Last night the Elliot Wave International Short-term update (published 3 times weekly) issued a bullish market call through year end. Both their top prediction and their top alternate prediction now call for higher prices into year end. This despite, by their own admission, the fact that investor bearish sentiment is now at a 6.5 year low ! Yet, despite being bearish for the better part of last 3 months and telling us that the next major wave down "P3" was just around the next corner, EWI are now telling us that the next intermediate sized move will be up through year end, not down.
Frustrating? Yes. It would have been nice had they issued this bullish call two months ago, at around S&P 950-1000, so we could have saved some pain and suffering on this last 10% leg higher. In fairness, Prechter issued a monthly interim report on 11/23 saying he is now recommending 200% short (bearish) positions, but this only causes further confusion because there is now a clear disconnect between the big man himself (Prechter) and the Short-term update (STU).
Been there, done that
As frustrating as this disconnect may seem, I have seen this movie before and I know how it ends. I keep a checklist of "factors" that I look for before a major turn in the market and truth be told, I now expect EWI STU to be leaning wrongly as one of the key factors I look for prior to a major turn in trend. To know why this is so, let's go back to the all time high in the stock market two years ago in 10/2007. At that time, an eerily similar series of events played out in which EWI's STU had been leaning bearish and then inexplicably issued a bullish multi-week forecast. Out of massive frustration, I was forced to "go it alone" and I went so far as to issue this tirade here, indicating that any thoughts about a "running triangle" into year-end, were pure bullshit and marked capitulation at the highest levels. Who was right in the end? As it turns out, the market did what I said it would do - it made its top 10 days later, rolled over, and never looked back.
What does this all mean? It means that if you are now "long" (owning) stocks now, just bear in mind one thing, that the Investors Intelligence Advisor's Survey shows the number of bears at 16.5%, which by EWI's own admission is a 6.5 year low. In addition, the all-time bearish investor newsletter service, none other than EWI itself, has now capitulated to the bullish camp (at least intermediate term) and is also now bullish into year-end despite having been bearish for the better part of the past several months. Therefore you might ask, just how bearish is EWI overall? Suffice to say, they begin each monthly Financial Forecast newsletter telling us that the next leg down will be a "SURVIVAL LEVEL EVENT". Therefore, their turning bullish, even for the intermediate term is a sign of complete capitulation by all things bearish.
Now ask yourself this one thing, if you want to sell stocks (Corp. bonds, Muni bonds, gold), who is left to buy?
