"I think we're getting ready for another leg on the downside," Prechter says, citing evidence of what he says are extreme levels of optimism, including:He doesn't think we'll hit the finally before 5-7 years from now, which I agree with, given my studies of the Great Depression.
— The most-recent AAII poll shows bearish sentiment at 24%, less than at the Dow's peak in October 2007.
— Mutual fund cash positions being at record lows, which Prechter says should be taken at "face value" rather than the result of massive redemptions from equity mutual funds.
— The TRIN Index (a breadth indicator) at one of its lowest levels in recent years, indicating extreme buying pressure of stocks at 52-week highs, i.e. investors chasing momentum/performance.
Finally, he believes that the Dow will reach 2000 near the bottom.