One short year ago, the US stock market was locked in a gut-wrenching tailspin. The major averages had plunged to their lowest level since Alan Greenspan had a full head of brown hair (i.e. 1987). And, according to the mainstream financial literature, "DOW-nte's Inferno" had officially arrived. It was, for the usual majority, time to abandon all hope all ye who enter here.
But don't take my word for it. The following list of late February 2009 news items capture the doom and gloom in its full glory:
- "Dow 5,000? A Bearish Possibility." (Wall Street Journal)
- "The bear market is tightening its grip. No one is taking a back-seat approach. Everyone is just selling. We're collapsing in on ourselves." (New York Times)
- "I don't want to sound like the grim reaper, but it's possible that one of the [major] averages could come down by... another 50% drop from here. This is a slow-drip, slow-death decline." (LA Times)
- "It's going to continue its easiest path, and that path it sees is down. That's where we're stuck right now and who's going to get out in front of it?" (AP)
"Who?"I have this answer: Elliott Wave International's president Robert Prechter, in a special, February 23, 2009, "Investment Issue" of his monthly Elliott Wave Theorist. There, Bob opened his commentary with the following crowd-parting remarks:
"Over the past four months The Elliott Wave Theorist, The Elliott Wave Financial Forecast and the Short Term Update have repeatedly stated... that the market required a fifth wave down. The Wave Principle virtually guaranteed lower lows, and now we have them. ...I recommend covering our short position at today’s close.
The [decline] is approaching a minimum downside target. The wave count is not quite finished, and ideally the S&P should continue down into the 600s. The market is compressed, and when it finds a bottom and rallies, it will be sharp and scary for anyone who is short. I would rather be early than late. We need to be smart bears, not pigs. Our main job is to keep the money we have. If we exit now, we will do that. We should focus now more than ever on keeping money safe."
Soon after, the February 27, 2009, Short Term Update identified a turning Elliott wave pattern in the DJIA and a time window for the onset of a major upside reversal. In STU's own words:
"By all indication, this pattern is back on track... the turn will come on or near March 10, 2009. Anywhere in this time period may mark a turn, which will obviously be a market low."
The actual turn came on March 9.
Once the rally started and the final piece of the puzzle fell into place with confirming price action, there was little doubt about our bullish wave count. The market's "multi-months long" rally was on its way to our target in the 10,000 region.
So, ask yourself this: What are you reading now, with the Dow swirling the 10,000 region Prechter's team forecasted a year ago?