Robert Prechter
Encyclopedia
Robert R. Prechter, Jr. is an American
author
and stock market analyst, known for his financial forecasts using the Elliott wave principle
. Prechter is an author and co-author of 14 books, and editor of 2 books , his book Conquer the Crash is a New York Times bestseller. He also has published monthly financial commentary in the newsletter The Elliott Wave Theorist
since 1979, and is the founder of Elliott Wave International and New Classics Library. Prechter served on the board of the Market Technicians Association
for nine years, and as the Association's President in 1990-1991. In recent years Prechter has supported the study of socionomics, a theory about human social behavior.
and graduated with a B.A.
degree in psychology in 1971. His career as an analyst began when he joined Merrill Lynch
as a market technician in 1975, where he learned much about the trade from Merrill's Chief Market Strategist, Robert Farrell (June 1982). There Prechter also learned of Ralph Nelson Elliott
and the Elliott wave principle
and was deeply intrigued:
Prechter has also said, "after I decided to make markets a career, I realized that mass psychology is what they're all about."
His visibility increased further after he won the U.S. Trading Championship in 1984, with a then-record 444% return in a monitored options trading account. He was profiled in many financial and business publications and named "Guru of the Decade" by the Financial News Network
(now CNBC
) for the 1980s.
Prechter has been forecasting a large-scale bear market, as explained in his book Conquer the Crash.
Still, not all the popular exposure to Elliott wave analysis was the result of Prechter's deliberate efforts. In the few years before and after 1987, media coverage inflated Prechter's "guru" status to extremes, including the assertion that his forecasts could single-handedly "cause" the stock market to rise or fall (a proponent of technical analysis
, Prechter considered this absurd). In the months after Black Monday
in October 1987, subscriptions to Prechter's Elliott Wave Theorist surged to some 20,000. That number declined in the early 1990s (as did the subscription levels of most other financial publishers), though "Prechter has done more to popularize and spread Elliott's philosophy than anyone else."
. Prechter coined the term "socionomics" and in 1999 published an exposition of socionomic theory, The Wave Principle of Human Social Behavior.
Since then, the counter-intuitive premise of the socionomic hypothesis—that in contexts of uncertainty, endogenous
processes (not exogenous
causes) create patterns of social behavior—has gained attention in academic journals, books, the popular press, at academic conferences and in research funded by the National Science Foundation
.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
author
Author
An author is broadly defined as "the person who originates or gives existence to anything" and that authorship determines responsibility for what is created. Narrowly defined, an author is the originator of any written work.-Legal significance:...
and stock market analyst, known for his financial forecasts using the Elliott wave principle
Elliott wave principle
The Elliott Wave Principle is a form of technical analysis that some traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective factors...
. Prechter is an author and co-author of 14 books, and editor of 2 books , his book Conquer the Crash is a New York Times bestseller. He also has published monthly financial commentary in the newsletter The Elliott Wave Theorist
The Elliott Wave Theorist
The Elliott Wave Theorist is a monthly newsletter published by Elliott Wave International. The first issue of the Theorist published in April 1976 and has been continuously in print on a subscription basis since May 1979...
since 1979, and is the founder of Elliott Wave International and New Classics Library. Prechter served on the board of the Market Technicians Association
Market Technicians Association
The Market Technicians Association is a non-profit, global, professional organization of Technical Analysts based out of New York City. The MTA seeks to educate the financial community and public, increase the use of Technical Analysis, and maintain standards of expertise and ethics among...
for nine years, and as the Association's President in 1990-1991. In recent years Prechter has supported the study of socionomics, a theory about human social behavior.
Biography
Prechter attended Yale UniversityYale University
Yale University is a private, Ivy League university located in New Haven, Connecticut, United States. Founded in 1701 in the Colony of Connecticut, the university is the third-oldest institution of higher education in the United States...
and graduated with a B.A.
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...
degree in psychology in 1971. His career as an analyst began when he joined Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
as a market technician in 1975, where he learned much about the trade from Merrill's Chief Market Strategist, Robert Farrell (June 1982). There Prechter also learned of Ralph Nelson Elliott
Ralph Nelson Elliott
Ralph Nelson Elliott was an American accountant and author, whose study of stock market data led him to develop the Wave Principle, a form of technical analysis that identifies trends in the financial markets...
and the Elliott wave principle
Elliott wave principle
The Elliott Wave Principle is a form of technical analysis that some traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective factors...
and was deeply intrigued:
So I tracked down R.N. Elliott's original books. They weren't even in the Library of Congress. But I finally dug around in the New York Public Library and found a catalog card listing a copy of them on microfilm and had photocopies made. I was amazed to find that there was a wealth of information that had been lost to Wall Street.
Prechter has also said, "after I decided to make markets a career, I realized that mass psychology is what they're all about."
Prominence
In 1979 Prechter left Merrill Lynch and published the first subscription issue of the Elliott Wave Theorist. The 1970s had been very bullish years in the gold market but mostly bearish for stocks, yet his Elliott wave analysis called for a long-term reversal lower in gold (February 1980) and a long-term "super bull market underway" in stocks (October 1982). Because these forecasts proved mostly correct—especially for the stock indexes—Prechter's following grew.His visibility increased further after he won the U.S. Trading Championship in 1984, with a then-record 444% return in a monitored options trading account. He was profiled in many financial and business publications and named "Guru of the Decade" by the Financial News Network
Financial News Network
The Financial News Network was a television network that operated throughout the United States during the 1980s.-Founding:Financial News Network was founded in 1981 by two men: Rodney Buchser, who had been general manager of KWHY, Channel 22 in Los Angeles and Glenn Taylor. The concept originated...
(now CNBC
CNBC
CNBC is a satellite and cable television business news channel in the U.S., owned and operated by NBCUniversal. The network and its international spinoffs cover business headlines and provide live coverage of financial markets. The combined reach of CNBC and its siblings is 390 million viewers...
) for the 1980s.
Prechter has been forecasting a large-scale bear market, as explained in his book Conquer the Crash.
Re-introduces Elliott
Much of Prechter's career as a publisher includes his efforts to re-introduce R.N. Elliott's wave principle to investors. He compiled and republished all of Elliott's available writings, including the 1938 "Wave Principle," and the "Interpretive" and "Forecast" letters (1938–1946). Prechter also published a brief biography of Elliott and the collected Elliott wave writings of the few technicians who practiced wave analysis in the 1950s and 1960s (Charles Collins, Hamilton Bolton, A.J. Frost, Richard Russell).Still, not all the popular exposure to Elliott wave analysis was the result of Prechter's deliberate efforts. In the few years before and after 1987, media coverage inflated Prechter's "guru" status to extremes, including the assertion that his forecasts could single-handedly "cause" the stock market to rise or fall (a proponent of technical analysis
Technical analysis
In finance, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands...
, Prechter considered this absurd). In the months after Black Monday
Black Monday (1987)
In finance, Black Monday refers to Monday October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin...
in October 1987, subscriptions to Prechter's Elliott Wave Theorist surged to some 20,000. That number declined in the early 1990s (as did the subscription levels of most other financial publishers), though "Prechter has done more to popularize and spread Elliott's philosophy than anyone else."
Socionomics
In 1979, Prechter postulated that social mood drives financial, macroeconomic and political behavior, in contrast to the conventional notion that such events drive social mood. His description of social mood as the driver of cultural trends reached a national audience in a 1985 cover article in Barron'sBarron's Magazine
Barron's is an American weekly newspaper covering U.S. financial information, market developments, and relevant statistics. Each issue provides a wrap-up of the previous week's market activity, news reports, and an informative outlook on the week to come....
. Prechter coined the term "socionomics" and in 1999 published an exposition of socionomic theory, The Wave Principle of Human Social Behavior.
Since then, the counter-intuitive premise of the socionomic hypothesis—that in contexts of uncertainty, endogenous
Endogenous
Endogenous substances are those that originate from within an organism, tissue, or cell. Endogenous retroviruses are caused by ancient infections of germ cells in humans, mammals and other vertebrates...
processes (not exogenous
Exogenous
Exogenous refers to an action or object coming from outside a system. It is the opposite of endogenous, something generated from within the system....
causes) create patterns of social behavior—has gained attention in academic journals, books, the popular press, at academic conferences and in research funded by the National Science Foundation
National Science Foundation
The National Science Foundation is a United States government agency that supports fundamental research and education in all the non-medical fields of science and engineering. Its medical counterpart is the National Institutes of Health...
.
Criticism
While Prechter has his admirers, he has been criticized by media and pundits for his long term record. For example, The Wall Street Journal ran a page one article in August 1993 with the headline, "Robert Prechter sees his 3600 on the Dow – But 6 years late," in reference to Prechter's 1987 forecast for the Dow Jones Industrial Average. Technical analyst David Aronson wrote:The Elliott Wave Principle, as popularly practiced, is not a legitimate theory, but a story, and a compelling one that is eloquently told by Robert Prechter. The account is especially persuasive because EWP has the seemingly remarkable ability to fit any segment of market history down to its most minute fluctuations. I contend this is made possible by the method's loosely defined rules and the ability to postulate a large number of nested waves of varying magnitude. This gives the Elliott analyst the same freedom and flexibility that allowed pre-CopernicanCopernican RevolutionThe Copernican Revolution refers to the paradigm shift away from the Ptolemaic model of the heavens, which postulated the Earth at the center of the galaxy, towards the heliocentric model with the Sun at the center of our Solar System...
astronomers to explain all observed planet movements even though their underlying theory of an Earth-centered universe was wrong.