U.S. stock markets will shed gains swiftly: Prechter

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U.S. stock markets will shed gains swiftly: Prechter

(Reuters) - Another deflationary wave of global credit strains, heralded by the Greek debt crisis, will broadly punish riskier assets, technical analyst Robert Prechter said on Friday.

U.S. stock markets will erase their past six months of gains "in a matter of weeks," said Prechter, president of research company Elliott Wave International, in Gainesville, Georgia and known for predicting the 1987 stock market crash.

Investors should opt for the safest possible investments, putting their money in very short-term Treasury bills or cash, he said, reiterating this long-expressed preference based on the expectation of long-term economic weakness.

Prechter maintained his call, made in January, that the dollar should continue gaining against the euro for about a year.

The euro hit a 14-month low against the dollar this week on investors' concern about the crisis in Greece and some other heavily indebted European countries.

In a telephone interview with Reuters, Prechter also predicted a "dramatic widening" of U.S. corporate bond yield spreads over Treasuries, which he said has already started.

Over the next few months, junk bond spreads are likely to widen substantially, he said. Over the next six years, as the U.S. economy weakens and more corporations and municipalities default, spreads will widen further as prices of corporate and municipal bonds fall, he said.

Prechter has previously said he believes the 2007-2009 markets crisis and U.S. recession were harbingers of a severe, longer economic downturn. His book "Conquer the Crash," first published in 2002, warned about the dangers of a deflationary depression. Prechter maintains the U.S. economy will struggle for years to come.

(Reporting by John Parry; Editing by Chizu Nomiyama and Dan Grebler)

http://www.reuters.com/article/idUSTRE6465TI20100507


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Robert Prechter's Stock Market Trend Forecast 2010 to 2016
Stock-Markets / Stock Markets 2010 May 12, 2010 - 05:35 AM

By: EWI

Stock-Markets

Best Financial Markets Analysis ArticleThe following article is excerpted from Robert Prechter's current issue of the Elliott Wave Theorist. For a limited time, you can Download the full 10-page issue, FREE.

By Robert Prechter, CMT

A Deadly Bearish Big Picture

As far as Elliott waves go, the rally since last March is totally normal. Two weeks off the low of March 2009, our Short Term Update published an upside target of Dow 10,000. So we knew a big rally was coming.

The August issue listed the range for typical retracement as being from 9368 to 11,620. This is a wide range, but there is nothing we can do about it; second waves have a lot of leeway. The illustration shown in that issue is reproduced below alongside an update of market prices. The Dow has so far stayed within the normal range."

Even so, I expected the rally to peak in the lower half of the target range then reverse. In August 2009, after 5 months, and in November, after 8 months, I was quite sure that the rally was ending. But instead of stopping near 10,000 at a 50% retracement, it has reached a 60% retracement. Whenever a market surprises me, I try to figure out why.



The Outlook From Time Cycles

Robert Prechter, Chartered Market Technician, is the world's foremost expert on and proponent of the deflationary scenario. Prechter is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.