Best Financial Markets Analysis Article The 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

For newer readers, I should reiterate that my view of time cycles is that they are very transient epiphenomena of the Wave Principle. This means that cycles are not the fundamental regulator for stock prices. They......... Download the rest of this 10-page issue of Robert Prechter's Current Elliott Wave Theorist FREE from Elliott Wave International.

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.

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