Let's say you knew someone that said on March 16 that the Nasdaq would slide to 3587 by June. At the time, the Nasdaq was trading around 4717. Would you listen to him now? Of course you would, though you may not want to hear what he's saying.
We did speak with such a man, Steven Frenkel, market strategist with investment bank
, back in March, and through the wonders of
linking, you, too, can see what turned out to be a fantastic prediction from Frenkel. At that time, Frenkel indicated that he still expected the Nasdaq to rise to 6800 by the end of the year, but his prognosis became more dire after the Nasdaq slipped below his 3587 target.
Frenkel told us he now is targeting 2729 in the Nasdaq, and if that level is exceeded, he could see an extended bear market with the Nasdaq eventually falling to 1990. He said there could be a bounce from 2729 back to 3500, but then it would fall down again.
Frenkel used Elliott Wave
technical analysis to reach his conclusions, saying that his Elliott Wave count going back to 1932 was complete. He said he expected the Nasdaq to peak somewhere around 3850 (he said this before the Nasdaq reached its high of 3851.56 today) before dropping. He also said that the
was doing too much and he expected the country to slide into a recession in a year and a half, and for there to be a two-to-three-year bear market. According to Frenkel, the inverted yield curve was a "slam dunk indicator" in predicting a recession.
Frenkel recognized that many investors were reluctant to short the market, either from no experience shorting or concerns about getting squeezed out if the market takes off. But he said investors "better learn" how to short. He said that going short was "slightly more tough" than owning a stock, but when you work out the odds, the risks were only "slightly greater," though you might need deep pockets to pull it off.
"Going short is definitely big leagues," he said. "If you're a minor league ballplayer don't go short. You can get a squeeze in any of these things so you have to be ready for it. If you don't have assets to back up your short you can't do it. You can't short at 105 and get out at 108. You have to say at 120 that you're going to short more. You have to have staying power."
In a report for today, Frenkel was advising traders to take profits now, particularly in
stocks "where they exist." He also was recommending shorting what he dubbed the "sweet 24," many of which were Internet and technology stocks. He's also recommending investors sell these stocks on any bounces.
Included in the "sweet 24" are
Art Technology Group
Terayon Communication Systems
Frenkel said he would sell those stocks short today and cover when the Nasdaq reaches 2900. Enjoy.