Every so often we have seen a clear divergence of opinion in wave count. Normally this blog posts the consensus view, but there are those times where there is a sharp difference. About six months ago Neely went bullish when Prechter was confident that the May top was it, in what he sees as a B wave off the 2002/3 bottom. Neely obviously called the market better back then. Over the last few weeks a similar divergence has emerged. Neely sees a strong uptick ahead - he has just gone off prediction for two weeks but his last recommendation was to go long. Prechter has instead been predicting that the big B wave top had happened again, and was recommending to go short or to cash. The STU has been watching a developing head-and-shoulders pattern, and as recently as yesterday saw immediate bearish potential. The market action today has blown that pattern, and in a special STU Hochberg sees more upside ahead - but only for a short time and modest upside. So another divergence.
What both have commented too little on is the rapid rotation out of commodities and cyclicals and back into tech - for the first time since late 98 in a major, broad fashion. (There was rotation back in in Mar 03, but in a selective, modest fashion, not across the board). Telecom stocks reversed their doldrums last March, and now tech is doing the same. This is what has been needed for the S&P to reach new highs. More on tech in a subsequent post.
With oil dropping towards (and likely below) $50, a slight strengthening in real estate (likely just a momentary counter-wave not an end to the downtick, but nonetheless a postponement of a large slowdown in consumer spending), and interest rates still low, we may be in for a delay in any recession, if not a soft landing. Put these together and we have the makings of a bull market extension.
I'm somewhat ashamed to admit I followed Prechter's "Free Week" advice and went short the markets at the July bottom. I became increasingly uncomfortable as the markets rose, but I held on to my shorts thgroughout the rally.
I was reassured that we were crashing, only it was a "silect" crash, and therefore not yet reflected in price.
At this point I have given up on my shorts, and plan to avoid Prechter's advice in the future. I'd feel even worse had I paid for one of his subscriptions.
Posted by: Free Week Reader | Thursday, January 11, 2007 at 08:15 PM
I think that EWI is really selling a fantasy. They suck people into believing that they know the future and that something "really bad" is imminent, something that nobody else knows; pay the fee and YOU TOO can see just how bad! "Congratulations subscribers, you are now part of an elite group who will be prepared for what no one else can even fathom".
Prechter may not be a good market forecaster but he is an absolute marketing genius, on par with PT Barnum and other great showmen of history. And yes, I was gullible enough to buy into the whole fantasy early on. I am just glad I woke up before I lost my entire stake.
Neely on the other hand, has an extreme pride in calling markets but even more pride in making money for subscribers. His trading methods are not based on forecasting but risk management. He provides forecasts because that is what people want but will often trade against his forecasts if the trading method tells him to do so. I use his trading method too as it is far superior to wave counts which are so often wrong.
In short, if you want to make money, learn from Neely. If you want entertainment, Prechter is your man.
Posted by: EN | Friday, January 12, 2007 at 06:13 AM
Life and Business Wisdom 101
"Beware of the most dangerous person in business -- the articulate incompetent."
http://www.i8b4u.com/wisdom.html
Posted by: Sun Tzu | Friday, January 12, 2007 at 07:46 AM
"Hochberg sees more upside ahead - but only for a short time and modest upside."
What is a short time and what is modest upside? May be another decade or so and may be 200% to 300% on the Dow?
Posted by: rdneu56 | Friday, January 12, 2007 at 08:44 AM
"In short, if you want to make money, learn from Neely. If you want entertainment, Prechter is your man."
Are you a moron? If you want to make money "FOLLOW THE TREND"!!! That's what idiots like Neely are trying to do while dressing it up with E-wave bullshit. Wake up, that's how it's done.
If you can't follow the trend you will NEVER make the big money. Mathematically proven.
Posted by: RogueTrader | Friday, January 12, 2007 at 09:49 AM
HA HA! Call me crazy. But FINALLY I agree with Prechter. The market is forming a top, probably a cyclical top! The funny thing about the market is when he gets this call right, which I predict he will, everyone will think is a correction. Precther has got to be wrong, right? He has been calling for tops for 20 years now. Eventually he has got to be correct. This is the perfect time for him to make a correct call. His credibility is shot. Most people think he should be paying them to read his free week! :) Go ahead pick on me call me a Prechter lover, or an EWI employee or whatever you want. But when the market becomes a bear I will be laughing all the way to the bank. If we are talking only Precther vs Neely, at this moment, I am going with Prechter's view! O God, I can't believe I just said that.
Posted by: cstradingman | Friday, January 12, 2007 at 10:06 AM
No Prechter is not gonna be right quite yet. I would say after about 3 or 4 more top-calling he'll nail the final top.
Bu who cares anymore. His credibility is indeed "shot" ...
Posted by: GeorgeY | Friday, January 12, 2007 at 10:42 AM
CS, What is your target of Top?
I agree that Pretcher will be right one day, just purely from mathematical probability. One can't strike all the time, or miss all the time.
I like Pretcher in the way that he did quite some study into the fundamentals, and looking at the stocks and economy from different perspectives. But lately I am losing my respect for him. He called that the Gold run was a fake back in 2005, for a long time he maintained the view. He also dismissed Dow to be priced in different currency. Now that his predictions were all wrong, he try to salvage by saying Dow is already in Silen Crash since 2000! What a lier! And a Loser!
Neely, though he made good predictions just purely from the technical charts, I did not really take his advice to heart. I do NOT believe that a person can make a long term successful career by just looking at stock charts and ignore doing some fundamental economic analysis. Just remember one thing -- most if not all successful trading method will be obsolete one day, unless you broaden your perspectives.
Posted by: Shawn | Friday, January 12, 2007 at 10:52 AM
By the way, anyone heard latest updates from the CycleMan Tim Wood?
Posted by: Shawn | Friday, January 12, 2007 at 10:52 AM
If Prechter were bullish, I would more inclined believe the top is in. For now, I maintain that the trend is up and will be up until evidence to the contrary comes in.
Posted by: rdneu56 | Friday, January 12, 2007 at 11:12 AM
Shawn.
Nasdaq - 2533
Dow - 12720
I have just started taking some small short positions.
I will start selling short more heavily on strength from here.
I don't want to miss this once and a lifetime chance in case my targets are not reached. It is starting to look like the decline could start as early as next week. We are almost there. We should definitly top this month.
Posted by: cstradingman | Friday, January 12, 2007 at 12:25 PM
rdneu56 said "If Prechter were bullish..."
rdneu56
Prechter turn bullish? I hope somebody by now has told you that crack is bad for you. STOP smoking it!
That guy will be rotting dead in a box before he ever would turn bullish.
:)
CSTRADINGMAN
Posted by: cstradingman | Friday, January 12, 2007 at 12:30 PM
Prechter has made more money for me than I ever thought I'd have. Problem is, I've lost more than that based on his advice. Prechter, a bull or bear.... I first read Prechter in B school in the '70s when there wasn't nary a bear to be found....except Prechter. He called that turn, called the '87 crash but then went wrongly bear. And continues to be wrong. His use of Elliott wave psychology helps him rationalize his counts that are too often wrong. He's too vested in the coming crash to objectively evaluate his own work. But it will happen.
Go back and read Jesse Livermore. If you are relying on Prechter to give you "the solution", you've failed to do your job as a speculator. Or Neely, Tim Wood or Richard Russell for that matter. That isn't Prechter's fault.
Posted by: VJ | Friday, January 12, 2007 at 04:29 PM
Tim Wood said something like---It now looks like the 22week cycle low could be in on the DJ TX and last week marked the 22cy low for the NDX and SOX. And a "good" chance for the other averages. The DJI and S&P are still unconfirmed so we have to wait. He has changed from a month ago. He was a pretty emphatic--The 22 wk cycle low can not be in yet. But then as we all know, markets will make everybody wrong most of the time...
Posted by: Ron | Friday, January 12, 2007 at 04:44 PM
Rogue Trader,
Embedded within trends are retracements of movements that can sometimes be quite profitable to trade as well. That's something idiots like you with your "follow the trend" mentality don't seem to understand. Sure, every Tom, Dick and Harry wants to "follow the trend". Have you ever seen anyone who wants to go "against the trend"? Notice, I'm not saying there aren't people who want to try anticipating a "reversal of the trend" because there obviously are. But, duh, that's because they think a new trend to follow is about to develop. So, everyone, in whatever fashion they dress it up, is trying to "follow the trend" and your comment makes no sense whatsoever.
Anyway, please do me a favor and continue to stay away from Neely's service. The fewer of you raving loons who subscribe, the better off current subscribers will be.
Posted by: DG | Saturday, January 13, 2007 at 07:05 AM
I was once known as the Dow Predator and now I am the Dow Convulser. I convulse every time I see the Dow Jones rally higher and higher.
I am convulsed by the Dow. I am a bigger hack than Prechter.
-The Dow Convulser
Posted by: The Dow Convulser | Sunday, January 14, 2007 at 06:58 AM
Yes the trend is your friend and you should stay with it if there is one but what to do when there is none? Almost a month now and the market has been range bound for the most part. Only short-term traders are making money now. That is when you have to move to smaller time frames and trade the microtrends.
Actually, I will retract my advice to learn from Neely. The less who learn how to trade like him, the better for us who do know how to trade like him.
Posted by: EN | Sunday, January 14, 2007 at 09:45 AM
I believe that the dow will start to head down in the next two days for a nice swing trade. If I get a signal I will be buying puts.
gary
Posted by: gary | Monday, January 15, 2007 at 12:45 PM
I just got this elliott wave ebook last week. It's really good. Check it out.
http://learn.wavegoogle.com
Posted by: Andrea | Monday, January 15, 2007 at 03:10 PM
Rogue Trader
I agree with you that following the trend is he simplest and best strategy. The difficulty arises in the following areas:
0) What markets, asset classes, indexes are you going to trade? (Equities, bonds, US, international, currencies, commodities, real estate, etc)
1) How do you define a trend? (Rate of change, straightline on log or lin chart, slope of a moving average - simple or exponential, etc)
2) How do you determine a trend has changed? (trend line breaks, moving average x-overs, channel breaks, etc)
3) How do you enter and manage positions (e.g. long - cash - short, stops, etc)
I subscribe to a trend-timing service and it worked very well until this summer with 3 whip-sawed trades in a row that cost 18 months of gains). I have tried unsuccessfully to develop my own mechanical system - it's like searching for the grail! Unless a market shows strong trends with plenty of volatility, it is hard to find something that doesn't get totally killed by relatively short periods of whip-saws - the period from Dec 2003 to Dec 2005 where the S&P meandered within a 20% range is a case in point.
Would you share with us an approach you favor?
Posted by: Eventhorizon | Monday, January 15, 2007 at 04:43 PM
Since Rogue Trader called me a "moron", I would be happy to hear how he deals with what you are describing, Eventhorizon.
I know exactly the period you are talking about. It was an expanding environment and I know of no trend following system that would have survived it. The only way to trade in such a trecherous environment is to know it is occuring; for it creats the constant illusion of breakdowns and breakouts that are, in fact, false. It is under such conditions that wave theory can offer hints as to what is coming.
Posted by: EN | Monday, January 15, 2007 at 08:32 PM
Eventhorizon,
I have the same experience with mechanical trading systems. I have examined many. There is no holy grail. There are only trade offs. For instance, you can design systems with extremely high returns, but the equity draw downs of such a system require an intestinal fortitude to ride through that no human being has. Be assured, those that fling about such platitudes as "the trend is your friend," have memorized the garbage printed in popular technical analysis books and have no experience beyond that.
Posted by: rdneu56 | Tuesday, January 16, 2007 at 05:11 AM
The treasury bond market has bottomed. Treasurys should rally from here. Get ready for lower interest rates.
Posted by: cstradingman | Tuesday, January 16, 2007 at 06:38 AM
Holy top in stocks coming! Everyone is panick buying the trannies CONVINCED this bull will resume and the trannies will make a new high to confirm the bull. Ha Ha! This is hilarious. When the market turns down in the next couple weeks buyers will be running for cover!
Posted by: cstradingman | Tuesday, January 16, 2007 at 08:15 AM
"0) What markets, asset classes, indexes are you going to trade? (Equities, bonds, US, international, currencies, commodities, real estate, etc)"
Stock indicies and commodities is what I trade. Can't comment on the effectiveness of TF in other markers.
"1) How do you define a trend? (Rate of change, straightline on log or lin chart, slope of a moving average - simple or exponential, etc)"
I use least squares regression lines over the last N periods. I use a combination of N=13 days, N=13 weeks, N=13 months. But identifying the trend is only half the story. Choosing the exit strategy is the other half. (Let me say that I have never liquidated a position at multiyear highs like we have just had.)
"... the period from Dec 2003 to Dec 2005 where the S&P meandered within a 20% range is a case in point."
I was bullish in December 2003 but lost money by getting whipsawed as well in that same year. However I have made more than enough However, I have made more than enough since then.
TF is really the only approach that makes any sense. The logic of counter-trend trades such as EW dictates is beyond my ability to comprehend.
Good luck. Nobody is going to give you the holy grail. It can only come from within you.
Best of luck.
Posted by: RogueTrader | Tuesday, January 16, 2007 at 08:02 PM
Bond market will rally today even though there is good news. Bonds have bottomed, lower rates coming.
Posted by: cstradingman | Thursday, January 18, 2007 at 06:50 AM
Great economic news and the bonds rally anyway JUST AS THE CSTRADINGMAN PREDICTED. Becoming a full time trader made the CSTRADINGMAN nervous. Usually that is the time speculators reach their peak. NOT THE CSTRADINGMAN!! CSTRADINGMAN still making great trades. Have we seen the cyclical peak in the nasdaq? We will know by NEXT WEEK!! It is looking good. If bonds can't selloff today DEFLATION is an eventual certainty. CSTRADINGMAN was patient waiting to get short and shorted stocks at the right time! This selloff should last a while similar to what you elliott people call (wave 1). Then there will be a rally (wave 2) that will not make a new high (and shake out the recent put buyers). That will be the last chance to get short. I will happen in the late Feb. March time frame. When that selloff gets deep people will begin to gossip about a new cyclical bear. There should be alot of people calling for bottoms from then on. Looks like technology leading this selloff as the more speculative investors wanted a rate cut. They now think they are not getting it. THEY WILL!!! But by the time they realize they are getting rate cuts the market will recover then sell of rapidly and unexpectedly!
And yes the CSTRADINGMAN is full of himself because he is the best!!!
Posted by: cstradingman | Thursday, January 18, 2007 at 11:52 AM
CS, good call! Hope to see things turn out as you wished.
By the way, what does CS mean? Counter Strike?
Posted by: shawn | Thursday, January 18, 2007 at 01:48 PM
Common Sense
Posted by: cstradingman | Thursday, January 18, 2007 at 02:33 PM
Notwithstanding all the well reasoned predictions of an impending deflationary collapse, I do not (yet) see evidence of it anywhere. Instead I see more off budget deficit spending and its attendant economic stimulus resulting from escalation of both the Iraq and Afghanistan wars. Oops... Sorry George and Condi, I meant to say temporary troop surge...
It appears that the Democratic Congress will put up only token resistance to the proposed "surge" and approve the expenditures in the end. Unless things change drastically we will likely muddle along into the 2008 Presidential election.
Posted by: rdneu56 | Friday, January 19, 2007 at 08:08 AM
Next week will be fun! Enjoy your weekend. I know I will.
Posted by: cstradingman | Friday, January 19, 2007 at 12:00 PM
"TF is really the only approach that makes any sense. The logic of counter-trend trades such as EW dictates is beyond my ability to comprehend."
While it is true that EW can put one into a counter-trend trade, it can also put you into a continuation trade, just as trend following would. If this is your only complaint about EW, then it really isn't a valid criticism.
"I use least squares regression lines over the last N periods. I use a combination of N=13 days, N=13 weeks, N=13 months. But identifying the trend is only half the story. Choosing the exit strategy is the other half. (Let me say that I have never liquidated a position at multiyear highs like we have just had.)"
You're overcomplicating things. EW just uses price data. Why wait 13 days to confirm something when you can confirm it just by watching what price does, in real-time?
So, EW does everything trend-following does, plus more. It also allow you to take advantage of price data to determine the end of a trend, not some arbitrary time element, like you use. So far, your arguments against using EW are not convincing and seem to stem more from a lack of understanding about it than anything intrinsic in EW. Or NeoWave, which is what I'm using now.
The main difficulty in EW is determining degree. Neely's gone a long way to setting out some rules to determine it, but even he says it's tough.
Posted by: DG | Saturday, January 20, 2007 at 09:52 AM
Any thoughts on Prechter's latest EWT? I thought it was a load of bollocks - similar to the tripe he published about car styling a few months back.
I find a lot of the social trend stuff anecdotal at best and more-or-less impossible to measure objectively. How scary is a scary movie? Aircraft accidents as a bear-market measure? Nuclear tests? Euthanasia? Sugar consumption?
And the best of all: How many miles a week one of his subscribers jogs. This person is now 36 years older than when he started logging his miles, but it's not his age that is resulting in reduced jogging, it is the bear market mood. Gimme a break.
Posted by: Eventhorizon | Sunday, January 21, 2007 at 06:49 PM
To Eventhorizon,
I believe EW Theorist is totally useless for trading purposes..I tried the whole service for a month (short term update, monthly update and the theorist) and I'm gonna stick to the short term three times a week update because its the only one that makes sense..this socionomics stuff has no value at all not even for academics ...the best short term update imho is wavespeak.com and i like to compare it to the ewi updates...great stuff..bottom line you dont have to be right its OK to have alternate counts and admit you were wrong you gotta make money in this business and only stupids never change their minds..
Posted by: sw9 | Monday, January 22, 2007 at 06:19 AM
yeeee haaaaah! Wow this is fun!
Posted by: cstradingman | Monday, January 22, 2007 at 07:50 AM
Surprised bonds are not rallying more (but rallying none the less).
It will be an interesting week if bonds sell of quite a bit (not likely).
Posted by: cstradingman | Monday, January 22, 2007 at 08:41 AM
You could hear a pin drop in here!
Posted by: Voice of Reason | Monday, January 22, 2007 at 03:23 PM
I hope anyone who has signed up for the STU gets a copy of one of Mark Hulbert's reports to see the STU's audited results. It's not pretty.
Posted by: tradebottz | Monday, January 22, 2007 at 10:53 PM
Let's see here, Steve's call for more limited upside has not happened, Neely's call for a huge upside acceleration a month ago certainly has not happened. I can't believe people actually pay these people to throw darts for them. I think I will open my own dart business! By the way, as we all know, Prechter has been wrong on so many calls that the only way to make money off his darts is to do the opposite of where the dart lands! Neely is a little better, but his darts have not done so well recently either. Not to long ago he was all excited about a quick move to new all time highs in the S&P. That did not happen and he quickly reversed his thinking. About a month ago the same thing was supposed to happen. The last I checked, the S&P has done nothing for a month.
Carl Futia web site had us quickly going up for 2 or 3 weeks now, with an especially big move in the Q's. Well the last I looked the Q's have done the opposite.
All these great experts who claim they have a system to beat the market, I want to thank you for all the humor you provide me!!!
Posted by: greatpredictor....pause....NOT! | Tuesday, January 23, 2007 at 06:08 AM
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Posted by: Joe Savard | Tuesday, January 23, 2007 at 02:42 PM
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Posted by: Joe Savard | Wednesday, January 24, 2007 at 04:52 AM
CS, so what's your take on the bonds? Bull still alive, or we are gonna get buried?
Posted by: shawn | Wednesday, January 24, 2007 at 12:41 PM
I still maintain that we are in a bear market in bonds, and have been since 2003.
There have been intermittent rallies, and large ones at that, but the trend in yields is inexorably higher.
Sometime this year, then, I would imagine we see 5.40 on the 10 year, and on the outside, maybe 5.90.
My "uncle" point on that view was 4.41 (as I had mentioned at around 4.50) at the time, and we got down to 4.425. So the view is intact. The new "uncle" point, I think is 4.33. Until then, I remain bearish, on a 1 year basis.
I don't have any money on this view - so don't pay too much attention to what I say, since I have no skin in the game. At 5.40, if we get there, I will turn short term bullish, but only for a trade.
EN: any thoughts?
CS: you are an awesome short term trader from the looks of it. You've certainly proved your mettle. But I maintain my long term view.
Finally, gold is trending up now. It managed to hold above its breakout point of yesterday. 730, here we come? I certainly hope so. I don't own bonds :)
Posted by: AA | Wednesday, January 24, 2007 at 01:36 PM
Hi AA:
I really only follow the NQ and ES and on VERY short term time frames so I can't be of any help on this board. If I had to guess, I suspect that the blue chips continue to put in new highs for a day or two while the NDX goes up to .618 or .786 retrace of this years high in a countertrend move and will not confirm that is just a wild guess. I would think it extremely foolish to be shorting the DOW which keeps hitting all-time highs as their is no place to put a stop. Then, once the next pullback comes, the NDX will retest that 1750 level before the next upmove of the bull market starts. Remember that that level was resistance last year and is now acting as support everytime we come back down to retest it. Long live the bull market in stocks! Actually I could not care less on the longer term direction I just wish the NQ would trade like back in the heyday when it moved 100 points a day and it was easy to catch 30 points per contract per day. Someday . . . maybe someday. . .
Good luck.
Posted by: EN | Wednesday, January 24, 2007 at 02:18 PM
Got stopped out of my equity shorts today a gave nearly everything back. Took a small loss on my bond positions yesterday. I was liking my equity short trade except I was expecting a bond rally along with it. When bonds didn't rally hard I knew something was wrong. I still like bonds at this point. But I know now that if I am wrong I will be dead wrong. If the bond bull is over, there will be a swift selloff on a retest of the 200 day moving average on the 30 year. And the stock selloff will be put off until that happens. If bonds start to turn north again the stock selloff we be very soon.
Long term -- 30yr bonds still trending up. -- bullish
200 day moving average sloping up -- bullish
We are still above 200 day -- bullish
50 day still above 200 day -- bullish
We are below the 50 day -- bearish
50 day trending down -- bearish
So there are potential signs that the bond bull is over.
But we will know if the 30 year breaks decisively below in the 200 day
or the the 50 day crosses the 200 day
If this happens, I will probably be wrong and we will be in a bond bear.
I AM STILL CONFIDENT WE ARE IN A BOND BULL AND IT WILL RESUME SHORTLY.!!!
God this week is wearing me out! and it's only wednesday. Good luck!
Posted by: cstradingman | Wednesday, January 24, 2007 at 02:47 PM
Perhaps I spoke to soon about the markets doing nothing. Neely's view of a huge upside breakout doesn't seem so far from reality now.
Posted by: greatpredictor....pause....NOT! | Wednesday, January 24, 2007 at 04:56 PM
CS, looks like the long term yield of 30-year has an upper trendline of 5.2%. So, I guess we still have some room till then?
I could not figure out a good site with a bond price chart instead of the yield chart. Any recommendation? I am using bigcharts.marketwatch.com, ticker tyx
Posted by: shawn | Thursday, January 25, 2007 at 10:26 AM
Support on the 10 year note comes in at 106 5'
In yields, that is 4.92.
If we don't get a massive rally from this support (to down at below 4.41 at least, and 4.33 ideally), the 20 year bull market will well be confirmed to be over.
Posted by: AA | Thursday, January 25, 2007 at 11:42 AM
A bond price chart does not contain any information that is not also available on a yield chart! Price and yield move in opposite directions, of course. Look at the bond as a stream of fixed amount cash payments until maturity. If the price of the bond is lower, the fixed cash payments correspond to a higher interest rate and vice versa.
Here is a free tip: Don't trade things you do not understand
Posted by: rdneu56 | Thursday, January 25, 2007 at 11:42 AM
If you are referring to shawn's question, when you actually trade a note/future, it is important to have the PRICE of the future. Thus, it helps to have the price chart (for trading) as well as the YIELD chart (for analysis). Remember - there is creep in the futures, so that distorts analysis.
Posted by: AA | Thursday, January 25, 2007 at 12:35 PM