(Semiot) Interesting Favors piece... not necessarily correct... but if you want to take your portfolio from 6 digits to 7, from 7 to 8, or in Crystal Ball's case from 9 digits to 10, you have the next several months to do it... then cash out or go short/put...
Jerry Favors Calls for Strong Rallies, More Volatility Throughout the Summer Months; Markets Won't Top Until Autumn (at the earliest);
DJIA to Reach a Minimum of 12,000, possibly up to 14,000; Bear Market in the Forecast
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StockHouse.com previously interviewed Jerry Favors, this past February, when he predicted the DJIA would run past 11,000 before correcting in early April.
The correction came a few weeks later. Now, Mr. Favors is forecasting a strong market rally with the possibility of an equally strong market crash. Mr. Favors
uses Wave Theory, among other technical tools, as discussed in his previous StockHouse.com interview. This StockHouse.com interview was taped on June
4th.
You may wish to click here to read the previous Jerry Favors interview: stockhouse.com
• • •
StockHouse: How does the market look right now?
Jerry Favors: I think it looks very good. I think next week will be a good week for the most part. I think we should see some sort of pullback early in the week, but after
that we look for much higher prices. I think the Dow is going to zoom higher from here. It won't be the same kind of market that we've seen for the last few months. I mean
it's been pretty much straight up without much in the way of pullbacks for the last couple of months, but I think that has changed because of the wave structure. We still
look for new highs and we look for new highs later in the year.
StockHouse: Is there going to be a late summer washout as many suspect?
Jerry Favors: We saw a pretty good washout already, especially in the Internet stocks. What I would expect from here is no major decline, but a lot more corrections than
we've seen for most of the year. We would expect, from here, relative new highs, then another correction from there, then a rash of new highs, and corrections from there.
So corrections will become more prominent. We'll see more corrections from here on than we've seen for most of the year. There just won't be anything major. We don't
think we'll see anything, like a 10% decline, or anything like that, until the market peaks out, sometime in the fall, probably of this year.
StockHouse: Such as in another Bad October?
Jerry Favors: We keep what's called (George) Lindsey's standard time span. Where we are today calls for higher prices, at the very least until the fall of this year. Now it
could be, whether it be September or October, I don't really know that. But, they've called for higher prices until that time frame. We don't think there's going to be any
major top in the Dow until then. I'm just not sure which month it's going to be yet. The important thing for us here, is that we're still looking for higher prices throughout most
of the year.
StockHouse: Does this mean both the Dow Jones and NASDAQ?
Jerry Favors: Yes, we're talking both Dow Jones and NASDAQ. The NASDAQ may very well pick up before the Dow, but they'll all go up significantly between here and
the fall of this year. I think there's a very good chance of the Dow seeing the 14,000 area before the year is out. From an Elliott (Wave) standpoint, we're still in Wave Three.
We passed in early May or mid-May the peak of 3 of 3. We're talking about a primary move upward from last year's lows and it's five waves up from there. The peak of 3 of
3 was at the high we just passed, but that still means we have to see a final peak of Wave 5 of 3. Then, we can see a Wave 4 correction. Then, a final Wave 5 rally and a
new high. That could take months to complete.
StockHouse: Is the September, October, November decline really an opportunity for investors to catch the bottom and load up?
Jerry Favors: I don't want to appear too pessimistic here, but I think when that top comes, later this year, I wouldn't be buying anything. I would be 100% out of stocks.
StockHouse: At what level would we find this market top?
Jerry Favors: I'd say DJIA 12,000 is the minimum. I think 14,000 is probably more realistic between now and late fall. But when that time comes, I want to be out of stocks
entirely.
StockHouse: Is this decline going to make a new low from the prior year when the market falls?
Jerry Favors: To say that it would take the Dow to a new low for the prior year would be on the optimistic side. I think once this bull market leg is over, we have to start a
bear market from there. For my money, Edson Gould was probably the most accurate market forecaster of his time. His work says that once you're in a bull market and
the bull market ends, the bear market would normally last just about one-third of the time of the bull market. If we take this bull market from 1982 to 1999 - or however long
it lasts….
StockHouse: A six-year bear market?
Jerry Favors: Yes. Now it doesn't mean the market's going to go down for that long. What happens is, you'll have a big decline that may last for a year, or something in
that area. The new rally, which doesn't take the Dow to new highs - and then you turn down again. Then, another rally, which gets everybody excited; then (the markets)
turn down to new lows from there. Even though, it could last that period of time, it won't be straight down (for) that whole period of time. Now, if you look at all the other
long-term bull markets and you take that same one-third relationship, it works phenomenally well. We've taken it back a long time. That's why we're convinced this is a
phenomenon that is real and that takes place. If you also consider that whenever this bear market starts - maybe it's next year, I don't know, but whenever it starts - it has
to wipe out the excesses of the entire bull market.
StockHouse: How much of a wipeout are we looking at?
Jerry Favors: How much excess do we have? A lot. Let's put it this way: Whenever the high comes - whether it's late this year or early next year - and it could be
according to our standard time span, we cannot see a high before the fall of this year - a final top - but we see that the bull market could last into even early next year,
before we see any major top. But, whatever that top is, we have to move out of stocks until we see some reason to move back in. It's already lasted a lot longer than I
believed it would, years ago. I never believed it would last this long. It's interesting - the same thing happened in the 1921 to 1929 period. That bull market kept going up
year after year after year throughout that whole period, with no bear market - just very sharp corrections, for two or three months - and then right back up to new highs
again. It actually caused people to believe that every correction was a buying opportunity. Now, this is worse than that. It's lasted longer, much longer. The Dow has gone
higher, and every time you've had a correction - every serious correction - people were right there to start buying again.
StockHouse: It's a little confusing. Are you saying that a big fall is slated for September through November?
Jerry Favors: No, I'm not saying I'm looking for a fall (decline). I'm saying that no top could occur in the Dow, before the fall (autumn) of this year. Now, perhaps the top is
in September or October. I don't know that. It's too early for me to tell that, because every move has to fit into a certain time span and this particular time span could not
end before the fall of this year. As far as I'm concerned, any correction is just going to be a buying opportunity until the fall (autumn). During the fall (autumn) - if all the
other pieces have come together and we're convinced that we've seen the top - certainly I would exit stocks. Period. I think whenever the top comes - whether its' the fall of
this year or early next year, it could be early next year - I would want to be out of stocks 100%. I will be able to be more precise, as time goes by, and we get projections,
and I see the wave structure unfold, but right now I cannot pinpoint when the high is coming. All I can tell you is that we should see a high (market peak) before the fall of
this year.
StockHouse: Just for the summer, for June, July and August, what do you foresee?
Jerry Favors: We had a cycle low, which was due on June 2nd, plus or minus one day, and then our cycle calls for a rally into June 21st, plus or minus one day. Then,
another correction, which may last until June 25th, or sometime in that range. Then another rally from there. We look for higher prices throughout the summer. It's just that
the corrections, from here, will be more frequent than we've seen most of the year.
StockHouse: So, strong corrections mean buying opportunities, for now?
Jerry Favors: Exactly. I think that's going to be the case for most of the year, until at least the fall (autumn).
StockHouse: Where do you think the DJIA will trade by Labor Day?
Jerry Favors: I'd rather not say.
StockHouse: Thank you, sir. |
