the bear market rally is ending

"The Elliott wave pattern and supporting technical evidence are clear and compelling— the bear market rally is ending," says Steve Hochberg in The Elliott Wave Financial Forecast.

"This strong potential is compounded by the four-year cycle, which is entering its hard down phase and scheduled to bottom late this year or early next. The downward cyclical pressure on stocks should be intense in coming months. The majority of stocks in the Dow have already entered the next leg down and the index itself should now play catch up. The absence of participation in many of the most important blue-chip stocks dramatically signals the weakening strength of the uptrend. Any further rise should be weak and brief.

"The all-time peak in 2000 was unprecedented in terms of extreme stock market psychology. The final upward twists of the current countertrend advance may not be generating an exact replica of that period, but it’s pretty darn close. Equity funds received $31.8 billion of net inflows in January, the sixth largest monthly total in history. The only bigger months were the first four of 2000 and January 2004, when the bear market rally was a few days from a peak. This surge represents a major capitulation to the uptrend. Discount brokerage firms are seeing record levels of activity and at Fidelity, net flows into stock funds surged $5.6 billion versus just $400 million in January 2005.

"Two more features of the 2000 all-time high—IPOs and corporate buyouts— are hotter than at any time since. In some areas, the latest stock market euphoria is even more vivid. After 213 years as a partnership of members, the NYSE is becoming a publicly traded entity. More than a century of seat-price records tell the story: exchange ownership is valued most highly at major tops. In 1999, the exchange made its first move toward a public offering, just prior to the bear market swoon. The success of the latest effort to get the exchange into the hands of the public undoubtedly heralds an even more dramatic reversal. The upcoming volatility explosion will make stock trading go out of style for a long, long time."