Elliott Wave Forecaster Sticks to His Guns
Checking In With the Chartists
SAN FRANCISCO -- As often happens when I cite the views of Steve Hochberg, co-editor of
Elliott Wave Financial Forecast
, my emailbox box runneth over. The usual happened after
last week's piece, only this time the emails contained a heavy dose of cynicism as Hochberg's "reversal" call appeared to fall flat.
To recall, Hochberg identified June 19-21 as a so-called Fibonacci turn window, or a point in time when the market's prevailing trend would reverse. To review, the windows are not designed to predict market direction, but points in time when the market's prevailing direction will subsequently reverse. Given the market's steady downturn from the highs of late May, the implication of the turn window was pretty evident (the market would go higher, that is).
Elliott Wave's
recent track record of calling such turns has been
pretty impressive. But this time around, the market didn't seem to be cooperating, as modest advances last Wednesday and Thursday were met with heavy selling of blue-chips Friday and yesterday, and early this morning.
The growing impatience/skepticism of some readers aside, "this
reversal forecast would only be negated if the
Dow Jones Industrial Average
breaks the March 22 low of 9106.54," Hochberg said in an email exchange. He reiterated that if that should occur "then something very nasty is happening and we would immediately shift our stance to bearish. But obviously we do not expect this outcome."
Despite the Dow's recent struggles, the
S&P 500
,
S&P 100
, and
Nasdaq Composite
have each stayed above the lows set June 18 (the day before the Fibonacci turn window, that is), Hochberg noted. As long as the S&P and Comp remain above those lows -- of 1208.43 and 1987.2, respectively -- and the Dow stays above its March lows, "I think our turn window marks another forecasting success and the decline from the May 22 highs is over," he proclaimed.
In fact, Hochberg anticipates stocks will "soon get on their horse and rally above the May highs," with the Dow threatening to eclipse its previous all-time high.
"Last week I said that 95% of the selling pressure should be out of the market once this window passes. The window has passed and I still hold to my same opinion," he continued. "We may see one or two indexes diverge and briefly break below their recent lows. But if this were to happen, we would view it as a buying opportunity because the downside appears limited."
Two other things to recall from last week's piece.
First, Hochberg said the market "might not shoot to the stars" right out of turn date. In the email, he suggested the market might "remain choppy" into the July 4 holiday week but should "gather momentum" thereafter.
Second, the newsletter writer said last week that a "washout" or "reversal" day might be necessary to increase bearishness and flush out the remaining selling pressure.
With the Dow battling back to record modest losses after being down more than 100 points early in the session, today's action seems to fit the bill. But the index closed off 0.3%, further muddling already-murky waters.
Tune in later for the TaskMaster's preview of tomorrow's Fed decision.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.