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July 12,

By Elliott
Wave International

While many people spend time yearning for the financial
to turn back up, a rare few have looked back in time to
historical markets with the current situation – and
delivered a clear-eyed view of the future informed by
of the past. One who has is Robert Prechter. When he
about markets and wave patterns, he goes back to the
1700s, the
1800s, and — most tellingly for our time now — the
early 1900s
when the Great Depression weighed down the United States
in the
late 1920s and early 1930s. With this large wash of
history in
mind, he is able to explain why he thinks we have a long
to go to get to the bottom of this bear market.

Here is an excerpt from the EWI
Independent Investor eBook
, which answers the
How close to the bottom are we?
* * * * *
Originally written by Robert Prechter for The Elliott Wave
Theorist, January

Some people contact us and say, “People are more
than I have ever seen them. This has to be a bottom.”
first half of this statement may well be true for many
observers. If one has been in the market for less than
14 years,
one has never seen people this bearish. But market
over those years was a historical anomaly. The annual
payout from stocks reached its lowest level ever: less
than half
the previous record. The P/E ratio reached its highest
ever: double the previous record. The price-to-book
value ratio
went into the stratosphere, as did the ratio between
bond yields and the same corporations’ stock dividend

During nine and a half of those years, from October
1998 to
March 2008, optimism dominated so consistently that
bulls outnumbered
bears among advisors (per the Investors Intelligence
polls) for
481 out of 490 weeks. Investors got so used to this
period of
euphoria and financial excess that they have taken it as

With that period as a benchmark, the moderate slippage
in optimism
since 2007 does appear as a severe change. But observe a
irony: When commentators agree that investors are too
they say so to justify being bullish. Thus, as
of the crowd, they are still seeking rationalizations
for their
continued optimism, and one of their best
excuses is
that everyone else is bearish. This would be reasoning,
not rationalization,
if it were true.

But is the net reduction in optimism since 2000/2007 in
enough to indicate a market bottom? For the rest of this
we will update the key indicators from Conquer the
so powerfully signaled a historic top in the making.
When we
are finished, you will know whether or not the market is
at bottom.

Economic Results of Major Mood Trends

Figure 1 updates our picture of Supercycle and Grand
periods of prosperity and depression. The top formed in
the past
decade is the biggest since 1720, yet, as you can see,
the decline
so far is small compared to the three that preceded it.
is a lot more room to go on the downside.

Stock Market vs. Divident Yield

Figure 2 updates the Dow’s dividend yield. Over the past nine years,
it has improved nicely, from 1.3 percent to 3.7 percent, near its
level at
previous market tops. If companies’ dividends were to stay
the same, a 50 percent drop in stock prices from here would bring the
yield back into the area where it was at the stock market bottoms of
1949, 1974 and 1982. But of course, dividends will not stay the same.

Companies are cutting dividends and will cut more as the depression
So, the falling stock market is chasing an elusive quarry in the form
of an
attractive dividend yield. This is a downward spiral that will not end
prices get ahead of dividend cuts and the Dow’s dividend yield goes
that of 1932, which was 17 percent (or until dividends fall so close
to zero
that the yield is meaningless).

the whole story about how much farther we have to go to a bear-market
by reading the rest of this article from EWI's
Investor eBook. The fastest way to read it AND the six new chapters
in EWI's
Independent Investor eBook
is to become a member of Club EWI.

article, The
Bear Market and Depression: How Close to the Bottom?
syndicated by Elliott Wave International. EWI
is the world's largest market forecasting firm. Its
of full-time analysts lead by Chartered Market
Technician Robert
provides 24-hour-a-day market analysis
to institutional
and private investors around the world.