Does the sharp drop in the Dow Jones Industrial Average signify the start (or resumption) of the Great Bear Market that started in 2000-2001? Or perhaps just a plain cyclical bear market for 2007-08? What do the great bears over at Elliott Wave International say? Or are they singing a different tune (they are independent thinkers if nothing else). Importantly, can you make money off this market in this new mood?

We have written about Elliott Wave, Elliott Wave Theorist and Robert Prechter at length in various articles. As mentioned before, Robert Prechter has been looking for a giant bear market to start for quite some time now - but the markets have marched to the beats of different drummer. But there is one powerful lesson that is easy to ignore in all this - and those are the Elliott waves themselves.

During the period between 2000-2002, when the bear market was taking down the S&P 500 by 40%+, the NASDAQ by 60% and Dow by 30% - the Elliott Wave Analysis done at EWI was on the money. Their subscribers were making money while the bear was growling. This is because their overarching theory of a bear market and the Elliott Wave analysis done by their team finally lined up with the actual market mood - and the result was incredible accuracy in many of their predictions. Not only was that hugely profitable, but was so remarkable that it can make you want to forego all other predictive tools!

But of course there is a catch in Elliott Wave Analysis - it is not such a great tool in predicting counter-trend moves. And alas, that was exactly what happened when the cyclical bull was born in October of 2002 and led the markets to new highs. But with the current drop in the Dow, especially the rapid and sudden nature of it, seems to indicate a shift in the mood of the market once again - and this would be an excellent time to subscribe to the services of Elliott Wave Financial Forecast and the Elliott Wave Theorist (where in a recent issue, Robert Prechter talks about the confluence of factors leading to the current move).

You can say that we are fans of the work done at Elliott Wave International, but we find it profitable only when their overall theme and that of the markets begins coinciding. Now is one such juncture.

Incidentally, if you are a currency speculator, EWI has a free-week starting on March 1 through March 8 for their currency related publication.