Party Like it is 1938

The STU made a clear comparison to the market in 1938.  Kudos to Da Bear, who commented on this in the prior post, and noted the odd behavior of wave (5) then and now - a very small 4th wave.  The STU has more than this chart, and their other charts are worth reviewing, and suggest that we should retest the 2-4 line (the upper trendline that connects the tops of waves 2 and 4), meaning a fall of around 50 SP pts.  Not required but would match 1938.

If we are in 1938, then after the test of the 2-4 line, we should have the expected multi-month rally to above Dow10K and SP1050. 

Next week should clarify. Other charts and possibilities and an analysis of sentiment readings, below the fold. 

The STU tonight also gave supporting evidence of the big wave [2] underway. Yet, they also show the alt count in the Naz as a large wave (4) flat which may have just ended.  This or a triangle wave (4) remains a lower probability but still extant count for the major indexes as well.

I gave a fairly concise summary of various wave count options in a comment to a question in the prior post. You can read it here. It lays out much of the case for the start of wave [2].  We can begin to eliminate some of them, particularly if we get a pullback to the 2-4 line next week.  The top count now is that wave 1 of A of [2] ended two days ago, and we are in a wave 2 pullback, having just done subwaves a and b.  Wave c of 2 may retest the 2-4 line. 

Two alternatives to watch: if we break the 2-4 line and head south, the Naz count may emerge as the top count - that we finished a wave (4) flat and are headed down in wave (5).  If we instead have a pullback then head north, but in a sloppy, meandering way, it may mean we are still in a wave (4) as part of wave C (if a flat)  or leg C (if a triangle).

Now, some contrary indicators. 

Sentiment.  ‘Everyone’ has been waiting for this wave 2, since they see a big 50% wave 2 also occurred in 1929-1930.  When everyone is on one side, go to the other.  What actually happened is the market did a head fake on 'everyone', since the Nov21-Jan6 rally looked like that wave 2, and fit the 1929 narrative, but it wasn’t.  Prechter said it was a fakeout, since the count was wrong (not yet a five wave pattern down), and proved correct.

You can see this ‘everyone’ sentiment in the CBOE put/call ratio.  This is a great contrary indicator.  When puts are much higher than calls, it shows a disbelief in a rally, and the puts get caught in a short squeeze.  Hence a sharp rally follows.  In contrast, now you have many more calls, meaning traders are worried about missing the bottom.  This reflects that ‘everyone’ expects the big wave 2 rally. 

The CBOE put/call ratio has closed at really low levels four times: Dec21, 2007; Feb9, Feb21 and Mar10.  The other three times it meant a fake rally and a drop the next day or so.  In contrast, the bottoms all the way down such as Nov20 and around Sep15 all had high levels of put/calls. 

This indicator is still negative on a big rally. 

Volatility.  The VIX is not yet confirming the breakout.  It is right on edge, in a triangle.   

Core Holdings.  The rally so far has been largely individual traders, not institutions.  Institutional holdings have increased, but were really low, and now sit at a level that goes back to Oct02.  If it breaks above, pile on, the rally will be strong from here on.  If it fades, we have to watch to see if this breakout is also a false one. 

 

Bernanke Nuclear Option.  Now, the final issue.  The bond market is very hard to read. This is because Bernanke has chosen to go nuclear and helicopter money directly into the economy by purchasing Treasuries.   Normally he buys from the Treasury, creating money; then sells into the open market, removing money.  This time he is buying in the open market, creating money, and not sterilizing it.  He has previously weakened his balance sheet by accepting a bunch of questionable debt from banks, and maybe he wants to begin swapping that poor reserve debt out for Treasuries.  But his stated goal is to keep interest rates low by paying above market for Treasuries.  His goal is to lower the cost of financing the huge deficits, as well as try to restart the housing market with even lower rates. 

The Fed has tried this once before, in Operation Twist from 1959 to 1966.  Then the long rate was 2.5%, and had moved up to 3%, and the Fed wanted to get it down again.  What happened instead is the Great Inflation of 1965-1981, and long rates rose to 6% before the Fed gave up.  Put simply, the gimmick of Twist created the inflation, rather than lower borrowing costs.  In a nutshell, a disaster.

The Brits began the same idea several weeks ago, and a couple of days ago were unable to sell out their version of Treasuries, called Gilts.  The Brown government may fall over this. 

The Fed auction yesterday was ominous. Very weak auction.  Foreign buying was down 50%.  You have to believe the minute the Fed made offers to buy above market, the Chinese among others tried to sell back.  They must have had overwhelming bids. 

If bond prices stay lowish, then the rally is in fine shape.  If bonds peak and rates start to rise, revisit the decision to hold stocks.   My bet is that the rally goes several months, and the Bernanke Gambit works for a while, then begins to fail.  And the market begins to fall.  Hence watch the bond market as a leading indicator of stocks. 

Comments

[Forkoholic Serge]

I should file a fork infringement lawsuit against EWI

[Forkoholic Serge]

CPC STO is already at March lows levels. This retrace may last 2-3 days
http://www.forkoholic.com/images/cpc032609.jpg

[da bear]

hmm, i should force an infringement lawsuit on EWI too! lol

the 1937-1938 pattern was something i brought up.

I would say that a DJIA 7,500 is the line in the sand for this particular rally. as long as that holds the Rally continues.

Mr. Fork, you think the retracement might last another 2-3 days. i was thinking so myself. ironically that would be a good comparison to 1938 low as well. that bottom was on March 31. maybe we get a mini-retrace low by then. the end of March is this week coming up. that would let the big portion of the Spring Rally to begin on April Fool's Day! lol

da bear

Wake up and smell the tulips!

[Robert Murdoch]

The retracement will end on or about April 6 or 7th.

[Tom CZ]

Yelnick,

great reading! I expect inflation to be transmissed through fx channel as all this stuff has to pay its price and if you support rate in irrational environment then the rest (FX) must work its way to correct this imbalance. B/W if there comes more support from domestic players to bonds (mean FED) then there is no such need for foreigners and also the need to buy the buck. Hence the buck may lose part of its former support. FX inflation and its denomination to equities will be the next hard play (repeat that does not mean equities need to rise in real values too much).

Tom CZ

[Forkoholic Serge]

so far we're skipping through fractal at 3:2 days speed
so it makes 4 days left unless we stretch a bit.

[george]

forkaholic serge,
how long have
you been using the Andrews
Pitchfork technique?
i have used this in
my trading over the
years. i obviously
have not had your
success with this
method of trading with
the pitchfork drawn on
the charts that andrews
originated years ago.
george

[jwalker]

Yelnick, 2 q please:

1. What is /your/ opinion on equities and on the US$? (You've been a lot more prescient that Prechter etc, and I wish you'd talk more about your own views.)

2. What is the source for the Institutional Index, and with what /lag/ is it published? There's a lot of interesting stuff collected (e.g. insider purchases, 13F filings etc) but by the time the data is published it isn't very useful.

Thanks!

jwalker

[Ursa Taurus]

Yelnick,

When the STU regards this rally as a Wave 2 up, they must obviously see this entire decline to be a five-waver down. This contrasts with McHugh who sees this rally as a B wave of an A-B-C down.

Doe the STU consider this five-waver down to be just an A wave? something else?

[Glenn loser neely]

I am a loser!
Does anyone has a gun I can use to end my life?

Glenn loser neely

[Tartan]

Based upon the commentary in this blog, I have begun to study NeoWave analysis and have subscribed to the NeoWave trading service. I also subscribe to the STU service and have done so for over a year.

I have done very well over the past year trading with an Elliott Wave model, but have had some struggles over the past month interpreting this current uptrend. I have noticed that Neely has done a much better job over the past month than Hochberg.

Here is my high level evaluation of the two services:

Neely has been better than STU at picking major turning points since the 1565 high to the 666 low. However, I spent this morning going through the last 12 months of Neely’s trading advice and found that he often had challenges with his real time interpretation of the structure as it unfolded from 1565 to 666. These challenges caused him to struggle with his placement of stops and he was often stopped out even though his interpretation was largely correct. As a result, his short term trading advice did not take full advantage of his spot-on longer term analysis. I also found that he sometimes placed fairly wide stops given his reward targets (ie higher risk/reward than I expected). I did not calculate the number of S&P 500 points that he picked up during this time, but would estimate that it was likely about 350 out of a possible 900. Has anyone done this calculation?

It is harder to evaluate the performance of STU because it does not provide specific trading advice – it just provides an Elliott Wave interpretation. I found this advice to be very valuable over the past year, but was often frustrated that I missed entry/exit points because Hochberg only takes strong positions after it is obvious what happened. By that time it is often too late to act with reasonable risk/reward trades. I had my best successes over the last year when I aligned with Hochberg’s EW structure but traded the smaller waves using my own analysis as opposed to the larger waves using Hochberg’s analysis.

Going forward, I am really torn between the Neely view and the STU view. My sense is that we are not going up to the 1000-1200 levels that many Elliott Wave analysts are predicting. So I suppose that means that I am more aligned with the Neely view. My dilemma is that NeoWave analysis is quite complicated and I am worried that I will not be successful making decisions on my own. I will be very reliant upon the NeoWave trading service. So at this point, I will likely use both methods. I will trade with Neely’s advice and continue to trade based on my own Elliott Wave analyses.

I have tried to align the NeoWave perspective (uptrend will stop at 860-912) within an Elliott Wave interpretation. In doing so, I am not convinced that we have completed primary wave 1 as STU has suggested. I am leaning towards the count that Yelnick suggested in the Vergence post on March 16. To summarize: the past several months could be a big wave 4 triangle that has not yet ended.
Wave a: Nov 21 to Jan 6
Wave b: Jan 6 to Mar 9
Wave c: Mar 9 - ??

Each of waves a and b appear to be 3 waves. This interpretation would allow the current up-wave to extend to about 850-900 (+/-) in an abc move. We then would expect a large wave down to about 500.

I am interested if others are going through similar dilemma’s in aligning NeoWave and Elliott Wave analysis?

[Robert Murdoch]

Ursa Taurus:

I wouldn't put too much stock into what McHugh is saying. I subscribe to his service. He was calling for a B-wave months ago and completely missed the call on the wave 5 down. He is accurate on his phi-mate turn dates but can't predict which direction the turn is. It becomes more evident the closer you get to the date. He has a Fibonacci cluster just before Easter which could be the end of the A-down move of wave 2. He has been calling for a catalysmic wave C down to significantly lower lows, following wave B up.

[Forkoholic Serge]

George,
I'm a vampire, so my technique was developed during South Sea Bubble.
You stick investor with a pitchfork ... you get the idea ;-))
My idea is an integration of pitchforks with Elliott Wave Theory.

766 looks interesting
http://www.forkoholic.com/images/spx765.jpg

da bear, is 2 people qualify for class action?

[Robert Murdoch]

I got a graph from another newservice that I recently subscribed to (free blog access and free weekend newsletter). www.amateur-investor.net. Coincidentally, they are drawing parallels between now and 1937 - 1938 in today's newsletter. Wave 1 up was a 25% advance for the DJIA. Wave 2 down was a 12% decline (C leg). This was followed by a 36% rally and another 12% decline. The final 5th wave up was a 24% advance. The total advance was 64%. All this is reflected in Yelnick's post. I am simply providing the percentages.

I have read many dire predictions that the bear market lows may not be seen until 2012 to 2014 and the DJIA could drop to 4000 or less and the S&P 500 could drop to 400 to 500 or less. McHugh even suggests the total decline could be 90% like in 1929 - 1932. These dire predictions do not correspond with what happened after the market peaked in 1932.

The newsletter I referred to above provided another graph that went on to show what happened after the market peaked in 1938 and then finally bottomed in 1942, followed by the huge rally into 1946.

This graph did not provide all the percentages. The decline from the 1938 top to the 1942 bottom was 42%. So the 1942 bottom for the DJIA looks to me to be 5% or less than the 1938 bottom and it took 4 years to get there.

Following the 1938 peak, the DJIA dropped 24% and then rallied 31% to just below its peak in 1938. This was followed by a small wave 2 down, a small wave 3 up, and a large straight down wave 3 crash. Wave 4 up broke as an a-b-c-d-e triangle, followed by a decent wave 5 down. The subsequent wave 1 rally looked to have lasted slightly more than a year.

I am wondering if the aftermath of the current wave [2] will play out like 1938 - 1942. Much of the reading I am doing suggests a scenario more dire than slighly lower lows over the next 3 years.

Does anyone have any thoughts on this?

[Robert Murdoch]

In the last line of the 3rd paragraph above, I meant 1938 not 1932.

[Robert Murdoch]

One more correction of my post (2 posts above). There are so many dates involved. What I meant to say in the 4th paragraph was: So the 1942 bottom for the DJIA looks to me to be 5% or less than the 1938 bottom and it took over 3 years to get there from the recovery high of late 1938 and approximately 4 years from the 1938 bottom.

This was essentially a 4-year cycle with the 4-year cycle low of 1942 being lower than that of 1938.

I am digressing now, but I strongly doubt that we will have to wait until 2013 to see a lower low. I expect one in 2010.

[DG]

Tartan,

I wouldn't try to reconcile the two methods, but pick one and stick to it. I have never subscribed to Prechter's newsletters, but I have read his Elliott Wave Principle book twice. I didn't read his other books, but my perception is that although they are relatively good on the "big picture", he has almost no sense of timing. Granted, when trying to warn people about a macro-event of humongous magnitude, split-second timing is an unreasonable expectation. As a trader, though, I think it's more practical to keep the big picture in the back of your head, rather than front and center.

I've subscribed to Neely for a bit more than three years now. He's had one major screw-up during that time that did hurt me a bunch, when he missed that large dump in early 2007. I was holding a sizable number of call options (in fact, too sizable) and they ended up worthless. I probably lost more on that one trade than the people who Neely-bash on this site lost in total, but that's life sometimes. He's definitely a man of few words when it comes to his services and he doesn't crank out essay after essay applying wave theory to social phenomena. I think he's working on a new book, though, because he mentioned that in one of the audio files on his website. What he does do is a great job of identifying an incredible array of patterns in market prices. You are right that NeoWave is much more complex than Elliott Wave. What I would suggest is to find a market you trade frequently and start charting it, using Neely's method of charting, on a timeframe you're comfortable with and use that chart in conjunction with Neely's book to count in real-time. I actually do this for the S&P using 5 78-minute intraday periods so that I can get a better feel for the markets myself and so that I can develop my NeoWave skills. Also, for those real-time moments when, after being stopped out, the analysis he was originally following starts to work again, I can often see that happening on my own charts and get back into the market without waiting for an "emergency update". I've also read Mastering Elliott Wave 7 times now and will just keep reading it until it all sinks in. I've also read all of the Questions of the Week at least once, including some I've printed out as supplements to MEW.

I tend to agree with Neely that the market has become more complex to compensate for the fact that there are a lot of technicians out there using Elliott Wave and, as is pointed out a lot on this blog, the market doesn't like it when everyone's on the same side of a trade or forecast. Hence, you get all these new patterns and variations on old patterns that, so far as I know, EWI doesn't even consider as a part of Elliott Wave. I just find it hard to believe that Elliott himself meant for his method to be considered that static that no new triangle formations could emerge, for example.

One last thing I like about Neely compared to EWI is that Neely is very reluctant to label things as impulsive. When you think about the fact that the markets spend most of their time correcting or in corrective patterns, this makes sense.

Once the markets calm down, hopefully after the big drop Neely's looking for, I plan to take his trading course based on his new "river" concept. He's just a bit older than me and I hope he stays in business another 25 years, but I want to learn as much from him as I can in case he decides to go into early retirement. From what I know of his trading calls over the past couple of decades, I doubt he needs more money. At this point, I would never subscribe to another timing service.

It's funny you mention the question about how many points Neely subscribers have gotten during this bear market. I only have good data on the timeframe from October 2008 to now (I keep downloading the older files, but haven't had time to actually build out the P&Ls from them) and in that time Neely has taken 370 points on the Hourly timeframe, 488 on the Daily and 506 on the Weekly. I was also looking at the percentage of "possible" points he's taken, using a relatively crude measure of taking the monthly high and subtracting the monthly low from it. On that measure, Neely's gotten 32% to 44% of the potential points, assuming you timed your entry and exit perfectly. For someone trading 1 S&P contract, the total haul has been between $18K and $25K, which is a pretty spectacular return on capital.

[Ursa Taurus]

Robert Murdoch:

Thanks. But if this is a five-waver down, is this five waves of Wave A with a B and C to follow? Or does STU view this is a Grand Super Cycle decline which is five waves down in total?

[Robert Murdoch]

Ursa Taurus:

I am learning on the fly so I will defer to Yelnick and the others who have been on this website for some time. I am under the impression that STU views this as a Grand Super Cycle with 5 waves in total.

Having said that I am not sure if STU has changed their cycle degree given that they are now talking about comparisons to 1937 - 1938 and beyond.

I don't know if they have revised their outlook for when this bear market might end and at what level.

[Ursa Taurus]

RM:

Thanks. I am relatively new to EW. So in STU's view, is a GSC decline in five wives while other corrective moves three waves? (assuming it is a zig-zag?)

[Robert Murdoch]

Ursa Taurus:

Again I will defer to others as I don't get STU.

Here is a little more information on what went on from 1938 to 1942.

I went back and read the commentary more closely on the amateurinvestor.net posting and they state that once the wave A peaked in late 1938, this was followed by the the B wave in which the DJIA dropped 24%. After the B wave pullback, the DJIA rallied again but stalled out just below the peak of A wave as it completed wave C to the upside with a gain of 31%. Once the ABC corrective rally ended, the DJIA went through another 5 wave pattern to the downside before finally making a new low in early 1942 just below the low made in early 1938 as it fell 42% from late 1939 through early 1942.

[Robert Murdoch]

As I mentioned, I subscribe to McHugh. Although he missed the wave 5 down call, he nailed the plunge from September 19th to the precise date and he had a phi-mate turn date on November 20th, which was the precise bottom of wave 3.

He now has a Fibonacci cluster window of 7 trading days running from April 6th through April 15th and maintains that the bottom of wave 2 should fall there. He maintains that we are in a rising bearish wedge and is not the only technician I have seen comment on this. McHugh says there should be one more up move to complete the e leg of the pattern and this could occur on Monday and truncate and not hit a new high. His next phi-mate turn date is May 20th +/-. If the April 6th through 15th period turns out to be the bottom of wave 2, I suspect May 20th +/- may be the top of wave 3. Historically, the market is reasonably strong up to Memorial Day, but I believe the market stalled out just before then in 2008.

I still can't see how wave [2] will get us to 1050 for the SPX and 10000 +/- for the DJIA.

I think what we will see at the end of the day is something like 9400 for the DJIA and north of 943 ( say 980) for the SPX with both averages stalling out at their 200-day SMAs and the DJIA move above its January 6th secondary high unconfirmed by the DJTI (transports) which would have to get north of 3700 to be a Dow Theory buy signal. This would then launch wave [3] down.

[Forkoholic Serge]

Wave A Nov 4-Nov21
WaveB Nov 21-Jan5
WaveC(A) Jan 5-March9
Wave(B) Mar 9-May15
Wave(C) May 15th - July16-August28

[Rich S]

DG,

As one of the few on this board applying NeoWave instead of conventional EW, what do you think of Neely's latest count? It certainly looks like he's violating his Rule of Similarity and Balance. The B wave of the contacting triangle with reverse alternation is less than one third of the price and less than one third of the time of wave A.

[DG]

Rich,

I was about to fire off an e-mail to Neely yesterday about that 1/3 rule, but I measured it on the SPY and it JUST crosses the 1/3 line in price, taking the March 9th low as the low of the prior move. Oddly enough, on the SPX it doesn't cross that threshold.

So, I wouldn't bet my life on this new count, but I'm not discarding it completely either.

[DG]

One other thing about the B wave is that since it is "standing in" for the D wave in a "normal" triangle, it might only need to be 1/3 of the C wave (however long the C wave ends up being).

[Tartan]

DG:

Thank you very much for your lengthy and extremely helpful response. Perhaps I need to keep track of 5 78-minute intraday periods on the S&P 500 as you are doing. This will be a big time commitment.

I will likely do this charting and monowave analysis in Excel as opposed to my charting software. I have been Googling around trying to find software or an Excel script that will automate some of this analysis. I have not been able to find anything.

[Wave Rust]

1937 high to 1938 low.

a nice similarity of the 3, 4, and 5 waves, but in the real world of trading, its irrelelvant. its not predictive of the future patterns or economic boom or bust.

large price moves over relative amount of time have a finite number of pattern resolutions.

if these patterns mattered, why do the weekly charts for the past 10-12 years look so different?

why does prechters predictions for the Dow make him look foolish for years, but show up in the naz indices with some strong similarities?

look at weekly naz's waves since it began and then the dow from 1896. the dow's 1932 low was just a retest of the 1896 low.

so the 1937-38 pattern is over and if you expect to have some map into the future from the 1938 low to 1938 high to 1942 low for the dow, i think you will be disappointed,,, and poorer. if any index does follow that 37 to 42 pattern, its probably going to be the financials, the sox and the rut.

the old saying is, trade what you see and not what you think

wave rust

[Mamma Boom Boom]

>>a nice similarity of the 3, 4, and 5 waves, but in the real world of trading, its irrelelvant. its not predictive of the future patterns or economic boom or bust.<<

Rusty, that's also my thinking. Almost nothing about the markets are like they were in 1938.
-------------------------------
>>and suggest that we should retest the 2-4 line, meaning a fall of around 50 SP pts.<<

Looking at individual charts, I see some very stretched patterns. Also, often times a (2) retraces .618. 50 pts may turn out to be correct, but a conservative trader would be wise to prepare for something deeper, IMO.

Ned

[Wave Rust]

ned,

I don't know if a lower low will come. weekly stochastics and other momentums have given a good enough checkered flag for my higher degree/macro opinion. also, sentiment is so widely negative that its hard to see the markets following the crowd without some new crisis popping into the picture.

smart money doesnt play to the crowd, it plays against the crowd. so a smaller and briefer retrace than expected is what i do think has good odds. higher into summer then the sideways for the rest of the year.

the pullback gives every EW trader another arguing point,,, the rally was a 4! No, it was a 2! it was a 4 and a failed 5,,,

but i think the mar 09 low was the end of big A and the e of C of big A was a 3. c of C= nov 08 low and jan 09 high was d of C of big A.

now comes the big B and that could take a very long time. neely is big on time relationships so maybe DG has some opinion on the B time min/max. a lower low in the big B would have to be an iregular or expanding, i guess.

my burning question about the big B is which index will take the big B high enough to call the 07 to 09 bear a flat correction like spx from 2000 to 2007,,, ndx maybe? then get a lower low in C???

spx big A in 2002, big B 2007,,, 2009 low is A of big C. many years to go for a new real bull market.

that is my count and im sticking to it for now :) or until Duncan or DG proves i am wrong. :)

if you disagree then find a bull market during extreme socialism. socialist bear markets are plentiful and very long. add in some protectionism and some ethnic/political/religious cleansing, and it could last decades.

wave rust

[Rich S]

DG,

Personally, I'm not comfortable using price/time relationships from one market to justify a count in another. That said, Neely doesn't rule out that two adjacent waves that aren't similar in price and/or time can be of the same degree, it's just improbable that they are.

[DG]

Rich,

SPY is just the ETF for the S&P 500. One of the reasons I like it is because it immediately reflects all 500 companies in the index at the open, because it doesn't require the underlying stocks to actually trade to reflect their value. You might remember in MEW where Neely talks about the need to sometimes ignore opening prices on indices because not all the stocks are open. The ETF avoids that issue.

If you read this explanation of why the % moves in each instrument could vary, it actually looks like the ETF is the more aligned with "mass psychology" than the index itself.

http://www.investopedia.com/ask/answers/05/indexvsetf.asp

While the benefits of these type of funds are familiar to investors, the accuracy to which they track the index is not. The most common ETFs tracking the contents of the S&P 500 and the DJIA are Spiders, or SPDR for Standard and Poor's Depository Receipt, and Diamonds. Both of these trade on the American Stock Exchange under the symbols SPY and DIA and can be bought and sold at anytime during market hours. Both of these ETFs work on a roughly 10:1 basis meaning that if the DJIA is valued at 10,000 points corresponding to a dollar value, the DIA will be around $100. It is a rough equivalent because the ETFs are constantly traded in the market, their value will not always mirror the index. For example, it is not uncommon for the S&P 500 to be up for the day while the SPY is down. The reason for this is that the index tracks the return of the underlying stocks but is not traded. The ETF, on the other hand, is a depository receipt of the underlying stocks that the index tracks and it is traded daily. It is the trading of the ETF that causes the variation in returns with the S&P 500's. For example, if all of the stocks in the index are up during the day, the index will also be up however if investors in the ETF sell because they do not feel good about the prospects of the market looking forward, the ETF will be down. However this is not be a major concern as the divergence between the index and its ETF are relatively minor and tend to revert back to each other. The reason for this is that the underlying value of the ETF is the companies in the index itself so there is little reason for the two to vary widely.

It could be that the count is wrong, I won't deny that. There's also the issue that this would be our second consecutive reverse alternation contracting triangle, which would be odd. I'm still not completely convinced that the A-wave is still the "real" count and that it's just extending in time.

[Bollinger]

Nominal or real ?

When discussing long term (ewave) counts is there any consensus on whether the count should be based on real or nominal values.

For instance Dow is very different between 1966 and 1982 depending on if you look at the nominal values or inflation adjusted.

[da bear]

the inflation adjusted Dow is in Wave C down.
Prechter's books had the Dow in Wave B in inflation adjusted terms for awhile.

Wave 5 peaked in adjusted inflation terms in the 1960's.

da bear

Wake up and smell the tulips.

[DG]

Bollinger,

I count in what impacts my P&L, not some theoretical constant dollar value. Here's Neely's take on this:

Does inflation effect Elliot Wave/NEoWave development and should I "fix" it by plotting in constant dollars or just forget about it and plot in current dollars?
Answer:

A market's historical price record is the result of of thousands or millions of traders interacting based on known and anticipated information at the time. If you alter that information you run the risk of inadvertently "filtering out" potentially critical behavior. When inflation exists, "markets" and people know it and respond accordingly. Whatever impact it has on wave structure is important and should not be ignored or altered.

Keep in mind, inflation is not an unexpected, natural, external force (such as hurricanes or earthquakes), but a man-made phenomenon caused by human decisions. As a result, even inflation becomes part of the human experience and "rhythm of life" that wave theory quantifies and categorizes. As a result, when following any market, I never attempt to alter the original transactional data for any reason.

Finally, don't forget all markets progress on a percentage (not arithmetic) basis, so the best wave structure and channeling will be accomplished on a logarithmic (or semi-log) scale. By its very nature, logarithmic plotting dampens a market's arithmetic progress, thereby automatically suppressing the effects of inflation if or when it occurs.

[Rich S]

DG,

Yes, some aberrations on the cash index can occur at the open. One way to deal with that is to ignore the first 10 minutes or so. The ETF, like the futures, can have some expectations built into the price, so I think cash is more "pure." As far as the count goes, the next few days should provide some clarification.

[Rich S]

My count had a possible terminal concluding late Thursday. We would need a drop in the SPX to 770 by the close of Monday to confirm. So far, Sunday evening, the futures are down sharply.

[Le Chiffre]

Hi Tartan and DG,

I'm also working on an Excel sheet to handle the monowave analysis, along with automatic checking of the NeoWave rules do help with the structure labeling. I'll share it if you're interested, after I've put the finishing touches on

Cheers,
Le Chiffre

[Mamma Boom Boom]

Rusty, you lost me in the prattle.

Ned

[da bear]

is this too far of a retrenchment for a small wave ii down of this Wave 2 up?

DJIA flirting with 7,500. that could be the new line in the sand...

da bear

[TD]

Yelnick,

Please critique the count wherein we may have just completed a wave 4 Flat.

three waves up from November 21 for A;

three waves down from January 5 for B; and,

five waves up from March 6 through last Friday. Wave 5 down commencing late

Friday? Anyone?

[chris papalado]

Le Chiffre,
I am interested in receiving the files.

Thanks

[email protected]

[da bear]

DJIA close above 7,500 today or Total Global Bank Run tomorrow...

It's just that simple.

Pass it on.

I'm tired of this shit.

If anyone wants my personal cell phone number send me a private message via the wal-streetweak.com message board. we'll chat. lol

Hint: take yer munny out in fives and in pennies. or tell the PPT fuckers to get the DJIA to close above 7,500.

Because if i don't get my Springy Suckers Rally then it is O-V-E-R.

da bear

All 'Their' Fiat Metals Are Belongs to We The People.

[Tartan]

Hi Le Chiffre:

It would be great if you would send me your spreadsheet. My email address is [email protected]

Thanks!

I developed a spreadsheet myself over the weekend to plot 5 78-minute intraday periods on the S&P 500 (10 data points per day) and 1 390-minute period per day (2 data points per day). It allows me to manually eliminate points to create monowaves based on my visual assessment of the Rules of Neutrality and the Rules of Observation. It then processes the NeoWave Retracement Rules (1 to 7).

I have not yet attempted to have the spreadsheet process the Pre-Constructive Rules of Logic to provide Structure Labels). Doing so will be much more complicated.

The spreadsheet is still very rough. If I get it into a shape that it is usable by others then I would also be happy to share.

[Wave Rust]

ned,
point out the peanut prattle parts :)) and I'll try to fill in the holes.

markets look bullish to me even with all the socialist federal acts,,, but current rally is a B of probably a primary or even cycle degree C wave. the A of bigger C was 10/07 to 03/09.

wave rust

[puravida19]

S&P500 just bounced below the .382 line of 781.20 to 779.81 and up to 783.91.

[da bear]

7,522.02

Disaster averted.

da bear

[Jim]

Do any of you know how to connect two charts, e.g. 60 minute and daily, and plot channel indicator in 60 minute chart based on daily data?

in the large indicator;
manual_name, e.g. gold_daily_large1

in small set the property;
manual_large_name to the same string

I have no idea how to. Thanks in advance.

[DG]

da bear,

I don't know, but having a nice round number like 7,500 being the line in the sand between disaster and non-disaster seems pretty arbitrary. Why not 7,501 or 7,499 or 7,522.03?

[da bear]

DG,

well, on the way up i thought 7,500 would tell us if a true sucker rally was here. that was met after DJIA was denied at 7,400. so i think a close above 7,500 DJIA was key. Hence, the line in the sand on the ceiling (upside) will also be the line in the sand in the basement (downside).

hey, if the PPT did not agree with my logic then DJIA would have closed under 7,500. lol

oh, the futures are up which is good.

oh hey i forgot. since EWI ripped my evoking of the 1937-1938 bear market then quite possibly the next STU will say "DJIA closed above 7,500 CRISIS AVERTED!"

last spring before the final run up to 11,800 i put out a "Simply Fabulous Letter" that spelled out why a rally was due, and why THEY would let us all go watch the Batman movie and take the Dow to around 12,000 in a three wave elliott advance. ... shortly after that, EWI put out the same forecast basically, as did Robert McHugh and also Granville. lol

oh, if 7,500 marked the closing low of ii down of Wave 2 up then will I get another mention by Yelnick?

da bear

Wake up and smell the tulips...