Alessio Rastani interviews Bob Prechter of Elliott Wave International on the likelihood of a major stock market top in 2026–2027
Alessio Rastani interviews Bob Prechter, founder of Elliott Wave International, on the timing and severity of the next major stock market top and bear market.
Summary
Alessio Rastani interviews Bob Prechter, founder of Elliott Wave International and one of the world's leading authorities on Elliott Wave theory and technical analysis. Prechter argues that the stock market is in the final stages of a multi-decade bull market that stretches back to the 19th century, and that a top is likely by the end of 2026 or into 2027. He presents multiple converging indicators — including a 26-year cycle, Fibonacci-based price multiples on the Dow, and extreme sentiment and leverage readings — all pointing to the same conclusion. Prechter states that the coming bear market will be far worse than the dot-com crash, which saw the Nasdaq fall approximately 80%, because current overvaluation, leverage, and public participation are historically unprecedented by multiples. Rastani adds his own analysis, noting that the Benner cycle independently projects a top by end of 2026, and that while he remains open to further upside into year-end, he agrees with Prechter's long-term bearish outlook.
Key Takeaways
FULL TRANSCRIPT
Introduction and context
Alessio Rastani: All right, guys, hello and welcome. We're honored to have Bob Prechter of Elliott Wave International as a very special guest. Is it possible or probable that the stock market could potentially top this year? We already know that the Benner cycle forecasts a top by the end of this year in 2026. But are there other things besides the Benner cycle which potentially indicate a likely top in the stock market — if not this year, going to the end of the year in 2027? We'll discuss this with Bob Prechter, who, as I'm sure you know, is by far one of the world's leading experts on Elliott Waves as well as technical analysis.
Bob, thank you very much indeed for giving me the opportunity to speak with you again about the stock market. He's the author of some of the leading works, some of the best works on technical analysis. I think one of Bob's most important works is The Socionomic Theory of Finance — I suggest you definitely get that book and read it. It will change the way you think and see the markets.
Some of you may remember that last year, when the stock market collapsed, I said the S&P could likely rally to 7,200, which it did. And also in September of last year, I put out a video saying that the S&P could go to 7,446. So this particular wave count has now gained a much higher probability based on the data we've looked at. This has significantly increased the likelihood that the market could make new highs in the next several months.
I've actually plotted and pointed out the levels quite clearly on this chart. I'm looking for the market, in the next several months and likely potentially by the end of this year, to move to the first target. We consider this wave five extending much higher to over the 7,000 level — that's over the 12-month period, which could take us eventually to 7,278. And I think the third important target the S&P could reach would be the level that Manuel is showing here at 7,446 by next year, again in the next 6 to 12 months. So that is the level I'm looking at right now as an important price objective and target for the market.
Has Prechter been too bearish?
Bob, one of the criticisms I get — or responses I get on YouTube from people — is that Bob Prechter is too bearish or is always bearish. Would you say that's fair, or what would your response be to that?
Bob Prechter: Well, my first response is: they're right. I've been bearish for quite a long time. I got bullish in the first quarter of 2016 and stayed that way until late 2017, 2018, when we got extremely stretched on the upside again. And if you know your history of the stock market, from January 2018 until March 2020 — which is more than two years — it net lost ground.
But part of the problem for me has been that the overpricing, the extreme optimism and so forth, has dwarfed everything that we've ever recorded — not just by a little bit, but by multiples from past peaks like 1929 and 1968. Those were virtually nothing compared to what we've been seeing for the last 15 years.
Yeah, I've been too bearish. But I also think it would have been foolish to be long the stock market, and I still think it's foolish to be long the stock market. On the other hand, I've got a history of being very bullish as well. Back in the late '70s and through the '80s, I was bullish at a time when it looked like stocks were cheap and everybody was afraid — they were all in Treasury bills. "No, we don't want to gamble in the stock market." Well, that's the kind of opportunity that I like. We haven't seen any decent opportunities like that. I also turned bullish within, I think, nine days of the bottom in March of 2009. But I think we were back up like a 50% retracement and I said, "Okay, that's about enough."
So yes, I've definitely been too bearish in the last number of years because of the historical overvaluation. What I think is going to happen is that the bear market is going to be unprecedented. It's going to have to undo all of the overvaluation, and mostly undo all of the debt pyramiding that's going on. There's record margin debt, but there's leverage in other ways too. You can buy ETFs that are two and three times leveraged. The big players are borrowing money overnight so they can gamble on virtually a dollar on the penny. So the amount of leverage is off the charts. It's going to be an unbelievable event when things finally turn.
If I had it to do over again, would I do something different? I don't think so. Because when you see ridiculous overvaluations — I mean, if you were bearish on Bitcoin when it crossed $50,000, were you a fool? You missed a doubling, more than a doubling. But at the same time, it was insanely overpriced at that time. Well, now we're back to that level. I think people are going to look back at some point later in this year and say, "Oh, I guess I see what they were talking about." Because the leverage is going to unwind on the downside far faster than it built up on the upside. Anyway, we're going to look at some charts and I'm going to let your people make up their own mind.
The Benner cycle and the 26-year cycle
Alessio Rastani: So I want to go to our first chart here, Bob. For those of you not familiar with this cycle — the Benner cycle — it was devised by a man called Samuel Benner. In the year 1875, he devised this cycle and projected, essentially based on it, major tops and bottoms and minor cycle tops and bottoms, as you can see there. It's something I do pay attention to, not as a buy signal or a sell signal by any means. What I want to focus on is the fact that the Benner cycle projected a likely top by the end of the year 2026. And by the way, for people watching, these dates or years do not mean the beginning of the years — they mean the end of those years. So that 2026 means Benner was, according to the cycle, potentially seeing a top by the end of the year 2026.
This is interesting because it actually correlates with your own work, Bob. You're seeing a potential wave five top — in other words, the wave five of a bull market that started not just in 2009, even though we are looking at one, but also — and this is where I think most people will probably find this very shocking — you're also seeing the end of a multi-decade bull market that started way back, even before the Great Depression, going back to the 19th century, the 1800s.
So if we go all the way back to the 1800s, the multi-decade bull market that has been going on — you're seeing a potential wave five top occurring perhaps by the end of this year, again going with the Benner cycle, and even if not this year, perhaps stretching to 2027. The bottom line is that according to the way you're seeing things, Bob, we could likely see some kind of a top maybe by the end of this year going to next year 2026 — the wave five of this bull market, as we can see there, the Great Depression and so on — and then a bear market lasting decades, to 2035, the 2040s. We'll talk about that. Would I be correct more or less? Is this more or less what you're seeing?
Bob Prechter: Now, this is kind of a casual observation — it's not anything you'd want to etch in stone — but I noticed that the 26-year span has been pretty good at marking turns ever since the depression of 1896. And what's interesting is that it points to the same year that your Benner chart points to, which is 2026.
You can see on the bottom left we had 25 years between the depression bottom of 1896 and the deep recession — it's like a great recession — of 1921. And there was 27 years to 1948. This may not look like a big deal, but it's a very big deal, because in terms of the S&P PPI ratio, this was the end of the bear market period from 1929. It's called a triangle under Elliott's terminology — not on this chart, but when you adjust it for PPI. So that was a deep low; people were extremely bearish. Then 26 years later was the next deepest low: 1974. Then 26 years after that was the 2000 peak. And then — are we switching from bottom to top, and now from top to top? I guess we'll find out. But 26 years from there gives you 2026. So I thought it's worth showing.
Alessio Rastani: Yeah, Bob, that's a really fascinating chart. Basically, what that 26-year cycle is pointing to is a potential top in the S&P — in the stock market — sometime by the end of this year.
Fibonacci price targets and the Dow
I think you also had another chart which was interesting.
Bob Prechter: Yeah, this is the price chart that I wanted to connect to the 2026 time chart. Here we see the main waves, at least as I'm counting them — it's one way to count them anyway — from 1932. I noticed long ago that the multiple from the 1932 low to the 1937 high was 5/3 to the third power. So you take the low, multiply by 5/3 to the third power, and you get to the top. Why that? Because it's a Fibonacci ratio — it's 1.618 but expressed in fractions. In this case, 5/3, which is 1.666 and so on.
And then from that low, the wave three high was an 8/5 to the fifth power multiple of the 1942 low. So I thought: okay, if those are true, maybe we should be looking for a multiple for the final high in this giant wave five. And we just got to an interesting spot this month, July. The rise from the orthodox end of the bear market in August 1982 at 776.92 on the Dow, times 8/5 to the ninth power, gives you 53,000 and change. And we just stopped at 53,000 and change — or at least we hit 53,000 and change. Whether we topped there, time will tell. But I think this is a good spot to be looking for the beginning of a bear market. And I think there are countless technical reasons to believe that. The extremities are so great that I'm taking this one to heart.
Alessio Rastani: Yes, very interesting. I like the way you think there — it's very methodical. And what you're pointing out is a potential top on the Dow at about 53,389. Is that correct?
Bob Prechter: Yeah, and so far the intraday high is only 100 points below that. The closing high was 53,055.91, as you can see up there in the upper right. The previous two actually had lead waves of 2%. This one is very close at 0.6%.
Alessio Rastani: Elliott waves are based on fractals, or fractal geometry, which occurs in nature. You see fractals out there in nature — like the leaves of a tree, where you get self-similarity, or similar things happening on different scales. The leaves of a tree are a good example, but there are others too, like the respiratory system in the body, where you see self-similarity on multiple different scales. And that's essentially what Elliott waves represent — these fractals where you've got waves within waves within waves. Very interesting.
S&P trend line resistance and signs of a slowdown
Bob Prechter: I think we've got a possible trend line resistance going all the way back to 2024. And interestingly, the market managed to get through there in May and June a couple of times. But in July, it's bumping and bumping and bumping. Meanwhile, the Dow Jones Composite Index made a new all-time high on the 16th of July, but the S&P didn't do it and the Nasdaq didn't do it. And I think they're breaking down. We'll see.
Rastani's near-term view versus long-term agreement
Alessio Rastani: My personal view on the stock market and the S&P is that there are some indications that the stock market could potentially push further higher this year despite any correction. There may be a pullback of some sort in the short term in the next several weeks or months. But because the NYSE advance-decline line has not shown any divergences — it's still going higher, it made new highs — that's still keeping me relatively bullish on the market for the end of the year. But I'm willing to change my mind if, for example, the market were to drop below a key support level.
Don't get me wrong — I'm on the same page with you about the long-term outlook for the stock market, Bob. I think you're correct. The Benner cycle as well as your work both indicate a likely top coming in the stock market by the end of this year, perhaps stretching even to 2027. I'm just saying that between now and the end of the year, December, I still think there is potential for more upside despite any short-term corrections and pullbacks. I'm not ruling out the possibility of new highs perhaps by the end of the year. What do you say about that, Bob?
Bob Prechter: Advance-decline figures, to me, were the very best indicator in the stock market through all of my career — until they went to decimal pricing. And then all the indicators that I used that were breadth-based started to act differently. TRIN is a great example — the trading index, which is the AD divided by the upside-downside volume ratio. That was incredibly reliable for telling you the underlying buying pressure in the market on an intraday basis, daily basis, and on a moving average basis. It was a great indicator. One of the things that helped me call the top in early October 1987 was an overbought TRIN. Ever since they went to decimal pricing, it just stopped working. I hardly look at it anymore. Sometimes it goes the opposite of the way it used to go. The market will be screaming on the upside and TRIN will be like 250 instead of 0.25, and vice versa. It just doesn't work anymore.
The other thing is, if the market has been parabolic — which I think is true for many of the individual stocks and some of the indexes like the SOX index, the semiconductor index —
Alessio Rastani: Yeah, true.
Bob Prechter: — parabolas just stop. And when they reverse, it's over. So I think that all that mania and enthusiasm for the various tech stocks especially, but some other areas as well, has been pushing the whole mindset up in a parabolic way. And I think it's already slowed to the point where warning signals are flashing, because a parabola can't slow down — if it slows down, it means it's reversing. So I think we're somewhere between the slowdown and the reversal, depending on which index you look at.
The day we have serious downside AD ratio — 9:1, 10:1 on the downside — that's going to tell you that the whole rotation game is over and a bear market is definitely here. So keep an eye out for that. Until then, you're right, it could float if it wants. I am currently as bearish as I can possibly be. I wouldn't want to be long waiting for any new highs — it wouldn't even cross my mind. So we'll see. We had similar talk about Bitcoin back in 2014 and you were right, it edged up higher for another number of months. So we'll see how this one turns out.
The severity of the coming bear market
Alessio Rastani: And just one last point to finish: if we enter a bear market by, let's say, the end of this year, that bear market could potentially be — I think in your view — as devastating as the dot-com crash that occurred on the Nasdaq, which is about 80%.
Bob Prechter: It'll be way worse than that. We're so much more overvalued, so much crazier. The amount of investing done by the public, especially on leverage, is insane. The number of puts and calls traded is the highest ever, especially on the call side. We have record foreign buying — they've now committed a trillion dollars in the past year to the stock market, bringing their total to $20 trillion. And you can track foreign buying going back 50 years, and every time the stock market nears a top, the foreigners rush in. And now they're rushing in at a record rate. Every indicator we have — we could have spent today showing 50 sentiment indicators and how extreme they are historically. They're all just crazily overdone. So when the turn happens, it's going to be stunning. It's going to make the downturn in Bitcoin look like nothing.
Alessio Rastani: True. Yeah, I absolutely —
Bob Prechter: My view. Take it or leave it. I've had that view for a while.
Alessio Rastani: Yeah. Thanks, Bob. I really appreciate it. It's always great to have you in these videos.