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Here's my blog on the analysis by Jim Ross: It's a little more explanatory.
OCTOBER 19, 2007 ELLIOTT WAVE THEORIST Near Term Picture Despite every chart presented in this issue, there is no guarantee about timing. Any euphoric period that has persisted for nine years can continue to do so. There are various scenarios for this top formation, so stay tuned to The Elliott Wave Financial Forecast and the Short Term Update for current commentary. On July 17, EWT recommended that aggressive speculators take a fully leveraged short position. That time marked the all-time peak in several indexes, including the Dow Jones Transports (topped 7/18) and secondary averages such as the Value Line Arithmetic index (topped 7/13). Our proxy for this type of recommendation is S&P futures. The December futures contract at that time (close on 7/17 to open on 7/18) was 1570.25-1572.25. The August 26 issue outlined the bearish seasonal period that carries through October 26. EWT made clear on page 1, “This observation does not rule out a new high within this period.” The major averages crawled to a new high in the second week of October. The futures contract made a new intraday high by only 7 points, closed down on that day and has fallen since. Place a stop at 1571.25, which is break-even. If stopped, use the post-October-12 low as a level to re-short. Like all indicators, seasonal patterns are probabilistic. The ending of this period has no reliably bullish implications, because the evidence of bearish potential given throughout the charts in this issue trumps every small-time bullish portent. In 1973 (34 years ago), the Dow and S&P bottomed on August 22, soared until October 29, and then collapsed in November to below the starting point of the rally. The Fed meets this year on October 31, and investors are breathlessly awaiting the next discount-rate cut, as if it were bullish. Investors holding interest-bearing cash equivalents have outperformed the S&P for over seven years. Hold onto that cash with both hands. ------------------- As the U.S. stock market found a bottom in late-February/early-March of this year, Robert Prechter, seeing the distinct Elliott Wave pattern into the low, issued a call for a major rebound in the February issue of his EWT investment letter and recommended investors cover any shorts established at the top in 2007. “The market is compressed,” he observed. “When it finds a bottom and rallies, it will be sharp and scary for anyone who is short. I would rather be early than late.” “This is an environment of escalating financial chaos,” wrote Prechter. “Our main job is to keep the money we have. If we exit now, we will do that.”