Dow Could Hit 1,000: Elliot Wave's Prechter

Longtime technical analyst Robert Prechter said Tuesday he expects that the US economy will sink into a deflationary depression and stocks will plunge. The Dow Jones industrial average could fall to 1,000 sometime in the next seven years

The Dow Jones industrial average stock index could fall to between about 1,000 and 3,000 points over the next five to seven years, he said in a telephone interview. The Dow unofficially closed at 9,744 Tuesday, up 0.59 percent.

"It is very clear there is substantial stock market risk," said Prechter, who urges investors to put their money in cash proxies such as safe-haven U.S. Treasury bills instead.

Prechter is known for his very bearish views on the economy, which many market strategists consider too pessimistic.

But he is also known for forecasting a big bull market in stocks in 1982 and for getting out before the 1987 market crash.

Critics say Prechter has made some forecasts too early.

In a 2002 book, he recommended investors move the bulk of their investment funds into the safest cash equivalents. But those who did so then would have missed out on five years of stock market gains.

However, those who shifted into cash just ahead of US stocks' October 2007 peak would have protected their investments from a big drop until March 2009.

Dollar Seen Under Near-Term Pressure

Over the near term, the dollar will remain under pressure against the euro and against the safe-haven Swiss franc, Prechter said.

In early June, he said the euro was about to embark on a near-term rebound of about 10 percent over two or three months because technical indicators showed that amid the euro zone sovereign debt crisis, investors had become overly bearish on the currency.

Prechter reiterated that forecast on Tuesday, saying the euro will continue firming for about another two months, until it has gained about 10 percent, which would put it at about $1.30.

In the past month, the euro has gained about 6 percent against the dollar. Late Tuesday, the euro [EUR=X 1.2588 -0.0037 (-0.29%) ] was trading around $1.2618