Dow Jones Stocks Bear Market 2,000 Target By Elliott Wave Disciple Prechter

• I am in agreement with Robert Prechter’s view that the stock market is heading down. This is a bear rally and is near to the end. The lows in March 09 will be retested and broken. How low? I won’t bet against Prechter’s view of 2000 for the DJIA. I am not in agreement with him wiith regards to the price of gold though. I still see hyper-inflation and thus a parabolic rise in gold price.
   
• Martin Hutchinson writes :
    
  To get the ultimate doom-laden view, I talked last week with Robert Prechter, who for 30 years has run an investment company based on the Elliott Wave Theory, propounded in 1948 by Ralph Nelson Elliott. I’d wanted to meet Prechter ever since I had seen ads he ran in Barron’s back in the bear market days of 1981-82. The Dow was around 800 at that time, and he forecasted that the U.S. stock market was about to enter a huge uptrend, which might last as long as 20 years, and for which 3,000 on the Dow was only the first stage.
   
  “Boy, he’s bullish,” I remember thinking – it was considered bold at that stage to forecast a Dow of 1,200, which would have been 15% above the index’s all-time peak set in 1972. But Prechter was right.
   
  He was also right in 1987, when he predicted the sharp bull market of that year would end, but that the pullback would be only a temporary problem before the market went on to greater things.
   
  In the late 1990s, Prechter turned bearish, explaining that the “fifth wave” of an Elliott Wave cycle – and therefore the bull market – was coming to an end. He was a few years early, but by following his advice after about 1998 you would have avoided a decade in which your money made an all-in return of approximately zero.
   
  He was still bearish in 2003 – as was I. In cash terms, we were both wrong and went on being wrong for the next four years, as the Dow zoomed from 8,000 to around 14,000. Of course, as he pointed out to me last week, if you accounted in gold, stocks had in fact declined somewhat between 2003 and 2007. It’s not the Elliott Wave system’s fault that the denominator in the equation – the U.S. dollar – fell out of bed through excessive money printing.
   
  Prechter even managed to call this year’s March bottom, expecting a substantial bear market rally at around 6,300 on the Dow, close to the bottom. However, he expects the market to resume its downward trend shortly, ending with a decline similar to the 86% in real terms of 1929-32 as we are in a long Elliott Wave downswing. That would take the Dow down to around 2,000.
     ……
  Where Prechter and I differ is on inflation. He sees a further collapse of asset prices and debt values, with consumer debt and commercial real estate wreaking more havoc on bank balance sheets. That could cause massive price deflation, and a decline – rather than an increase – in the price of gold.
   
  Personally, I look at the over-expansive monetary policy pursued by the Fed for a decade now, and its continuance, and see inflation ahead. Inflation would also help Uncle Sam finance those deficits, so it seems more likely than not.
   
  That difference in opinion aside, Prechter was both charming and fascinating. Maybe we can combine our views, and agree that the deflation will be of the dollar’s value, so that prices will inflate in dollar terms, but deflate in such other hard currencies as the euro, the renminbi (China’s yuan), or the Brazilian real. We shall see.
   
  The bottom line: While the market could go up a little further in the short term, it’s not the time to get aggressive.

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