time frame to the drop from 2000 to 2002. 

What if 1919=2000, and 1929=2008?.  Joe Russo adds to the speculation by overlaying where we would be right now with 1929-1932=2008-2011. 

Intriguing is that it ends smack dab in the range of the 1987 crash (Dow 1700-2200).  A common relationship is for the bottom to be in the range of the 4th wave of the prior 3rd wave, which the 1987 crash represents.  

Russo goes on to show his long count, which characterizes the current corrective pattern as a large triangle.

Now, historical analogies only go so far, and it is an extreme leap to extrapolate from one data point (the 1919/1929 analogy).  Nonetheless, it is striking how our bounce from March to August mimics the similar bounce from Nov29-Apr30. 

Comments

[da bear]

thanks for the update yelnick!

looks a lot like the Figure 5.7 in At The Crest of the Tidal Wave!

da bear

[Concerned]

Has anyone seen TERA_BAAP? He disappeared shortly after going long.

[come and go]

>Has anyone seen TERA_BAAP? He disappeared shortly after going long.

get used to it.

[speculation]

>Russo on How Low Could We Go

common,
I am bearish, but it hasn't started yet.

[DG]

Has anyone seen TERA_BAAP? He disappeared shortly after going long.

Posted by: Concerned | Friday, September 04, 2009 at 03:55 PM

I think you mean he disappeared after going short. Anyway, as the next guy said, posters come and go. When they're on a hot streak you can't get them to shut up and once the streak ends, the just move on to the next website.

This is Neely's take on the "big picture", from his "Question of the Week" archive:

http://www.neowave.com/qow/qow-archive-488.asp

Question:
Many orthodox Elliott Wave analysts believe we are in a secular bear market and that the Dow Jones Industrial average will bottom near its 1920s bull market top (i.e., 400). Do you agree?
Answer:
For nearly 25 years my long-term stock market perspective has been at odds with that of orthodox Elliott Wave analysts. It began in mid/late 1987 when I turned very bearish on the Dow, expecting a 38% market decline in just three months off the high. Turns out, nearly 90% of that bear market occurred in 1 day (from top to bottom the bear market took less than 2 months), but it did produce a decline of the magnitude expected. Where I really began to diverge from the orthodox Elliott Wave camp was when I turned "wildly" bullish in mid/late 1988 (see CYCLES magazine, the Sep/Oct 1988 issue where I revealed my 73 year stock market forecast, complete with a prediction the 1987 stock market low would not be broken for the rest of my life and that the Dow would exceed 100,000 by the year 2060)! Not only had such a long-term and specific stock market forecast never been attempted before, but it is the ONLY forecast made in that era by anyone that is still coming true today and still has 50 years to go!

In the mid and late 1990's, while nearly every Elliott Wave analyst was bearish, I was calling for a powerful continuation of the advance. Finally, on September 5, 2000 (which under wave theory was the actual day the bear market began), I told my subscribers the bull market was over. I remained bearish on the Dow until early 2003, at which time I proclaimed the bear market was over and that a 5+ year bull market - pushing the Dow and S&P back above their 2000 highs - was underway. At the same time, nearly all orthodox Elliott Wave analysts were calling for a major stock market crash, a deflationary depression, social upheaval, possibly nuclear war, etc. Finally, in late 2007, for the first time in nearly my whole career, I and many orthodox Elliott Wave analysts were finally in agreement, calling for a major bear market and a retest or break of the 2002 low.

Sometime in 2009 or 2010, with the S&P around 500 and the Dow around 5,000, I will once again be a major odds with the orthodox Elliott Wave camp (and most likely the rest of the analytical world - just like in 1987) when I say the bear market has bottomed and that the 2009-2010 lows will not be broken for at least 50 years!

So, to answer your question, NO I do not agree with the scenario that the Dow will return to 400 or that the stock market will fall more than 90% off it highs. As I have said many times in the past, the wave count that produces that scenario is flawed and has been flawed for the last 25 years, which is why most Elliott Wave analysts keep getting the major market turns wrong. My logical, scientific NEoWave approach allows for more accurate, unemotional and objective wave counting that tends to be right a far greater number of times than is possible with orthodox Elliott Wave techniques.

[Upstart]

Interesting. Thanks for that, DG.

[min]

I'm not a Neely devotee and I also get a low around DGs projections, actually around 5500-6000.

Some of you guys have out there have contracted Prechterosis.

Remember that guy gets it wrong quite often. Prior to 2008 I had tabulated it at wrong 9 out of 10 times. He can't seem to shift gears too well. Yeah, recently the market is synchronized with his chronic doomsday outlook and it seems like Prechter is not so bad an analyst after all but this is only an illusion.

The market will reach the end of it's correction and Prechter will continue to stick to his guns of DOW 400, gold under $200/oz and residential real estate at 10 cents on the dollar (from 2001 prices) to the day he stops breathing.

[min]

Another point.

Prechter excels at finding parameters that make his predictions valid in order to "save face".

Throughout 2003, 2004, 2005 and probably even later than that he was certain that the next bear market leg down was right around the corner ("right around the corner" didn't actually START untill late 2007 and didn't really become worth playing untill well into 2008).

Well, to defend and validate his bearish stance, he started using a graph of the DOW priced in Gold to show he was right and the next wave did start as he said only it was being distorted by a deteriorating dollar.

That may have been true but why not make subscriber's aware of how he was defining his "next leg down" in real time and not years after being wrong.

I may be off a bit on this but I bet you that in gold terms the DOW has already or will soon lose close to 90% of it's value. You can count on him pulling that little trick out of the hat when it suits him. The guy is seriously flawed and I really don't get all the admiration he receives.

This market still needs a long time more to correct but price wise it won't go much further down than it already has. The powers that be have their collective asses on the line and know how to cover them while the natural order of things still plays out.

[DG]

Well, to defend and validate his bearish stance, he started using a graph of the DOW priced in Gold to show he was right and the next wave did start as he said only it was being distorted by a deteriorating dollar.

Yeah, I thought that was such a crock. The outright dishonesty in that "analysis" was off the charts (pun intended!).

Interesting. Thanks for that, DG.

Sure, glad you thought it interesting.

[Name]

WHENEVER PRECHTERITES BRING 1929 OUT OF THE MOTHBALLS

MARKET RALLIES BIGTIME

BEAR-B-QUE AHEAD!!! BEAR-B-QUE AHEAD!!!

[Mike B]

Well Its only a matter of time until all the truths and false hoods come out. Yes this market will crack and investors will all pay a price. Seems like the government will take away the bears chance to make money on this downturn. I already have been informed from my broker no more tradingin 2x Leveraged ETF's. I feel as the market heads lower and breaks 6500 dow, the government will stop all short selling and any other form to make money on the down turn. I hope it does not come true but its a possiblity.

[min]

Yeah, that would be typical government behaviour.

Stepping in with legislation and policy changes to fix something that no longer needs fixing.

A decade late and a trillion dollars short is their modus-operandi.

Good bottom indicator

[DG]

I already have been informed from my broker no more tradingin 2x Leveraged ETF's.

Some brokers are stopping their customers from using them, but there is no general ban on them that I know of, and FINRA is raising margin requirements effective December 1st, from what I read.

http://seekingalpha.com/article/159579-finra-raises-margin-requirements-for-leveraged-and-inverse-etfs

[Questioning bears]

Yelnick:

I am concerned. Have we been here before? How many times has Prechter predicted the crash of the system and it did not happen. I thought I read somewhere that Prechter was calling for deflationary crash after the tech bubble and was still trying to pick tops after 2003.

How is today any different? How is today the time where our monetary policy cannot overcome the pressure of deflation and the credit cycle? How can we make the direct comparison to 1929? I can see us stagnant while the deleveraging process goes on, but putting this country into the economic situation where we return to the 30's is something hard to take here.

I don't have time to rake your archives to see if you were reporting people picking the deflation in the 2001-2005 period. Why can trad TA showing upswing, but the rising wedge from march is leading us to beleive that the next leg is kinda going to happen. So the severity of the next leg down is the question. How can we expect 1929-1932?

[Q]

Yelnick,
I tried to hit the 2nd link, the one to Joe Russo's site and it didn't work. Can someone please post his link.

TIA

Q

[yelnick]

Questioning Bear, great questions. Prechter indeed thought 2000 was 1929 and expected a deflationary depression. Greenspan instead created the Kondratieff Indian Summer. If you go to the search bar and try Indian Summer you will see some of my posts in 2004 and 2005 on this. Greenspan was able to stave off the Kondratieff Winter, but he created an even bigger bubble in its place. The Austrians believe you can postpone this for a while but eventually the magic stops working and the consequences are more severe. I may do a new post called Living in the Petri Dish to lay this out. We are all guinea pigs in a grand macro economic experiment. We have just done more stimulus than was ever even contemplated in 1931 when the real banking crisis hit.

[yelnick]

Q, it was my fault. I fixed it. The link should work now.

[Cornholio]

Granger (www.MarketBreeze.com) just sent a mass email to his subscriber list; here's the message:

"Buy gold now!". FWIW, he's NEVER given this recommendation before.

Huge article at www.marketbreeze.com

I'm backing the truck up on Tuesday...going 100% PM's.

[no such website]

>Huge article at www.marketbreeze.com

that proves one LIEs.

why don't you post the mass email. hard to believe anything you says.

[Forkoholic Serge]

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[Questioning bears]

Fair Enough Yelnick. Keynesians believe that they can always catch the falling knife by the handle. Interesting that the study of the Japanese lost 10 years shows that massive injection of money would have prevented that economic situation. I feel as though that we are headed for another low here soon, no doubt. However, the petri dish needs to include that the Fed has likely made one last Indian summer and 2014-2015 will be painful times in my mind. It follows the 16.5 yr cycle roughly and I tend to think the bulls will have one last run here before ending it all at the hand of the matador. Ok, so I am dramatic. I think we have one last wingie keeping us above water. Newly created investment instruments are starting to pop up, courtesy of The Street. Who knows, a persistent unemployment above 9% is dangerous. Its funny though, we all try to make our best stab at this...economists, the gov't, analysts...and yet most get blind sided. Swenlin is cautious as well, I respect his views. He also has the same comment, TA indicators saying to go long, but a chart that says it should resolve to the downside.

Good luck everyone. Breaking above 1026 and we could start moving up to another new high, maybe close to Neely's estimate box.

[Forkoholic Serge]

>complete with a prediction the 1987 stock market low would not be broken for the rest of my life and that the Dow would exceed 100,000 by the year 2060)!

the key phrase here is "for the rest of my life"
Neo must die! lol :))

[Forkoholic Serge]

http://www.neowave.com/qow.asp
>I missed more than half of the March 2009-to-present rally in the stock market. It simply was NOT predictable and could not be counted on.

We need to send Neo Prechter's February Gloomberg video about rally coming soon
EWI wins this time!

[Forkoholic Serge]

Or better I send my April 7th newsletter to Neo
where I predicted rally based on a 19XX fractal.
Let's fork Neo! :))

[vipul garg]

by same time in september 2010, the markets would have shown that this is not the same as great depression. and spx would have hit the bottom or be close to the last selloff.and be much much higher than great depression levels in percent drop terms.

[min]

When gold gets into the 1500/oz range and the DOW30 into the 6000s it will have lost 90% of its value measured from Prechter's "true" all time high in 2000.

Prechter devotees take note because he will play this card somewhere down the road after subscribers have lost most of their money and feel too depressed to get angry or protest his chronic boneheadedness.

As for backing up the truck to buy gold... Caution! I've bee long the precious metals since Nov 08. It has been a good run but I will soon begin to hedge my physical and sell my calls. E-Waves and other indicators show a strong potential for a large correction coming up that could last well into 2010.

Only fly in the ointment is Prechter has a similar stance (damn!) so it may turn out to be a non-event

[Cockroaches]

>where I predicted rally based on a 19XX fractal.

Forkoholic Serge

Maybe you were right one time; that does not make you superior.

You, like many others, disappeared
when your predictions are wrong, and came out like a super star when markets go up.

[a small cockroach]

I am not defending neowave.

However, readers are not that stupid to believe your comparison between neowave's
actual trading recommendation with stops versus your general market prediction that market would be higher.

If you think you can sell your subscription that way, you are a small cockroach.

[Upstart]

I wish DOW Predator would make an occasional stop by.

[Hank Wernicki]

The DIA is displaying an instance for a surrogate market fractal top.

12:30 pm 90M 8/7/09 << base fractal

Either the market has peaked or will peak in the morning.

This represent a good short entry with a reasonable Stop

[Viper]

Can anyone get www.MarketBreeze.com to come up?

I want to read the "european gold/bearer bonds" article.

[Forkoholic Serge]

>Maybe you were right one time; that does not make you superior.
Actually I was right more than 1 time.
I did not claim to be superior, I questioned Neo's claim of unpredictability.
You have to clean your rosy reading glasses sometimes, so you will read correclty.

There is always more than one Cockroach anyway

[Forkoholic Serge]

>gold E-Waves and other indicators show a strong potential for a large correction coming up that could last well into 2010.

I think gold will rally til EOY and when crash. That would be one of the best trades of 2010. but if gold exceeds 1300 all bets are off as it opens much higher projections and a hyperinflationary thingy.

[Forkoholic Serge]

if you google www.MarketBreeze.com
you get Domain for sale ads
maybe owner just pushing visitors count to sell domain
if you get to WayBackMachine there is nothing there for www.MarketBreeze.com

so I'm thinking it's a hoax

[Forkoholic Serge]

Gold vs SPX
http://stockcharts.com/h-sc/ui?s=$ONE:$GOLD&p=D&yr=3&mn=0&dy=0&id=p88014224329

[50:50]

>Actually I was right more than 1 time.

it is 50:50 chance if you are average.

>You have to clean your rosy reading glasses sometimes, so you will read correclty.

Hope this incident cleans your attitude.

[Silver]

Hank Wernicki

How about Silver?

[Forkoholic Serge]

Fresh Prechter on FSN
http://www.netcastdaily.com/broadcast/fsn2009-0905-3a.m3u

[Forkoholic Serge]

50:50, shoo
we're mocking Neo here, not me

[50:50]

Forkoholic Serge

As I said, I am not defending neowave, nor mocking anyone.

I did not see, and I do not think you are better trader or adviser. Certainly your attitude today was below average.

[50:50]

Also, your statement proves you do not know basics of probability 101.

Think again..

[Forkoholic Serge]

You keep changing the subject, defending Neo by picking on me. You don't know me!
I'm smart enough not to agrue with the idiot you are :)

[Forkoholic Serge. Think.. you are a sales guy, you want to sell subscription, you do not call anyone idiot.]

Forkoholic Serge

I know you enough by your behavior, and many people whom I trust talked about you and laughed at you selling subscription.

You have not talked anything intelligent, including your knowledge in probability 101.

You have not showed your track record, but mocked others.

You also behaved very stupidily by calling someone idiot. Even thinkingtrades.com was smarter than you were by using different name to advertise his subscription.

Think.. you are a sales guy, you want to sell subscription, you do not call anyone idiot.

[min]

"if gold exceeds 1300 all bets are off as it opens much higher projections and a hyperinflationary thingy."

I hope you are right. Can't complain about more gains untill my stops get hit. But next failed high after being stopped out and I'm short. That contracting triangle, among other things, is way too ominous.

[min]

Hey "50:50"/"...idiot", are you thinkingtrades.com?

[min, missing brain?]

?are you thinkingtrades.com?

Hey min,

what are you missing, eyes or brain?

your conclusion proves you do not know nothing about basics of logics 101.

[min and serge]

>a hyperinflationary thingy."
>I hope you are right.

I hate incompetency, and noticed people who are incompetent get along quiete well with another incompetent people.

You guys deserve each other.

[min]

Idiot:

I've noticed you lack the back bone to post your responses with your real name or even a consistent post name.

No doubt you trade the same way and are yourself incompetent, lacking "logic 101", and all the other things you are acusing others of being.

Get your facts right you spineless, 50/50, sitting on the fence geld.

I don't know Serge and often times we disagree, but I respect him as he at least has the balls to post his name and even his picture on other web sites he contributes to regularly.

As for me I 10xed my trading portfolio last year —six-figures turned to seven figures and so far I'm up 100%this year.

You should check out some of my posts from 2008.

Now who's incompetent?

THAT'S RIGHT CAVE DWELING GELD IT IS YOU. YOU DON"T EVEN HAVE THE CONFIDENCE TO POST WITH A CONSISTENT NAME.

Go crawl back under some rock until I say you can come up.

[min]

...that's it now, continue being a good geld under your rock and you can comeup by year end.

[Granger]

My data says Gold closes above $1,033 tomorrow (9/9/09).

www.LogicChip.com

Do your own due diligence before making a trade.