I recently interviewed Prechter, who released a ground-breaking book, “The Socionomic Theory of Finance,” at the end of December. In the 813-page book, which took 13 years to write, he proposes a cohesive model that takes into account trends in sociology, psychology, politics, economics and finance. I highly recommend the book.
As I’ve explained here, Elliott Wave theory says public sentiment and mass psychology move in five waves within a primary trend, and three waves in a counter-trend. Once a five, or V, wave move (the waves are sometimes described in Roman numerals) in public sentiment is completed, it is time for the subconscious sentiment of the public to shift in the opposite direction, which is simply a natural cause of events in the human psyche, and not the operative effect from some form of “news.”
As one reviewer on Amazon wrote about Prechter’s new book: “This [cohesive] approach allows a measure of prediction on the basis that social mood fluctuates in fractal waves, and knowledge of them allows one ‘to achieve some measure of success in forecasting the direction, extremity and character of financial, social, political, cultural and economic trends.’ ”
Here’s an edited version of the interview, in which Prechter gives his outlook for the U.S. stock market, the general theory of Elliott Wave analysis and his new projects.
Avi Gilburt: You’ve said that, once the stock market tops, you expect a major bear market and economic contraction to take hold. What is your general timing for this to occur?