...and A Bet for Stock Bears

01/07/2005 12:00 am EST

Focus:

Steven Hochberg

Chief Market Analyst, Elliott Wave International

Steven Hochberg, associate of Bob Prechter , is known for the intriguing and rather esoteric field of study known as Elliott Wave Theory, which combines mathematics, psychology, and socio-economics. With this background, he offers his top play for 2005.

"The best place for the bulk of one's investment dollars in 2005 should be cash, or safe cash equivalents, such as short-term US Treasury Bills, as the secular bear market for equities that started in 2000 should resume with a vengeance. For those with capital to risk, a stellar opportunity appears to be at hand establishing a short position in small-cap stocks .

"Specifically we suggest shorting the iShares S&P Smallcap 600 index (IJR ASE), an exchange traded fund. The Small Cap index is completing a near-textbook Elliott wave from the October 2002 low of 84.00. A few more near-term subdivisions should complete the entire two-year rally and lead to the largest decline in the nine-year history of the index. Intermediate-to-long-term time cycles point lower through at least 2006 for small cap shares."

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