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Two Ways: Sounding the Bear Alarm

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Strengthen your portfolio in good times and bad.

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Renowned technician Robert Prechter is sounding the bear alarm: He warns that the current rally isn't sustainable, and that the S&P 500 index could drop to half its March lows.

According to Reuters, Prechter, who correctly forecasted the 1987 stock market crash, stamped out the "green shoots" statement recently put forth by Fed Chairman Ben Bernanke.

"It's not the start of a new bull market," Prechter, chief executive of research firm Elliott Wave International, said. "Our models are (showing) right now that it is a much bigger bear market than most people realize, something along the lines of 1929-1932."

Prechter continued to describe the current scenario as a very rare event, and said he expects another leg down in stocks to possibly be as severe, if not more severe, than the declines suffered in 2008 and 2009.

"Deflation is coming," he said. "We're not at the bottom yet… I think we are going to have bouts of deflation separated by recoveries."

For another look at the economy, see Professor Satyajit Das' The End of American Financial Dominance?

From the Bull Pen: So long as sell stops are in place, bulls need not worry about a market crash. If you're in the camp that the S&P 500 had a successful retest of the 20 day moving average, consider the S&P Depository Receipts (SPY) with a sell stop below $88.

From the Bear Cave: One can keep an eye on Apollo Group (APOL) re-approaching its 50 DMA ($65.80) and gapfill. Could be a decent place to make a downside bet, if and when.


Have a great night! See you for a special edition of Freaky Friday: Expiration Day.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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