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Stock-Market Sages Say Worst Is to Come

Stocks in this article: BAC AIG UNH

A new bull market or a bear-market rally? The stock market has chosen to focus on those relatively better numbers, because the stock market always looks ahead. But is this a new bull market or just a temporary rally, an opportunity to sell stocks before another collapse?

A well-known Wall Street money manager said on Friday: "This is a "once-in-a-generation opportunity to get in at prices that haven't been as good since 1982." One stock market sentiment indicator has gone from only 2% bulls to more than 80% bullish in just the past two months.

The bulls are running. But two legendary traders beg to differ. They each correctly timed this "bounce." But neither feels it will last much longer.

Elliott Wave Theory: new lows ahead: Bob Prechter is a stock market technician, meaning he charts historic stock prices and patterns using the "Elliott Wave Theory." You can learn more at his Web site.

Lest you think this type of analysis is like reading tea leaves, Prechter gained fame predicting the stock market crash of 1987. In 2002, he wrote a book titled "Conquer the Crash -- You Can Survive and Prosper in a Deflationary Depression." In it, he correctly forecast a huge credit contraction, brought on by all the mortgage and debt issues that we're now facing.

Reading this book today, it seems as if Prechter had a crystal ball. That's why his current view of the market is so compelling. After correctly forecasting this current rally in February, Prechter suggests that traders should be looking for an exit point soon, an opportunity to sell short. He laments: "On the major trend, there's such a long way down to go."

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