Stock Market Crashes Are Predictable, Major Decline Is Coming In 2003 And 2004, Says UCLA Physicist

Science Daily ^ | 12-17-2002 | UCLA

[oldcomputerguy]

"Centuries? Wow, this guy is good. I wonder how many centuries he went back to study the market?"

I think data exists for various markets back 200-300 years or so.

[oldcomputerguy]

"Markets involve humans. I think that this system will fail like all the others... "

On the contrary, humans are much less complex than you give them credit for.

[oldcomputerguy]

"Elliot Wave theorists always predict doomsday."

On the contrary, the current Elliott Wave proponent Robert Prechter, predicted a hugh bull run in the early 80's when the market was under Dow 1000. At the time, he predicted the Dow would go to 2700, and people thought he was nuts then too. Prechter got out of stocks in 1987 at 2700 and the market crashed right near that figure. He just never got back in.

He also won a trading championship in 1984 using Elliott Wave and his monitored account was up 444% in 4months. No.... Elliott Wave works allright. Where he got his recent reputation was that he didn't allow for the mania that was the 90's. That fact doesn't alter where EW says we are going next however, the only question is degree. I sure hope he is wrong this time but I am not betting against him.

[oldcomputerguy]

"Statistical analysis of the stock market cannot predict the social, regulatory, and economic factors that form the market economy."

Ah yes that incorrect argument again. Actually the truth is that news fits market action, not the other way around. EW has documented that again and again. Hell I have even seen financial astrology do it time and again too, months in advance of the "news" that moved the markets.

Usually the news story goes like this: The market was down on the trade report........or The market shrugged off the bad trade report.

The truth is that the trade report never made any difference in the first place, the news people just keep looking for an explaination. It is a form of curve fitting.

[Indrid Cold]

Maybe the human element isn't as important as we'd like to think.

[Mr. Jeeves]

Where he got his recent reputation was that he didn't allow for the mania that was the 90's.

Prechter probably never expected that Clinton, Rubin and Greenspan would team up to help create the environment that allowed the mania to evolve. That's the only problem with using Elliott Wave for TIMING, which isn't a good idea when the Fed has so much ability to tamper with the natural course of the market.

Right now, Greenspan has done a 180 and is actively promoting inflationary policies as a remedy for the pending deflation. I predict it won't work - stagflation is on the way, and Prechter is going to look like a genius again within the next 24 months.

[oldcomputerguy]

The more likely course, I think, is that capital will be destroyed faster than the Fed can create it. We are already down 7-8 Trillion in market cap and we are still at SP 900!
By the time this thing bottoms, derivatives come home to roost, and the bankruptcies stop, inflation might be hard to see anywhere.

[Doctor Stochastic]

I've been looking at the paper. There's the rather troubling statement: ...a power-law decrease of the price (or of the logarithm of the price)... which indicates a severe lack of understanding about the shapes of curves. A power low change in price is a linear change in logarithm. Neither the authors nor the referees (if any) seem to have caught this. It may be just poor phrasing but I wouldn't have let it get by.

[Maelstrom]

You said, "Do not confuse correlation with causation."

I'm not confusing them. I might suggest you not ignore causation when in the presence of correlation.

I work with feedback loops. The market is driven by those three forces. There is feedback, however, that doesn't stop the simple fact that the market is driven by those three forces.

I'm not confusing causation and correlation, I'm removing your ignorance. I've provided the cause for economic shifts for you so you don't have to study more economics classes under obviously inferior tutelage.

[Maelstrom]

That'll work, but it's an unstable system and guarantees a "crash" or "correction" because it isn't real.

[Maelstrom]

It is a form of curve fitting.

It's self-fulfilling prophecy. It isn't real. You can fit curves forever, but doing so tells you nothing of the driving forces of the actual curve.

It might even appear work most of the time, but there will be something like the mid-year elections this past cycle and your guy will be scratching his head, "Huh, THAT'S never happened before."

What's funny is: I called it self-fulfilling prophesy in the first place, here you're confirming it and still not recognizing it for what it is...form of curve-fitting...geeze