Stocks: Could Dow Jones Hit 1,000?

I was reading the recent newsletter of Robert Prechter from Elliot Wave International. The gentleman, like many other deflationists, thinks that the stock market is on a downward trajectory in nominal terms. Fair enough. However, here is the icing on the cake about Prechter's thoughts. He thinks that the Dow Jones is heading towards 500 points. Thats right, it's not a spelling mistake! Let me remind you that Dow Jones is currently trading at 10,856 points as I write this, therefore this type of a crash would be a 96% drop from the current price. Prechter thinks this will occur over the next several years.

Before one completely rules out this case scenario, calling it totally insane, I would like to say that Robert is a very gifted and skilled market technician, who has been right with his grand calls many times, on many different occasions. I have also been following him for a decent amount of time now and always enjoy reading his views. He is also a pure contrarian, so majority of the time his calls are far far away from the consensus and therefore right. You see, the more people think you are crazy and the more they disagree with you - the better your chance of being right. Nonetheless, his success is also mired by his failures at times as well, where his perma-bearish outlook constantly led him to try and short the stock market advance from March 2009 lows. He did eventually get his call right this July 2011, when he recommended to go short and obviously caught a market crash. A great call!

Even though I hold a huge amount of respect for Robert, I would have to say that if the Dow Jones was to crash by 96%, the world would most likely go completely bust and there would be a huge war. I am sure some clown will leave a comment that this is not "technically" right and give me the necessary facts to back his university thesis up. Whatever. Either way, at that point, you wouldn't even make any money shorting the stock market as there would be no stock exchange around to profit from.

Therefore, if you are ultra bearish, like Prechter, instead of predicting the stock markets decline into dark ages, you should stock up on Gold (probably not right now because we have 98% bulls according to DSI) and build yourself a bunker, which would be protected by trip mines, which work on a laser system similar to that of a bank vault. On top of that make sure you stock up on a AK 47 (those don't lock up in water or mud) and plenty of hand grenades, a massive machete and a German Shepard. If all hell breaks lose with the stock market, at least you will be protected!

Please Note: Keeping all these ultra bearish thoughts in your mind, please participate in this month survey on the right side of the blog menu and tell me where you think the Dow will be by 2016. Thank you!

Update: After a couple of days of voting, only one person thinks Prechter could be right. I did say he was a contrarian! Majority thought Dow will be making an all time new nominal high.