Pressed to put that into numbers, he said a normal rally from the 667 low on the S&P 500 would take that index back up to the 1,000-1,100 range. (It's around 900 right now.) After that, he expects the next wave down to be larger than the initial drop of 58%. You do the math. Prechter calls it a "C" wave in Elliott Theory and notes: "Declining C waves are usually devastating in their destruction." He says the "credit implosion" isn't finished. Much like Japan, he predicts, we'll have to live through a long period of declining asset values, summed up in one word: deflation. Traders can follow these volatile waves, but where do long-term investors hide during extended deflation? Not in stocks, real estate or commodities, even though today's prices seem like bargains. "Until the credit implosion is over, the only place to hide is cash -- safe equivalents such as Treasury bills and Swiss money-market claims (Swiss T-bills). Holding on to your money will give you a chance to buy the real bargains when the bottom eventually arrives several years from now." I had just finished digesting that forecast from Prechter when I received the latest issue of Bert Dohmen's Wellington Letter. Regular readers know I highly value Bert's perspective, as he uses both technical analysis and an insightful view of both politics and the economy. Noting that bear market retracements can be deceiving, Dohmen pointed out that the first rally after the historic 1929 crash extended into 1930 and produced a 52% gain. And then the market plunged another 64%.