Robert Prechter - Deadly Bear Cycle Phase II Has Begun

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Modification to Robert Prechter's base chart

It is interesting to look at the Constant Dollar Dow chart since 1920 that was developed by Robert Prechter as shown above. I have added in (in red) the head and shoulders as mentioned in his article and the October 2007 line showing the October 2007's peak in Dow (current dollar) that did not correspond to Dow (constant dollar) chart. In constant dollar term, the peak was on July 1999. Robert Prechter is fairly confident that the Phase II of the bear market has started. Dow will complete its head and shoulders formation and it will continue to move lower for another 6 years until 2016.

My short-term reading on Dow remained the same, I am expecting Dow to have another up within a week or two to complete the wave b of II before it drops to around 9300 to complete the II.



According to Robert Prechter's view, from now until 2016, Dow will move all the way down to reach the minimum target of 3000 of the head and shoulders. The only questionable count is the wave 3 and 4 as shown above and the short major wave II.


To allow for Robert Prechter's bearish scenario, I would prefer to have the wave count as shown above.



A bullish school of thought would prefer to take the March 2009's bottom as the end of the 2007/2009 bear and the current correction as the major wave II pullback to be followed by a major wave III bull run. But with the current debts crisis in Europe and George Soros's view that Euro could easily tumble to below US$0.80 and even risked 'disintegration' as a currency, there is a big question mark to this bullish view.