The Elliott Wave theory (lots of background on this at
www.elliottwave.com), which seems to be the main interpretive tool they are using at HPH in addition to their linguistic analysis, is all about outlining most probable scenarios for future market movements and then refining those scenarios based on actual price movements. I've been an adherent of this method of stock market analysis for many years, though I readily admit it has its limitations and in no way provides a "crystal ball".
A good overview to the Elliott Wave theory and the related field of “socionomics” is provided in a free online film at
http://www.socionomics.net/history/ .
One of the most curious aspects of Elliott Wave analysis for those who sense the coming world changes is that this theory of stock market behavior, which was developed by a relatively obscure accountant back in the Depression era named Ralph Elliott, is predicting a major stock market bottom around the year 2012. That forecast relies entirely on numerical relationships of past stock market price levels, not Mayan prophesy, astrology, etc. . . . though of course it can be seen as corroborating predictions based in those traditions.
I happen to agree mostly with the short-term "wave count" or forecast posted at HPH, in that I'm looking for a move Thursday off today's low up to around 8800-9000, followed by a big selloff of at least 20%. I'm more comfortable calling for the selloff to make a temporary bottom in the 6800-7000 area, though, rather than 5800 (not clear how HPH arrived at that figure). But it will definitely be a very emotional selloff so extensions to the downside wouldn't be surprising. In all likelihood there will be a sustained rally late this year and in the early months of next year, and this will probably fool a lot of people into unwisely re-investing in the stock market at precisely a terrible time.
The mainstream media like Money Magazine and Bloomberg.com are unfortunately doing a major disservice to the public through both shortsighted analysis and, in some cases, willful attempts to get mom-and-pop investors to play the stooges who will buy stocks from the “smart money” insiders getting out of the market while there is still time.
When they quote figures such as 80% recoveries within a few years, or claim that “buying and holding” stocks is a nearly foolproof long-term strategy, they are basing those claims on data sets going back only to the early twentieth century. That is where the “shortsightedness” comes in:
A key hole in all of the media comparisons of the current financial crisis to the Great Depression is that the current crisis, in Elliott Wave terms, is one degree of magnitude greater than the Great Depression; its most recent historical precedent is in fact the 70-year bear market of ca. 1720-1790. Precisely because no one alive today personally recalls the economic crisis of the eighteenth century, few people have an accurate estimation of how bad the coming bear market will be. It’s no coincidence that wars raged in many parts toward the end of the 18th century bear market (USA, Europe, Southeast Asia. . .) and so the potential for armed conflict towards the end of the current bear market is also rather high.
Luckily, and for reasons with which many here at Avalon are familiar (in terms of the “speeding up of time” going into 2012), the coming bear market is not likely to last several decades as in the eighteenth century. We will probably get through the worst of things by 2013-2015. However, quantitatively speaking, we will see the Dow fall at least to 1800 and very possibly to just triple digits as envisioned by HPH.
There are always multiple possible scenarios within an Elliott Wave interpretive framework; and that is to a large extent where the group consciousness / imagining and bringing into reality of positive futures work here at Avalon plays a key role. That is the kind of factor which absolutely can make the difference between having the bear market end at 1800 or 700 (or 50) on the Dow.
Elliott Wave theorists have found that the underlying neurological reason why stock market prices follow the patterns identified by Ralph Elliott is that investment decisions in most people are predominantly made by the reptilian (fear/greed) part of the brain, rather than the higher intellectual or intuitive faculties. As we evolve as a species away from the reptilian aspect of our thinking and behavior, it makes sense that we will also cease subjecting our society to these alternating cycles of financial boom and bust.
The bottom line in terms of investment advice is to get out of stocks, bonds, and nonessential real estate, and get into a combination of gold, silver, and strong currencies (the yen will be the dominant currency in the coming months – beyond that timeframe the markets will tell us what to hold, but the USD will likely be toast by then). Gold prices are nearing $700/oz. now and will likely bottom around $600-650. However, since availability is so tight, it’s probably a good idea to buy it when you can (where I live gold is readily available but we pay a 10% premium over spot price for example) even before prices have bottomed.