An ominous pattern forming in the stock market may be telling us the DOW is about to plummet to 2000-3000, says Robert R Prechter, Jr.
Prechter, who writes a market letter for Elliott Wave International, is no stranger to apocalyptic forecasts. For the past year or two, he has been steadfast in his prediction that the market is on the verge of a historic collapse. The timing and depth of this crash has varied--earlier this year, Prechter suggested the DOW might fall to 1,000, and more recently, he said we were looking at the worst bear market in 300 years--but he hasn't wavered in his conviction that we're due for major pullback.
One cause of Prechter's concern is a technical pattern called a "head and shoulders top." Historically, Prechter says, this pattern has often preceded extended bear moves. Prechter thinks the left-hand "shoulder" of this pattern was the market peak in early 2000, the "head" the higher market peak in 2007, and the "right shoulder" the recovery we're enjoying now.
If the pattern is followed by the same pullback Prechter has seen in other eras, Prechter says, the DOW could fall to 2000-3000.
Fortunately, Prechter says he is not predicting that kind of crash. He's just warning about an upcoming severe pullback in stocks.
And he also sees similar doom in the forecast for high-yield bonds, gold, and other commodities.
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