Prechter as Top-Rated Short-Term, Dead Last Long-Term

Prechter's EWI comes out as the one of the best short term service over the past two years. This will surprise a lot of Prechter bashers. His problem is his Lost Decade from 1994-2004, where he missed the extended fifth wave aka the dot-com bubble. He got his mojo back in 2005, and is rated in this article as the best since 2007.

From my own tally, he called the top in June 2007, which while a bit early was a great call, as the July and Oct tops were not much higher and his followers could not only avoid the debacle but play it all the way down. He called the bottom in late Feb 2009, just a few weeks away from the Mar6 bottom. He called the top in early August, a bit early; in reading his services I didn't think we got there until late Aug. We are only modestly up from then (5%). Now he has gone all in with his leveraged 200% short call. Monday it looked like a turkey; but today it looks prescient, given the meltdown overseas and the US futures. 

Comments

[Tahoe]

like Art Cashin said on Trader's Talk on Wednesday, some outta nowhere geopolitical event might just push things around a little. The markets today felt that shiver. The Asian and futures markets are continuing with weakness.

BTW - I used EW commentary to exit my equities on August 22 (35%)-September 23 (35%)- October 22 (30%) - for those that think this is still going up, I was too early, and for those that see a W or whatever .... they would feel good about making that decision.

[joe]

Also - the dx-y is above the close before it failed wens - and Japan is making "strong" overtures to step in and support thier yen - which the see as a crisis"

Shorts who went in calmly in dollars at the rout yesterday will be bailing - longer terms shorts are alwo going to bang thier heads trying to get out tommorrow and probablly Monday too.

How many people hoding now in the money puts for december would hold them until Monday???

Joe

[Kallidromos]

There is a reason for this discrepancy.
Short term no matter where you start on a financial time-series it progresses in nearly ideal Elliott fashion. As the pattern evolves, waves become more complex in an accelerated fashion. A cursory look at the time series of ,say the Dow since 1928 ,the pattern becomes more complex in an accelerated fashion.
If you assume in your counting, that waves of the same degree should sub-segment in ideal Elliott fashion you would be making three mistakes:

1. Increasing complexity demands a different approach because the number of waves per one higher degree wave changes from 1.618^3 to exp(1,13) as a function of the number of waves in the whole pattern.

2. The impulsive waves increase in complexity.

3. Corrections are at best equal in complexity to the preceding impulse and usually one ore two degrees more complex.

We live in an inflationary Elliott universe and conventional counting doesn't take this into account. Therefore, the analyst would be right short term and sometimes wrong long term. I have been working on this for some time and I believe that I will be able to post my theoretical work on my blog for comments and criticism by the Elliott community before Christmas.

In the meantime, I must say that the future looks dismal for my home country, Greece. My personal non-classic analysis, that I have come to believe in after many trials and tribulations over the past 15 years, shows that the end of the crisis points to ASE FTSE20, around 900 (currently at 2200) over the next year and ultimately after a rebound to around 2300, to the astounding number of 240 plus minus 100, sometime in the next three years. This means that Greece will default.

Expect geopolitical turbulence in the Aegean shortly after we hit this point.

Today the salaries of the doctors of a large public metropolitan hospital in Athens were seized by pharmaceutical companies toward the state debt to them.

God bless you all and may you come intact out of this crisis.

Kallidromos

[john walker]

Yelnick, Re your comment that Prechter's "problem is his Lost Decade from 1994-2004...", let's not forget that he was long stocks Oct 19th, 1987 (his "sell" signal was sent *after* the market close on Friday Oct 16th).

[EN]

To support the proposition that Prechter is top rated as a short-term market timer, I think one would have to show some hard data: wins/losses, stops, entries, exits and percentage gains-losses, overall gain-loss for a specified time period, etc., instead of cherry picking a few good calls in retrospect and not mentioning all of the horrendous calls (short-term or otherwise).

Intelligence and rationality don't correlate that well. That is to say, even highly intelligent people with lots of capital to use and lose suffer from dysrationalia and are easily fooled by focusing on confirming a proposition rather than falsifying it. This is especially true when their hard earned money is at stake; the heart rules the mind.

[Michael]

Yelnick,

With all due respect, in your unabashed support of Prechter your "pom poms" appear to have gotten in the way of good, solid reading comprehension.

The article that you cite from Mark Hulbert never said that Prechter was "THE BEST short term service" as you have claimed in your very first sentence.

Hulbert said nothing of the sort.
I suggest that you re-read his analysis.

[Shemran McCoy]

Partial analysis is worse than no analysis at all. I subscribed to Prechters STU service in the fall of 2001 noticing what looked like a wave 4 bounce, and thinking the market was ripe for at least one more down wave. I made a lot of money using his ST service, and then gave it all back 2003-2006 as 'ol Hochberg remained resolutely bearish, shorting evry rally, looking for the "turn". I'll never forget his comment when the 50x200 crossed, " some would say this is important, but I'm certain they can be ignored".

Thankfully, I cancelled my subscription, and put everything into GLD, running it from 650 to the obvious $1000 sell level, I recall Prechter being bearish GLD for the entire move. I think he's still calling the current move a "B" wave, looking for $105.

My point is, you can cherry pick Bob's calls - which aren't market calls at all because he always posts his "alternative count", or if you are intellectually honest and try and follow all his analysts calls (quite a few contradict each other), I'm quite certain you'd be broke.

p.s. 94-04 was a helluva dumb time to be bearish. That's like a footbbal player saying, "we lost 90-3 because I didn't complete a pass the entire game, but, boy wasn't that field goal in the closing seconds spectacular!?"

[yelnick]

Michael, with all respect, it says:"So take your pick: Short-term top-rated, long-term dead last." Do you really need the article to use the word "best" rather than "top-rated" in order to support my post? 

[yelnick]

Kalidromos, look forward to your work. I think the Lost Decade came in part because Prechter was so adamant about his longer term count in nominal terms he lost track of what it looked like in constant-Dollar terms

[MI]

Short term vs. long-term
Commentary: Robert Prechter on Monday moved to 200% short
By Mark Hulbert, MarketWatch

Buried inside article below is this statement "No wonder, therefore, that their newsletter has one of the best stock market timing records over the last two years of any that the Hulbert Financial Digest monitors."

Because so many are following Mr. P and consider him as the visionary who had seen all this coming, market may decide to the opposite just it had been for past four months. Today's market action, if not closed down 400 points, is negative for Mr.P's views because nothing can shake bulls at this point as they know something from powers that be like Mr. Bernanke etc.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++

ANNANDALE, Va. (MarketWatch) -- It might not exactly be news that Robert Prechter, the famous follower of the Elliott Wave theory, is bearish on the U.S. stock market.

That's because he has been playing the equity market from the short side for quite some time now.

But what is news is that, earlier this week, he became even more aggressively bearish than usual: He is now recommending that traders allocate 200% of their stock trading portfolios to shorting the stock market.

What should be your response to Prechter's latest advice?

There is no easy answer, unfortunately.

But this question does raise a whole range of fascinating issues having to do with how best to interpret not just his, but any adviser's, track record.

On the one hand, Prechter's advice over the last couple of years has been top-rated. It's not just that he was bearish during the financial meltdown -- he also did a good job of playing the various intermediate-term corrections along the way.

Consider, for example, the issue of the Elliott Wave Financial Forecast that was sent out at the end of August 2008, some 15 months ago. This issue, edited by Prechter colleagues Steven Hochberg and Pete Kendall, appeared just two weeks before Lehman Brothers went bankrupt. Soon thereafter, of course, the entire financial system came dangerously close to becoming completely unraveled, and the stock market went into a free-fall from which didn't finally stop until March of this year.

Hochberg and Kendall wrote: "The stock market is building up the necessary reserves for its next major move, a third wave decline at multiple degrees of trend. This should be the strongest decline of the bear market to date."

Right on target, as we now know.

Furthermore, only a couple of weeks after the March lows earlier this year, Prechter and his colleagues reduced their short-side exposure, anticipating that the rally would continue for some time.

No wonder, therefore, that their newsletter has one of the best stock market timing records over the last two years of any that the Hulbert Financial Digest monitors.

On the other hand, Prechter's longer-term record couldn't be more different. The last time that his newsletter recommended that traders be long stocks was in 1997, some 12 years ago. In fact, during the bull market of the 1990s, traders following his advice spent most of the time short the market or in cash.

This helps to explain why the newsletter's timing advice for traders is in last place for performance over the last 20 years among all stock market timing strategies tracked by the Hulbert Financial Digest.

So take your pick: Short-term top-rated, long-term dead last.

The newsletter's track record therefore provides a particularly graphic illustration of an enduring problem for assessing an adviser's track record: How much weight should be placed on recent performance, versus how much on the long-term?

Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va.

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

[MI]

It is not Dubai news or Mr. Prechter views, market action that matters.

In my view, today's market action is bullish.

[Michael]

"Michael, with all respect, it says:"So take your pick: Short-term top-rated, long-term dead last." Do you really need the article to use the word "best" rather than "top-rated" in order to support my post?" - - - Yelnick

Yes, I do.
It is highly MISLEADING to claim (as you do) that he has "the best" track record of all that were surveyed by Mark Hulbert.

To say that it is "the best" or "top-rated" isn't even close to Hulbert stating that Prechter "has ONE of the best stock market timing records over the last two years".

Not sure why you are unable to see that distinction, let alone why it is that you can't simply state that in your article . . . that Prechter's track record was "one of the best".

There's a pretty big difference.
Not sure why you are unable to see that.

[DG]

It is not Dubai news or Mr. Prechter views, market action that matters.

In my view, today's market action is bullish.

For me to consider today's action bullish, at least in the short-term, I would have wanted to see us take out Wednesday's high on the rebound. So long as we remain below it, I think the trade is short with a stop at Wednesday's high.

[Hockthefarm]

Gold and the buck:

Mirror image isomers:

http://www.chartoftheday.com/20091125.htm?T

Hock

[Hank Wernicki]

Black Monday

The 13m child top from Wednesday's close has iterated to a 13m parent top for today's shorten close ( exactly )

400 + points for the DOW going down is a high probability , currently short for a swing trade

Hank

[MR]

Hank what's your stop?

[Hank Wernicki]

1096.82 Stop SPX cash

[Paul]

Shemran, Hochberg has a habit of ignoring nearing every technical indicator, if it goes against his case for a depression. I subscribed to the STU from Nov 08 to June 09. He did a good job on stocks, but the rest was garbage (dollar, Euro, silver & gold). A real forecaster is supposed to look at the charts and then make a determination of where prices are to go. Hochberg does the opposite. He makes up his mind beforehand on market direction and then manipulates charts to support those beliefs.

As for the dollar, every rally was supposed to be the start of Wave three up. He did not even mention the dollar breaking below the 200 day. He betted against the giant H&S pattern that formed between Oct and May. That is at least the second time Hochberg did that and of course it turned out disastrous. I still have the STUs during free week of May 06 and he made no mention of the H&S that was forming during the previous ten months and remained adamantly bullish. We know how that turned out. His favorite indicator is the DSI (daily sentiment index) which he cites ad nauseam when making the case for a dollar bottom or gold top but strangely made no mention of the readings when the dollar was topping last spring or when gold was bottoming last fall. Every pennant or flag was viewed as a reversal pattern when history suggested otherwise. Every decline in gold was supposed to be the Wave 3 down (now Wave C) that carried gold below $680. I remembered he kept saying that the rise in gold "is clearly not in an impulse wave". I finally had enough and called it quits.

[MI]

I agree with everything Paul wrote above. In addition, I may add that entire EWI team have made-up their minds, not open to other interpretations as often warranted based on market action. They were correct once in a decade because of Lehman collapse and since missed big on everything they cover. Overall, I summarize their record as dismal. Subscribers lost big for betting on the wrong side and also failed to capitalize on major trends in gold, dollar, and euro. I doubt if these guys can call correct by chance once on anything they cover. Until now it was easy to make money by betting against whatever they said.

[Michael]

Agreed 100%.

The Prechter/Hochberg record is a joke. More often than not, they "analyze" the market with their inherent bias instead of looking at the market technically and seeing what the market is telling them. In fact, it reminds me of many of these EW "bloggers" that are seen littering the Internet these days . . . seeing what they want to SEE, rather than listening CLEARLY to what the market is telling them. Same thing with Prechter and Hochberg. Hochberg's reliance on the DSI is equally absurd.

Moreover, as several posters have pointed out, it isn't just Hochberg but the ENTIRE EWI team that is horrible. I subscribed to their energy market analyst Steven Craig during the Summer of 2008 and he kept looking for a "B" wave rally in Nat-Gas ( as well as other energy markets ) that NEVER came. The Nat-Gas market was in a dramatic bear trend and all Mr. Craig could do was look for a "bounce" to get short on that never came! In fact, by the time the market did bounce, 3/4's of the nat-gas bear market was over with.

And here we are a couple of days after Yelnick's article, and he has still yet to correct the very first sentence which claims that Hulbert has Precther rated as "the best short-term service" over the last 2 years. I repeat, that is NOT what Hulbert said in his report. But if Yelnick wants to be as biased and sloppy as EWI, I guess there is no need to get one's panties all twisted. It's just more of the same from the EWI "cheerleader" crowd!

[DG]

I subscribed to their energy market analyst Steven Craig during the Summer of 2008 and he kept looking for a "B" wave rally in Nat-Gas ( as well as other energy markets ) that NEVER came.

Does anyone else find it rather odd that Michael claims to have almost 30 years in trading and has continually bashed Prechter's "lost decade", which happened long before 2008, yet was willing to subscribe to EWI's energy markets letter in 2008?

If I bashed a publisher as much as he bashes EWI (as well as the whole idea of Elliott Wave, regardless of who's doing the analysis), I wouldn't subscribe to that publisher's "Direction From Which The Sun Will Rise Tomorrow" newsletter for free.

I'm not saying he's wrong to bash and I've never been a subscriber to EWI and I'm not defending their track record, but it seems inconsistent to bash and subscribe.

[yelnick]

Michael, I think it is pretty ironic if not bordering on funny how many times you have reiterated that Prechter is "one of the best" in your attempt to bash him again. By emphasizing the essential point of the article and nitpicking a minor nuance, you have done more to resurrect Prechter's reputation than my post did!  How then can you square "one of the best" with your recent comment that "the Prechter/Hochberg record is a joke"?  

I don't mind people disputing my arguments and calling them wrong; that is what makes this blog healthy. The whole point of "yelnick" is that predictions are hard, especially about the future. I certainly don't mind a discussion of why an article I cite is all wet. And I don't mind strong emotive language.

I would, however, appreciate it if you would not try a personal shot at me, or other posters here. Please keep it on the message not the messenger. 

[MI]

I agree with Michael's point that Hochberg's reliance on the DSI is absurd.

Entire EWI team uses DSI indicators repeatedly on things they cover. About eight months back DSI for silver was 95%, today it is the same 95%. Based on above 90% DSI readings, for many months STU was calling for a silver top, yet silver kept going up. Same argument is valid for gold, euro, S&P etc. EWI view is that if everyone agrees on something, then it must be wrong or topped. This kind of logic is flawed and in bull markets it is outright dangerous to financial health of traders.

[yelnick]

All, I have changed the phrase 'best' to 'one of the best' in this post. I strive for accuracy and welcome corrections.

[vipul garg]

some sheikh must have been short asset classes.hence the shake.

maybe now the sheikh will shake hands with some bankers.

[vipul garg]

michael, what are your indicators saying for the trend now.
any signs of reversal?should one be buying these dips?

[min]

Agree with Michael and MI (I hope this wasn't a partial hijack of my signature "Min") About EWI's dismal track record.

I got burned badly when I first opened my mind to the plausability of their nonsense. I am sorry I was away when this thread was front running because you can bet I would've weighed in heavily with my "100 cents".

I also have the facts to back it up. Man I wish I could've been here.

There is a difference between causitive market timing and holding on stubornly for over ten years untill the market finally swings over to your misguided and stubornly held beliefs. Anyone have any doubts "P" will miss the next market low like he did in 1987 and in 2002 - 2003?

Wake-up!

[min]

I'm not saying he's wrong to bash and I've never been a subscriber to EWI and I'm not defending their track record, but it seems inconsistent to bash and subscribe.

Posted by: DG | Saturday, November 28, 2009 at 09:17 AM

True DG. Unless...

Michael's using them as a contrary indicator which is about the only good way to use these cats 90% of the time. I've made some damn good trades like this, although I can't bring myself to pay for a subscription at any price other than "Free".

[min]

"Hochberg has a habit of ignoring nearing every technical indicator, if it goes against his case for a depression. I subscribed to the STU from Nov 08 to June 09...

...A real forecaster is supposed to look at the charts and then make a determination of where prices are to go. Hochberg does the opposite. He makes up his mind beforehand on market direction and then manipulates charts to support those beliefs.

Posted by: Paul | Saturday, November 28, 2009 at 05:15 AM "

DEJA VU...

From 2001 - early 2005 "H" as well as "P" could be observed doing more or less the same from what I observed. I wrote in to the EWI message board about this no answer back and of course it wasn't posted...

Yeah, those fine gentlemens don't take too well to this kind of scrutiny. Try it yourself sometime if you don't believe me!

Did you see anything similar in 1993 Michael? That would've been before my time but I would be curious to know how long and "consistent" their compulsive obsession has been...

[graspthemarket]

I'm still at odds with Prechter's/Hochberg's record myself...but the stock market is not based on the past, it is based on what may occur in the future. Right now I believe in what they're saying and that we are in a deflationary environment, so I'm siding with them about where we are headed. However, I'm not completely convinced on their price targets for things. I've seen some very, very low long term numbers, and those just seem a little out of reach.

One way to contribute to this dicussion, though, is to add a little social trend analysis. (I tend to look at the bigger picture anyway.) If the market continues to act like Oprah's ratings, then we are in trouble. There seems to be a connection between the TV "star" and the market "star." in regards to social trends. I posted some of the article below and the rest you can find here: http://www.graspthemarket.com/articles/20091125a.php

An interesting part of the Tribune article was a graph that showed the average daily
viewership slipping from approximately 9 million in 2005 to 6.2 million in the beginning of 2009 (the graph only showed 2009 as a single point, not month to month). That is a drop of about 31%. The Dow Jones Industrial Average was trading at about 10,500 at the beginning of 2005, and hit a low of 6,469 in March of 2009. This is a drop of about 38% during that time period. Both percentages are very close to each other. Is there a connection? I think there might be.

[Greg]

Oprah indication is really something. I am shocked Mr. P missed it... A few months ago he also used the Baltic Dry index since it had a correction (pointing potentially to ominous things to come) but since then it went up which was a good reason for Mr. P to abandon it.

[yelnick]

Grasp et al - you guys seem spot on with the Oprah Indicator. Another bull market phenom fades in the bear.

[Michael]

"True DG. Unless...

Michael's using them as a contrary indicator which is about the only good way to use these cats 90% of the time. I've made some damn good trades like this, although I can't bring myself to pay for a subscription at any price other than "Free"."

Posted by: min | Saturday, November 28, 2009 at 05:30 PM

Bingo!
Looks like someone actually knows how to use their brain on this board.
:)

[MI]

World currency printing presses had removed deflation threat permanently off my radar. No crisis ever hit when everyone was watching for it. Deflation is what every politician, banker, analyst, economist, trader, bear and bull watching. While people like Prechter making irresponsible and egoistic calls every week for deflation led market crash, gold is going relentlessly higher due to a different reason, hyperinflation. Stock markets may go down one day because of recognition of hyperinflation and resulting high interest rates, not because of Precter's theory of deflation. There is no place for deflation in this world as everyone is entitled to their own printing press. Prices of my grocery, medical, insurance, tution, taxes, and anything I want all going up.

[DG]

Bingo!
Looks like someone actually knows how to use their brain on this board.
:)

Posted by: Michael | Sunday, November 29, 2009 at 01:07 PM

Then why did you stop subscribing? Why all this talk about your indicators and figuring out "the TREND", when all you or anyone needs to do is trade contrary to Prechter and EWI? Why weren't you short during the entire March to now rally, since Prechter covered his shorts in mid to late March?

Look, it's clear from the logic gaps in your posts that you are as full of sh*t as the local sewage treatment plants. Just drop the act and post as yourself. All of these rationalizations of different subscriptions ("It was for a friend" or "I use them as contrary indicators") fools no one, min's point notwithstanding.

[DG]

While people like Prechter making irresponsible and egoistic calls every week for deflation led market crash, gold is going relentlessly higher due to a different reason, hyperinflation.

The main problem with this explanation is that we aren't even at inflation-adjusted highs for gold. If you factor in the claims of gold bugs that say the US government has been understating inflation for decades, we're even further from true inflation-adjusted highs. Isn't this kind of odd if the market is expecting hyperinflation?

[Paul]

Remember when the retirement of Michael Jordan was supposed to be a harbinger of things to come? Or the number of abandoned cars on the side of the road? How about his environmentalism theory? Didn't Prechter say that people became more environmentally conscious when social moods increase? I believe he also said the same thing when social moods decline. So which is it?

[Michael]

DG,

Congratulations!

You have shown so much ignorance in your recent posts regarding my thoughts, experience, and real-world "use" of Prechter/Hochberg that your logic is flawed beyond belief. Only you and your ridiculous thought process would allow yourself to come to the conclusion that all one needs to do is use the counts/recommendations of Prechter and Hochberg EXCLUSIVE to all else. No one has ever claimed that, let alone implied that; certainly not me.

And while I am certainly "flattered" that you continue to hang on every one of my posts here, I would suggest that you spend more time worrying about yourself and your current NeoWave short-position and your defense of Glenn Neely, Volumes 1,2,and 3.

[Michael]

"michael, what are your indicators saying for the trend now.
any signs of reversal?should one be buying these dips?" - - - Vipul garg

The indicators that I follow still tell me that the trend is still up.
Even though retail type newsletter sentiment has shown a lack of Bears (now down to 17.6%), it is clear to me that the institutional investor is hunkered down at the moment, and not nearly as bullish as one might tend to believe given the recent rally in equities. The latest State Street Investor Confidence Index is anything but frothy. See page 16 of this week's Barron's for an interesting gauge of institutional investor sentiment and risk appetite, of which State Street is a custodian to 15% of global investment assets.

[DG]

And while I am certainly "flattered" that you continue to hang on every one of my posts here, I would suggest that you spend more time worrying about yourself and your current NeoWave short-position and your defense of Glenn Neely, Volumes 1,2,and 3.

Ah, it looks like the internet ate my original reply. No matter. I find you boring at this point, anyway. The only thing from the original reply that I'd reiterate is that I don't need to defend Neely's track record, since Timer's Digest has documented it over the past two decades. Go tally up the number of times he's appeared in their various top 5/top 10 for the markets they track and compare his numbers to anyone else. A single six-month period of underperformance isn't going to wipe away two decades of superior performance. That's the only defense that matters.

[MI]

"Isn't this kind of odd if the market is expecting hyperinflation?"

When this market finally recognizes hyperinflation, interest rates go up, stocks go down and gold continue to move higher. The recent move in gold is just a catch up act for all the under performance for past 20 years. Prechter and his team has no record of forecasting gold price correct even once.

Tonight, world markets are up big, S&P futures are trading seven points higher. Last Friday, S&P futures rose 31 points from their overnight lows. Market action clearly speaks for itself. This market is not going down more than a day. This kind of action tells me that deflation was just a joke.

[DG]

This market is not going down more than a day.

On to new all-time highs, then, right? Got a timeframe for that?

[DG]

This market is not going down more than a day.

Also, are you saying that ANY buy I make at the end of a down day will be profitable by the end of the next trading session?

[steveo77]

A lot of EWI readers took put with a few months of theta in June 2007. They were decimated.