Timing of the Bottom

Tonight's STU attempts to estimate the coming interim bottom using a pattern of between 247 and 254 days that has come and gone and come back again in the S&P: Between Mar10 and Mar18.  Now, they are the first to be skeptical of timing models and turn dates, especially based on patterns, which can come and go, but this timing may fit the current wave count: we are close to finishing wave 3 of (5) down, and then should have a relatively sharp wave 4 reversal and a final wave 5 down, which might truncate.  All this may happen next week, or (more likely) extend a bit in time into the turn window. 

Neely also sees little near term downside and a coming rally, followed by his huge shorting opportunity of a market meltdown.  Hence he says to close out short positions.  The rally could be pretty strong, certainly back to the S&P 800s, but as yet he does not see the type of Obama Hope Rally seen by the STU:  a 38% - 50% retracement of the whole drop from 2007.  Instead, more like the wave 4 rally, although a longer and more extended one than seen by the STU, followed by a stronger and deeper wave 5 drop.  Note that their methodologies are related but different, and their counting systems are different - to Neely this short rally will be an X wave before his deep drop. 

Wildcard is the continuing banking crisis, which is not abating. In the US, Citi and BofA are not out of trouble, and indeed may need further bailouts or complete restrucuring to survive.  In Europe, banks continue to deteriorate, particularly those over-exposed in real estate (Englosh banks) and Eastern Europe (Austrian banks among others). 

Comments

[Forkoholic Serge]

>We have Neely still expecting a dreadful fall, but Prechter in his EWT this week saying it is time to get out of the short positions

The War of Elliotticians has already begun
http://www.forkoholic.com/images/WaveVz.jpg

[DG]

Neely's been beating Prechter like a rented mule for years and I see no reason for this streak to end. It looks like Neely's big drop could take a month to materialize, though, so the outcome won't be known for a while.

Just as a speculation, my guess is that when the rally off this upcoming low (a low which could really happen any time and hopefully happens early next week) stalls, Prechter will just see it as consolidation before a large upwave and will be caught completely off-guard by a huge drop.

[Wavetrader]

Large put trades taken Friday cboe look for a collapse starting Monday.Descending triangle breakdown confirmed with all markets hitting there stride to the downside.Supercycle bond top in place 1982-2009...nobody competes with rising yields.Market weak!no rally not even a sliver....bad news.

5560 here we come.

[elskid]

The usd/yen has a very constructive look. It has done me well over the last several months. As it rises, so does stocks. Recently, its has built a decent base. I would like to see it pull back, but not violate the uptrend. I think THAT point would confirm a rally of some degree. But people on both side are very nervous. I fear a short covering rally as much as I fear the bottom falling out, maybe more.

[Yves]

We are in the Puetz window.It will close around end of month of March.As I mentionned yesterday on Bloomberg Radio that the next 30 days are critical for a massive drop.
I will use extra leverage to buy into this.I feel crowded with my count so its probably the wrong count.Always be prepared to re-re-re-write your count.

Yves

[Hank Wernicki]

Saturday Feb 28th:

1,000 Point Rally for the DOW 30 :

Based on the recently postly fractal for the OEX, Friday

may have been the Low for an Intermediate turn UP

Ideally I would like to see 731 on the SPX Monday

If we break that level then all bets are Off.

But the evidence is abundant that a great rally is on the horizon.

I'm recommending to my suscribers to close short positions

And to go Long on the Emini for a minimum target of 100 points.

Hank

[Steven_737]

Yelnick and DG

I have being intrigued by your description of Neely's forecast. My guess is that most Elliott wave practitioners are puzzled by this forecast.
So let’s add some detail to it:

My understanding of what you have presented, in Elliott Wave terms, is:

The wave evolution that Neely is expecting (as described by you guys) is most likely a failure of wave 4 (the WXY flat), i.e. instead of the Y wave of ES/SPX reaching the 990 level, it will presumably top half-way and then the final wave 5 will jump into the abyss.

This implies that from an assumed low of the X wave, circa 730, the market rallies to 830~860, wave Y of (4) fails to reach the expected level 990~1000 and then the market drops in wave (5).

If Length(wave 5) equals Length(wave 1) ~325 points,
then the bottom according to this scenario is expected at 505~530
(830-325 = 505 ; 860-325 = 535).

The key question that follows is:
If the market is searching for value in the 505~530 area, why not follow an extended w3 of 5? Such a trajectory would be:
w3 of 5 falling to 650,
followed by w4 of 5 to 750~770 and then
w5 of 5 to 505~530.

The expected bottom in the case of extended 3 of (5) is:
from the January 6 top of wave (4) at 943,
if Length(wave5) = 0.618 * Length(wave 3)= 0.618 * (1441 - 739)= 433,
then the end of wave 5 is 943 - 433 = 510, in the area of the previous analysis.

QUESTIONS

Q1) Is this scenario a mainstream pattern of Neely's method or is it a twist to forecast an unexpected trajectory, that will cause major damage?

Q2) what would the reason be for such an abrupt change in the wave 4 evolution ?

Yelnick, what's your take on this?

DG, I have been reading your posts; Your recent posts have also questioned how this forecast will come to occur, contemplating extreme events to satisfy the conditions for this trajectory.

Steven_737

[DG]

Steven 737,

Note that wave 4 is Yelnick's term. Neely has us in a second x-wave in a triple running correction X-wave, to be followed by one last corrective pattern to finish it off. As I said above, this last corrective pattern could take another month or so to play out. This X-wave, when it ends, will give way to a continuation of the complex correction downtrend that begin in October 2007, although the actual NeoWave dating of the bear market beginning is January 2008. The continuation of the downtrend will be, %-wise, approximately the same as the initial downtrend, i.e. another 50% haircut from wherever wave X ends, although Neely is saying that the bear market probably won't end until 2012 to 2014, albeit at a higher price than the low we are about to see. This is consistent with his idea that complex corrective patterns CAN END with contracting triangles, something traditional Elliott Wave does not allow. Translated, that means this upcoming drop is the A wave of a triangle that will then stretch out to 2012-2014.

Yes, I have been open to the possibility that whatever acts as the catalyst to set this continuation of the downtrend in motion could be something extraordinary. The historical "moment" seems propitious (for reasons I've stated in other posts like new US administration, AQ wanting to stay "relevant" and take advantage of Western economic disarray) for a terrorist strike, unfortunately, so that type of event is foremost in my thinking, although I can't discount the possibility that the catalyst could be something relatively "minor" like a Citibank bankruptcy. Wave structure implies a very quick, sharp move like the end of year Euro rally or bond rally, only, obviously this forecast is for a decline in the S&P.

[yelnick]

Steven737, I love DG's Neely analysis. Really good. Neely back in the 2002 time frame thought this would be a large triangle off 2000, and for a time so did Prechter. Still could be if we end this current wave C or (1) of C around the current levels. For the moment, the question is when we either rally or collapse. Fairly high contrast difference between the two. We seem to have at most a month to make the call. My prior experience has been Neely tends to call these big moves better than Prechter, although to give Prechter his due he did turn at Jul07 whereas Neely waited until Feb08 to call Jan08 as the high point for the next 5 years or so.

Will this be a big contracting triangle, or maybe a large ending diagonal? I think first we see how the next few weeks go. The bad news after hours on Friday from the banks may cause a gap down Monday. If you didn't see this, go to the Stock Timer blog and read his Friday post. Scary stuff - banks still trying to hide the depth of their problems. Prechter leaves open a lower odds scenario where the banking crisis accelerates suddenly and we have another meltdown. That would match Neely's view, at least how the wave structure evolves. He sees it as lower odds than a big rally.

[Steven_737]

DG and Yelnick,

Thank you for the analysis.

Yelnick,
what is the url for the Stock Timer blog?

[Forkoholic Serge]

If the market is searching for value in the 505~530 area, why not follow an extended w3 of 5?

Coz if you look at every part of this decline every small 5 extends, not 3

[yelnick]

http://market-ticker.denninger.net/

[Steven_737]

Serge

good observation, BUT you are missing the point.

The point being an extended (5), be it via w3 or w5
vs
a failed Y of W-X-Y i.e. (4) from the Nov-21 low, followed by a 5.

[Forkoholic Serge]

I'm not missing anything. It's just silly almost everyone think we're in Wave 5 from Oct 7 top. I'm counting us in Wave 5 from May 08 top.
The only other possibility March-May08 is not 1-2 but A-B instead
http://forkoholic.com/officialcount.htm

I think big rally everyone expecting will come in 2010-2011. Sure we can try to close the gap at 930 this time around, but 1100 gap I think is for 2011.
Kondratieff Cycle peaked in 2007, with 57.2 years to go, it makes 2035 as a possible low. This will be The Greatest Depression ever :)

[yelnick]

Serge, the current K cycle began in 1949 and seems to be likely to end around 2014 except to the extent Obama's policies extend and prolong the disaster. Ian Gordon is the keeper of Kondratieff, and I think when the dust settles he will see the K Autumn as almost ending in 2000, but Greenspan extended it with a last gasp reflation (what I call the Greenspan Indian Summer), which ended in 2007. Sometimes the K Winter can go as long as 20 years from the initial crash (eg 1873 - 1896, or 1929 - 1949), so this one might go to 2020 (2000 - 2020). Recall how the 1929 debacle had a second leg down in 1937; similarly the 1873 crash had a second panic in 1893. Japan has gone 20 years and counting (1989 - 2009). We shall have to see how it plays out. The K Wave is more descriptive than prescriptive, and timing subject to the foibles and mistakes of politicians.

[Steven_737]

Yelnick;

"The bad news after hours on Friday from the banks may cause a gap down Monday. "

I searched the web for analysis regarding
Karl Denninger's assessment of the 10K filing, ("Yeah, but your balance sheet is full of lies.")

I have this comment from
http://messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_B/threadview?m=tm&bn=1903&tid=606560&mid=606577&tof=31&rt=2&frt=2&off=1

"They shouldn't let idiots post. Not a loss. Just carrying assets above market value because they don't plan to sell those assets and will hold to maturity. This is done because their is not a good market which is close to the intrinsic value of those assets. They have already taken write downs for what assets they expect to have losses. I hope wallstreet is smart enough to figure this out probably not hedgefunds will con people into thinking it is a loss."

Best advise:
Don't believe everything that you read, especially if you don't know the credentials and the agenda of the person that writes the editorial.

Lets see what comments and analysis will come up till Monday on this issue.

[yelnick]

Karl has followed the ups and downs of the mark-to-market write offs of the banks. They divide into tier I II III assets. Write downs to date are fairly large (and cause a loss on the income statement each time they are increased - don't know what the commenter is speaking about when he says "not a loss"). What worries Karl is they have been stair stepping down, meaning they have been trying to string out recognition as long as possible. Given that mark-to-market rules have exacerbated this crisis, you can applaud them for trying to deal with the havoc those rules let loose, but Karl's point is at the same time you don't know how bad it really is, and this lack of trust means the market will gap down. We shall see.

[Forkoholic Serge]

>Serge, the current K cycle began in 1949

Yelnick,
Puetz actually disagrees, arguing Kondratieff cycle peaked in 2007

[Forkoholic Serge]

Opps I mean agrees

[Wave Rust]

Tier I, II, and III loan gradings are the lower 3 rows of cards stacked in the world's House of Cards.

Billions of bad loans? no problemo. really! Central banks can handle those numbers, big though they are.

Think of a 3 level stack of cards in a perfect pyramid. Then see a spinning orb on the top of the pyramid. Inside the orb is the contents of a Financial Pandora's box.

What's inside the spinning orb? It's the 65 trillion of various Credit Default Swaps (generically CDS) and Pandora's progeny of monstrous CDS variants of incalculable value. Where are they? Try AIG and other foolish insurance companies.

[Insurance companies are quietly cutting off their good hand (profitable businesses and markets), because their bad hand is holding CDS that they can't get rid of anywhere. They are trying to raise cash and/or lower total risk in their portfolios.]

The bottom-up strategy of the world's Central Bankers is to do everything possible to keep the House of Cards intact, lest the orb stop spinning, roll off the House of Cards and crash,,, releasing on the world the most unthinkable of catastrophes.

So, the moral to this true story is,,, support your local Central Banker.

Beware the Ides of March,,, especially if it arrives at a high.

Serge, Steven, Duncan, DG, Prechter and Neely are on the same track,,, the right track. The differences are almost semantic when compared to the ultimate resolution,,, whether it comes now or next year or even later.

wave rust

[DG]

Neely back in the 2002 time frame thought this would be a large triangle off 2000, and for a time so did Prechter. Still could be if we end this current wave C or (1) of C around the current levels.

Neely still holds that view of a triangle, only he sees it as a "Neutral Triangle", which means we can go much lower in the C wave.

"With that in mind, it is easy to understand how the S&P began (in 2008) a 4-6 year "bear market" in social psychology, but that the market's price low is likely to happen during the first or second quarter of 2009. After that low, the S&P is expected to consolidate (possibly in a contracting Triangle) for a few years without breaking 2009's low. Eventually, wave-C, of an ongoing, NEoWave Neutral Triangle, will complete way above the 2009 low sometime in 2012 to 2014, at which time the multi-year, D-wave rally will begin."

Background on Neutral Triangles:

http://www.neowave.com/qow-result.asp?qid=8&searchterms=neutral

What is a NEoWave NEUTRAL Triangle?
Answer:

Under orthodox Elliott Wave, there are two patterns that contain five segments - Impulsions and Triangles. Elliott Wave breaks impulsive patterns into three categories (where either the 1st, 3rd or 5th leg of the pattern is much longer than the other two), but only breaks Triangles into two categories (contractions [where the 1st segment, wave-a, is the longest] and expansions [where the 5th segment, wave-e, is the longest]). It was logical to assume Elliott`s Triangle categories had a "missing link."

In the mid 1990`s, I started seeing five-legged corrections where the middle leg [wave-c] was the longest, thereby filling in the "missing link" in the Triangle category. Lacking a specific name for this category, I decided "Neutral" was the best compromise between expansion and contraction.

Just as Contracting Triangles are similar to Impulsive patterns with a 1st wave extension and Expanding Triangles are similar to 5th wave extensions, a Neutral Triangle is similar to a 3rd wave extension. Therefore, a Neutral Triangle is a five-legged formation in which the middle leg (wave-c) is the longest and waves-a & e tend toward equality. The channeling of a NEoWave Neutral Triangle is similar to a 3rd wave extension; you usually employ parallel trend lines drawn across the end of waves-b & d and another line drawn parallel to the b-d line starting at the top of wave-a.

Behavior following a NEoWave Neutral Triangle is not as violent as that seen after a Contracting Triangle, but is more "trendy" than what occurs after an Expanding Triangle.

[Wavetrader]

A neutral triangle doesn't exist, only in the minds of people who don't understand technical analysis.I am sorry real market techs like Edwards and McGee are textbook a breed lost in the shuffle of Money making leaches ala Prechter and Nealy.

This defines the pattern exactly and completely no more no less
anything else is hyperbole.
***************************************************************
DESCENDING TRIANGLE DEFINED
A bearish chart pattern used in technical analysis that is created by drawing one trendline that connects a series of lower highs and a second trendline that has historically proven to be a strong level of support. Traders watch for a move below support, as it suggests that downward momentum is building. Once the breakdown occurs, traders enter into short positions and aggressively push the price of the asset lower.

8000 SUPPORT WAS VIOLATED

[DG]

Wavetrader,

Yeah, sure, whatever. You trade your way and I'll trade mine.

I didn't realize Edwards and McGee gave their book away in order to avoid being "Money making leaches"[sic].

[DG]

Wavetrader's harkening back to the "third phase" of trading with his call out of E&M. The question is, why would anyone want to rely on techniques that didn't take advantage of phases 4 and 5, presuming they exist and Neely's history is correct?

http://www.neowave.com/qow-result.asp?qid=15&searchterms=five

What is the difference between Elliott Wave and NEoWave?
Answer:

The world of trading/investing has gone through at least four major phases as technology has progressed. NEoWave begins phase five in the evolution of markets, analysis and trading.

Before telecommunications, reliable news outlets and market data were available, the trader had to rely a great deal on hearsay and rumors to make decisions, leaving the final decision much to personal INTUITION (what I call Phase 1).

With advances in equipment, telecommunications, plus access to market data and business news, the FUNDAMENTAL era (Phase 2) of trading emerged. This phase would include the development of P/E ratios, EPS (earnsing per share), market cap, revenue growth, debt and dividend ratios.

When the recording of market data improved (including the reporting of high/low and intra-day data for each period, not just daily closes), TECHNICAL analysis (Phase 3) became possible. This phase would include moving averages, stochastics, open interest and volume studies, etc.

Phase 4 was created by merging Phases 2 & 3, producing what some might call the "Golden Era" of PSYCHOLOGICAL analysis, which is what Elliott Wave is all about. This type of analysis includes pattern recognition, Fibonacci price and time relationships and the science of fractals.

With NEoWave I introduce a new paradigm - SELF-DEFINITION (Phase 5) - to the field of market analysis and trading. In other words, NEoWave is not just a way of forecasting market action, but also a new way of trading based on observation, not forecasting. NEoWave provides the first LOGICAL, self-confirming and self-defining process of market analysis and trading.

[Wavetrader]

Hey M&E are the good guys Prechter and Nealy are leaches....read what I said....sheeesh!

I just don't agree with all this new fangled artsy technical B.S.

[Forkoholic Serge]

guys, remember "Puetz window"?

Famous cyclist Steve Puetz just mapped markets using his Unified Cycle Theory

I can tell you one thing: "Dude, we're f#cked til 2035!" Check it out here
http://www.geocities.com/WallStreet/Exchange/9807/Charts/SP500/uct1950-2050.jpg

btw there is a new book called "The Unified Cycle Theory" coming soon and you can have one right now personally SIGNED! Just mention Forkoholic sent you

http://uct-news.com/page7.html

[DG]

I just don't agree with all this new fangled artsy technical B.S.

Wavetrader, I did read what you said. I was being sarcastic. E&M clearly made money from their book sales, so I don't know how they can be morally superior to "leaches" like P&N.

E-wave in general is an attempt to create a more precise language of market analysis. To dismiss that attempt without considering both why it was attempted and whether or not it was successful seems short-sighted. E&M are clearly the apex of one phase of market analysis, but I don't see how that makes them the "last word" on market analysis and everything coming after them is "new fangled BS". You're stating an opinion but not giving anything but a subjective reason for having that opinion.

[Genesis]

Which one will happen:

1. Bonds & stocks crash/gold spikes
2. Bonds stay high/gold stays steady/stocks stay steady
3. Bonds & gold crash/stocks spike
4. Bonds, stocks, all currencies, and paper gold crash/physical gold goes up by a factor of 50.

Based on the T.A. I've developed, and based on recent, seemingly accelerating events, I believe there is a 70%+ probability that one of these options will occur within 4 months. I'm not telling you which option I think we'll see (figure it out for yourself...)

[underdog]

Genesis, you've been making lots of dramatic calls that haven't panned out. Your credibility is low and you seem to revel in the drama. You're probably an intelligent guy who early on began to conflate self worth and accomplishments and you're looking for adoration, genius status, etc.

[Genesis]

Underfrog,

One doesn't have to be a "genius" to have played this market like a well-tuned piano over the past 18-months; he just has to have had a deep respect and understanding of History and of workable Monetary Theory. What we're watching unfold right now is the net result of decades of waste, fraud, ignorance, and apathy (you pick who's picture goes next to each negative trait...hint---your picture goes next to apathy...probably ignorance too:)

Tell you what, kids; a depression is unavoidable at this point; the only question is, how bad will it get? Dark times are coming.

[underdog]

Thank You, oh Genesis-Ur-Bashaal! Please save us, oh Well Tuned Piano Player! And tell us how we can learn from our waste, fraud, ignorance and apathy and become more Perfected in your Light!

[Donna Kline]

Genesis -

I vote for #4. I have always felt that ETFs are the next bubble to burst. I simply cannot trust that each share is truly backed by the underlying... a house of cards, dare I say.

Yelnick et al: I truly appreciate the insightful input on this blog. Thank you, and good luck to all!

[usdollar]

The next 2 weeks it looks like alternative #5 everything but the dollar get whacked. After that most likely gold and silver and food will stay steady. The problem after this wave 5 of 3 down is done, their will no longer be any safe places but gold and maybe even silver will be safest. Silver will most likely not be confiscated. Maybe guns boz and cigaretts with gas and propane as a close second alternative. Have started to stack up on rice beans suger flower yeast cans iodine, etc, skipped the gun even though it was a close call.boz is pretty simple to produce at home, cigaretts could be used for barter, Figured the gun would be nice for hunting if it gets that bad. now it is just a matter of how low in this wave down, 4600 or 2800? anyone.

[Wavist]

Thank You, oh Genesis-Ur-Bashaal! Please save us, oh Well Tuned Piano Player! And tell us how we can learn from our waste, fraud, ignorance and apathy and become more Perfected in your Light!

Underdog YOU are a genius!!!

[Steven_737]

Wave 3 of (5) has extended.
It appears that 3 of (5) is complete.

Estimate for top of 4 of (5) at 750 ~ 780

Preliminary estimates for 5 of (5)
650+-20 (if w4 reaches 780) to 620+-20 (if w4 ends at 750.)

[Steven_737]

Serge

your Elliott wave count would fit the Neely prediction nicely.

what other technical data support your count?

are you ok with the time spent by wave 4 of (3) with respect to the time taken by 3 of (3)?

[Steven_737]

capitulation watch

http://www.marketwatch.com/news/story/Contrarian-analysis-new-market-low/story.aspx?guid={03F9C9F3-A23A-4270-A462-C406AF15CF53}

[Forkoholic Serge]

>your Elliott wave count would fit the Neely prediction nicely.

No way! I'm not predicting Dow 100K around 2060! :))

my count supported by
1) forks
2) ElliottOscillator (5,34) and (15,102)

somewhat by 3) fractal (but I'm still fuzzy on that one)

[crashish]

What are the chances that we just keep melting-down, instead of getting the bounce that everyone is calling for, a la the 1720-1722 South Sea Bubble crash (In other words, that we're in what EWI would call primary 3 down)?

[Steven_737]

Sergei;

THIS prediction (posted by Yelnick):

"Neely also sees little near term downside and a coming rally, followed by his huge shorting opportunity of a market meltdown. Hence he says to close out short positions. The rally could be pretty strong, certainly back to the S&P 800s, but as yet he does not see the type of Obama Hope Rally seen by the STU: a 38% - 50% retracement of the whole drop from 2007. Instead, more like the wave 4 rally, although a longer and more extended one than seen by the STU, followed by a stronger and deeper wave 5 drop. "

[EN]

I just trade trends, pivot points and moving averages. Forget all the predictions. They are for the birds. Believe me, I spent years wasting time on wave theory. Useless, useless, useless. Keep it simple and you will make WAY more money.

With wave theory you will be convinced that the next turn is imminent and blind to the realities of the trend. With monthly zig-zaging or even breaking of the 200 week MA you would still be short from last year and hundreds and hundreds of SPX points in the bag.

In fact, it was Neely who finally convinced me that wave theory was useless; stating that it only works one third of the time if done right. I took his trading course.

[Al from Oz]

Refer 2009 predictions.
Maximum downside for the Dow in the next two years is 5074 (Dow @5000 scenario). Dow at 6892 is prefered, the rate at which we go through 6892 will determine how quickly we get to 5074.
Its clear that in wave count terms we have entered the 5th wave with wave 1 to the downside starting @Oct '07 and the complex fourth wave begining Nov '08 and ending first week Feb '09. Both Dow and S&P both easilly breached initial resistance levels (Dow at 6892) which is not a good indication. Stress testing and AIG are still obviously major worries.
Will the short selling rules due to expire this Friday be repealed, lifted or reimposed?
They should be lifted and allow the free market to find its own bottom. DOW 5074 and S&P 550 very possible this year. Still see Gold at $1050 and Oils Nymex and Texas intermediate) slowly tracking up nicely, notice how Nymex light sweat and Texas intermediate, Gasoline and Ethanol cash futures in nearest contracts didn't retested the Dec 20 lows but North Sea Brent has gone through its low. Europes in just as much (even more of a pickle than the USA I say)of a pickle.

[DG]

With wave theory you will be convinced that the next turn is imminent and blind to the realities of the trend.

I think this is a character trait flaw, not a flaw in wave theory. In fact, Neely's book Mastering Elliott Wave tells you on the very last page, last paragraph, exactly how to best deal with this kind of situation:

"For example, let us say you observe a large Impulse advance which you assume is the end of a bull market. After correcting, the market makes a new high. The new high indicates the bull market is not over. What do you do about your previous labeling? The high you had just marked as the end of wave 5 (of any degree) at the top of the bull market, becomes wave 1 of the same degree. The degree title of wave 5 drops down a degree. If you had been working with a corrective pattern, what you had marked as the end of the Correction would become a lower degree wave a of a larger corrective pattern".

That, and if you use the "post-constructive rules of logic", I think you can stay on the right side of the market a good chunk of the time. And anyone with any experience trying to count each individual wave in a corrective pattern knows that it's not really feasible, although it does become easier once you realize that there are a lot more x-waves happening than one would think. Lots of corrective patterns make sense when you start allowing x-waves to be relatively common and not relatively rare.

After reading MEW a half-dozen times and all of his Question of the Week answers nearly that often, I've gotten to the point where I can almost always figure out what Neely's take on a given pattern development will be before he sends out his trading recommendations and I can do intraday counts that have led to some excellent results without any input from Neely, but I still subscribe because he's a good guy and now that the method is like second nature, I don't see any reason to switch, but I only give a forecast one chance to be right, otherwise I abandon it as soon as it is wrong by even one tick.

Again, though, I think ego is a bigger impediment to trading success than methods.

[EN]

Hey DG:

If have success trading with Neowave that is great.

For the time I subscribed to Neely, I found his Neowave scenarios rarely played out. The predictions kept changing and changing and changing. At times, he would make definitive statements only to retract them a few months later - such as the bull market in gold being over and new bear market beginning.

That said, Neely has a trading service that can be tracked for performance, which is more than most of the other EW guys who give some prediction and then only draw everyones attention to it when it comes to fruition, a rare event.

One thing about this move down I have noticed is that the NDX is still above its 2008 low. I expect some kind of a snapback is coming shortly based on that intermarket divergence alone.

[DG]

EN,

Not sure when you were subscribing, but Neely has made some significant changes, primarily with his Neely River concepts. His self-assessment of his forecasting accuracy is that it is higher now than it was in the past, but he is, as you might know, trying to get away from forecasting and trading using other methods, like Neely River.

What I find, and gold is a perfect example of this, is that even when he ends up needing to retract a statement, he's still able to trade that asset pretty well in the meantime, using his working wave count and Neely River. After I started resubscribing in October and he was still counting gold as starting a multi-year bear, he was able to make a couple of big $100+ gainer trades because he was right that something significant had changed the trend, it just hadn't changed to the degree he forecast. OK, that is just the nature of trading. So, on two of three timeframes, he is up over $130/contract on his various gold trades, even though he was wrong about gold entering a multi-year bear. His hourly trades have not worked out because he's been shorting breakdowns, but they've kept on recovering and heading higher. That's what I mean about ego. If he "had to be right" because that's what the wave count said, he would have shorted gold and held or kept adding to shorts off the bottom and would be way underwater.

Yes, the NDX is holding up well and that does bode well for a snapback rally. I started picking up some longs today and the futures look good. We'll see what Europe's open brings.

[Steven_737]

STA Opposes Proposed Congressional Bill H.R. 1068

http://www.finalternatives.com/node/7043

"The Security Traders Association (STA), the leading advocacy and education organization for professional equity traders in the U.S., is stating its strong opposition to a bill introduced by Congressman Peter DeFazio, H.R. 1068 the “Let Wall Street Pay for Wall Street’s Bailout Act of 2009.” The bill aims to impose a 0.25% transaction tax on the "sale and purchase of financial instruments such as stock, options, and futures." The proceeds of this tax are to pay for the “net cost” TARP and emergency Federal Reserve programs."

[VJ]

Gotta have sympathy for Wavetrader's point. Why get all fancy when you always get back to the major trendline breaks? This market was toast when that upward sloping trendline from 2002 was broken and confirmed (ala Edwards/Magee). I really enjoy EW, but there's a point where the complexity obfuscates the really powerful bottom line 'tells' in the market. Prechter, himself, never ignores those great trendline breaks, head and shoulders, Dow Theory signals... If anything, his career and life's work has been dedicated to a synthesis and integration of dozens of models and methods.

[DG]

"Complexity" is relative, I guess. The stuff I do in my non-trading life (corporate strategy and risk management for very large companies) is much more complex than wave theory, so I don't even really notice the complexity of wave theory, although like everything there was a learning curve.

[Steven_737]

At last, Karl Denninger has a proposal!

Stop OTC CDS Abuse NOW

http://market-ticker.denninger.net/archives/849-Stop-OTC-CDS-Abuse-NOW.html

Yelnick, what do you think?

[Steven_737]

Trading Tax Would ‘Decimate’ Markets, NYSE’s Niederauer Says

http://www.bloomberg.com/apps/news?pid=20601087&sid=abNkskpey.4I&refer=home