18/05/2010 – What Becomes of a Broken Stock Market?

You know what a mystery the Dow’s 1,000-point drop on May 6
has been.
Wall Street is looking for a smoking gun — a trader’s mistake, a computer
glitch — but nothing definite has been found yet.
If you’re familiar with Elliott wave analysis, last week’s shocking decline gets
less mysterious. The chart you see below is from Robert Prechter’s latest, May Elliott
Wave Theorist. Notice the price area where the drop occurred.

Read
Part One of Robert Prechter’s Latest Two-Part, April-May Theorists FREE
The April-May Theorist series entitled “Deadly
Bearish Big Picture” reveals a lucid picture for
2010-2016. It’s the flipside of Robert Prechter’s February
2009 Forecast for a ‘Sharp and Scary’ Rally. Click
here to download the 10-page part one for FREE now.

Chart: http://www.elliottwave.com/images/marketwatch/mw%2005-11-10.GIF

As you see from Prechter’s chart, the Dow reversed after the
rally off the March 2009 low had retraced about 61.8% of the
2007-2009 crash. To be exact, “The Dow met the .618 retracement
level when it reached 11,258 at 11:15 a.m. EST on April 26. Then
it reversed, as shown in Figure 9,” writes Bob in the May Theorist.

Why is that important? Because in Elliott wave analysis, .618
is a common Fibonacci reversal area for market corrections.

Based on the Dow’s 300-year-long Elliott wave pattern, Prechter
sees a huge difference now compared to the last two significant
tops in 2000 and 2007. In fact, “This massive stock market
top is preparation for something big,” writes Bob.

The May 8 Theorist shows you two Elliott wave paths
that stocks will likely take from here — and both point
in the same direction.

There is more — you also discover the likely final outcome
if this decline indeed develops into “something big”:
Prechter gives you his ultimate DJIA’s price targets several
years from now.

This article was syndicated by Elliott Wave International. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Trade Forex, Commodities, Stocks and more, trade CFDs on the Plus 500 CFD trading platform! *CFD Service. 80.6% lose money - Register a real money account here and get trading right away.

Disclaimer: Please note all prices are for information only, they should not be relied upon for accuracy or trading. All prices quotes are based on CFD prices and are similar though not always identical to real exchange prices. STOCKTRKR or anybody connected with STOCKTRKR will not accept any liability for loss or damage arising from use of any information/commentary/charts or articles which is provided 'as is' for educational purposes only, nothing contained on this website should be considered as investment advice - please seek proper investment advice from registered financial broker or institution if you wish to trade on global markets and ensure you are familiar with the risks.