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Prechter Remains Bearish After His April 2010 Top Call at Trader’s Narrative

The fact that the S&P 500 index has broken above its summer trading range doesn’t impress Robert Prechter. He made a very accurate call in mid April for a top: A Deadly Bearish Picture. This, combined with the fact that he nailed the March 2009 low as an important inflection point, makes Prechter someone worth listening to.

The video below is only a few minutes long and is well worth your time. Right now, he remains bearish and attributes it to several indicators that have reached an extreme.

First among these indicators, is the extreme bullish sentiment from the weekly AAII survey. In the previous link there is a chart of the bull ratio showing that it reached the same (68%) level as October 2007.

Prechter also points out that last week there were just 24.3% of those surveyed bearish but at the October 2007 top, we saw slightly higher bearish readings (between 25.3% and 25.8%). So right now, you could say that there are less pessimists than at the major top 3 years ago.

The second indicator at an extreme is the percentage of cash held by mutual funds. Prechter argues that portfolio managers would not be holding so little cash if they thought that prices would fall and offer them the opportunity to buy at cheaper prices.

Next, he points to the TRIN which measures breadth and has fallen to 0.74 - the third lowest reading in 7 years. The last time we had a lower reading was on September 2008 when we were in the middle of the credit crisis, as the market had a dead-cat bounce off the July 2008 lows.

Finally he makes the ultimate comparison to the 1930’s stock market saying that short term recoveries can fool everyone into buying into stocks and positive sentiment while the market is stair-stepping lower.

For an update, see the September issue of the Elliott Wave Theorist. If you missed the April warning, you can get it here.

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4 Responses to “Prechter Remains Bearish After His April 2010 Top Call”  

  1. 1 jezza

    Prechter made yet another terrible call, which would of lost his followers a ton of money, the stress of his failed strategy seems to have aged him enormously!

  2. 2 bullmarket

    Pretcher is one of the many folks who called the March 2009 bottom. In fact, just about everyone (bulls and bears) claims they called the bottom. When both sides claimed such, it means somebody’s lying.

  3. 3 shou

    everyone knew it was a bottom…. no one had the guts to buy

  4. 4 Babak

    shou, to be perfectly honest and humble, I certainly didn’t recognize it as the bottom. I started buying too early in Oct/November 2008 when everything went to hell in a handbasket. Then it was confirmed a tad too ‘late’ by the Coppock curve in May 2009.

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