Robert Prechter, Elliott Wave International Feb. 24 (Bloomberg) -- Elliott Wave International Inc.’s Robert Prechter, who advised shorting U.S. stocks three months before the bear market began, said investors should end that bet after the Standard & Poor’s 500 Index tumbled to a 12-year low. He warned of a “sharp and scary” rebound for anyone still wagering on a retreat, according to this month’s “Elliott Wave Theorist.” Short selling is the sale of borrowed stock in the hope of profiting by buying the securities later at a lower price and returning them to the shareholder. “This is an environment of escalating financial chaos,” wrote Prechter, famous for cautioning that stocks would crash two weeks before the Black Monday retreat in 1987. “Our main job is to keep the money we have. If we exit now, we will do that.” The S&P 500 has sunk 52 percent since its October 2007 record as financial firms worldwide posted $1.11 trillion in credit-related losses and the U.S., Europe and Japan fell into the first simultaneous recessions since World War II. In July 2007, Prechter advised shorting U.S. stocks, saying “aggressive speculators should return to a fully leveraged short position.”

Dominic Frisby, Commodity Watch Radio Could we see a buying opportunity? It is a characteristic of bull markets that sell-offs are short, sharp, violent and bigger-than-expected – so much so that people question whether the bull market is still intact. The same applies to bear markets, only in reverse. You get these sudden, short-covering spikes up as traders who've been betting on falls rush to cover their positions. These spikes – if timed well – can be good money-making opportunities for those who have the spare cash to dabble in short-term trades. I think we could be reaching one such opportunity – and it could come as soon as Thursday. Here's why... Here is a long-term, log chart of the S&P. As you can see by the red trend lines, there is a clear, long-term channel in place. We have come back to the lower line of the channel. That is, technically, a likely place to find a bottom.   As trader Michael Hampton of Global Edge Investors observes, what is interesting is that we have also retraced to the levels of late 1996 when the S&P broke out above that long-term channel. The markets have come back to 'revisit the scene of the crime'. What crime though? What happened in late 1996? Well, it's worth noting that this break-out came just a month before Alan Greenspan's famous 'irrational exuberance' speech of December 5th, 1996, when he said: "How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy? We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability. Indeed, the sharp stock market break of 1987 had few negative consequences for the economy." Despite the warning in that speech, Greenspan did nothing to rein in credit growth – the credit growth which resulted in the greatest debt bubble of all time, the consequences of which we are all now suffering. And in fact, that break-out above the long-term trend-line marked the beginning of the era when the banks began to outperform the general markets – the era of cheap credit – an era which ended on February 26th 2007, when the banks began to underperform. It was the era of monetary irresponsibility. The stock markets have now lost all the gains that were made. So that's one reason to expect a bounce - we are at a nice technical level at which to find a low. Why else should it come now? Well, bearish sentiment is now overwhelming and everywhere. It has flooded the mainstream. One example came yesterday when Max Hastings wrote in the Daily Mail: "The stability and political fabric of entire societies are imperiled by the meltdown of capitalism's institutions". Sentiment doesn't get much more bearish than that.