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« Targets for the Pullback | Main | Yves on the Flight To Safety in the Dollar »

Wednesday, April 29, 2009


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O.K. Neely...and Carl Futia is also looking for a run to 940, with not much pause in it until 900. But look at the McClellan Osc. It's been diverging bearishly with every new high since mid-March. Does this look good for continuation now? Other minor divergences in RSI, ROC.



In the previous thread you mention an important downside level of 85.81 on the SPY. Why are you considering this to be an important level? Actually, I can't see a recent important turning point at this level, so I must be missing something.



I mentioned last Thursday that I saw a triangle completing at 84.15. Since then, there's a possible flat that may have completed at today's high. In that span, the largest correction so far has been the correction from SPY 87.31 to 84.76, which is 2.55 points. Taking 2.55 points off of today's high gets you the 85.81 price. That correction took 7 of my 78-minute intraday periods to complete, so that's how I got the time by which we'd have to take that price out to make it the largest and fastest correction since the end of what I think was a triangle. The stop would be at 88.36 to start (or wherever we print as the highest price tomorrow that isn't over 88.36, so long as we take out 85.81 by 10:48 Friday morning) That's if someone wanted a short-term trading idea with well-defined risk and was based on NeoWave logic.


By the way, that last example is how I think all wave theory trading based on trend reversals should work. Put together a set of plausible assumptions based on the rules of the various wave patterns, combine them with Neely's logic rules about trend reversal confirmations, define your risk and enter when your price gets hit and exit at the exact moment when the market proves you wrong, if you're wrong. Will the trade work? I don't know, but I know what I stand to lose if it's wrong and if it's right and it's the big reversal Neely's been expecting, only it came a few points later than expected, my upside potential is a move under 800 on the S&P, which is about 3 or 4 to 1 risk/reward ratio. Also, I know I can lower my stop pretty quickly if the trade starts to work right away, since looking at the late-day move down, I'd say we have a good chance of not taking out today's high tomorrow, which means I don't have to keep my stop at today's high but can put it at tomorrow's high, lowering my risk even more.


I don't know if this has been mentioned, but how about the rally from the March low being a double zigzag, with W ending on 4/2 (at about 8080), and X being a triangle that ended yesterday morning (b ended at 8190, c just under 7800, d at about 8130)?



I don't see a double zigzag being a possibility on the S&P. With a double zigzag, you'd expect it to channel well based on the channel lines established by the first ABC. On the S&P, any lower channel line that would have been established by the initial move up from March 9th to March 26th has continually been broken, even by yesterday's low, which broke the lower channel trendline from the March 9th low to the April 23rd low.


DG, where in Mastering Elliot Wave does he cover Neowave time? I hope it's not in Chapter 3 because that material was difficult as heck and so I haven't gone over it closely.

Just wanted to share with all of you an Elliott Wave count from Robert Miner's service. It is a count that I had in my head as well. That we are in a 5-wave rise from the March 6th lows, where wave 3 explains the mystery wave (March 30th through April 17th) and wave 5 has been continuing since April 21st. Yes, I know there is a big problem with overlapping waves - that within wave 3, we have its fourth wave trading into its first wave, which is a no-no for Elliott wave purists. Miner takes this rule more liberally and believes that as long as the closing prices don't overlap, you are OK. I believe that since we may be in C-wave (since March 6th) within a larger flat correction (since Nov 21st), the 5-wave structure of the C-wave has a tendency to show corrective characteristics which is what we have here. So Miner has us completing wave 5 of 5 sometime tomorrow (if not already done today) in an ending diagonal. It would be fitting since it seems not many Elliott wavers see the potential for an ending diagonal here whereas everyone was screaming for that on April 17th, but did not get it. I'm pretty sure Prechter and team debated this count and concluded that March 30th through April 17th can't be wave 3 because it isn't impulsive enough, but I'd take this over his new preferred count in today's STU which to me is even more odd. Anyway, enough with theory, we'll see how it all plays out.


DG, at least it appears to be acting like a triangle has ended. A cycle was due to bottom ideally sometime this month, and sometimes that manifests in holding the market sideways in a triangle instead of having a big pullback. I think that just happened. The rally has more legs.

Mike McQuaid

The SPX wave 2 running correction off the March 6 originated trend reversal rally looks complete, as of 835 on April 23.
Confidence in this scenario remains as 875 support holds. XLF portrays a similar pattern and gains bullishness when 11.33 resistance breaks.
An SPX logarithmic spiral from the '07 high adds confirmation to the March 6 reversal scenario.



Yes, the majority of the time rules are in Chapter 3, but there are also a lot of Questions of the Week that deal with time relationships between waves. There is also the "logic" of time relationships for reversals, which is covered in Chapter 6 on the "Post-constructive Rules of Logic". In the case of this trade, that was the chapter I was basing it on. As of right now, the updated version of that trade is that we need to get under 86.47 by 12:24 Central Time on Friday to activate it.

I remember someone on this site was saying they had programmed a spreadsheet with all of the rules from Chapter 3. If you can find that post, that person might be willing to share.



What are the dates on the triangle you're seeing?


Hi DG,

Running triangle wave A began 4/2 at 8075.73 and ended 4/8 at 7750.85, B ended 4/17 at 8190.66, C ended 4/21 at 7791.95, D ended 4/24, and E ended 4/28 at about 7939. So there is an absolute stop at 7939.


Makes me think it's a mini version of the rally and triangle in the Nikkei off the 2003 low.


Hey guys... which is the best service Neely's or Prechter's ?

I mean to make money following the calls... I'm very interested in EW, but don't have the time to learn it, since I'm always so busy....

Which one of the services is the best?

I signed to STU and Prechter's and STU just gives opinions and probable scenarios, and not trade setups...

I do like to hear Prechter's view... probably just signing up to the Theorist? Since they have really good insight



The Dow is so odd in it's composition that I'm wary of basing anything on it, especially with all this bankruptcy crap surrounding GM, the stress tests on C and BAC, etc.

That said, I would expect a better thrust out of that triangle yesterday and today, especially since it would be a running triangle, indicating pent-up strength in the market.

Kevin Smith


I say Neely as he provides exact entry & exit prices with stop loss levels. When he is wrong he admits it. When he is uncertain, he says so. No excuses. You would be up about 60% YTD following his weekly trading timeframe w/o margin. Trading his exact e-mini futures reco's YTD would have yielded about $20,000 in profits. I discontinued EWI in December to focus on one approach.



Kevin Smith...

Thanks very much.

I only trade E-mini, what is the recommended service from him ? Is it the Trading S&P service?

That's what I'm looking for, trade setups...

I guess I could maintain the Theorist (which is way more cheaper than what i have now GMP...GMP is good but for hindsight, well---insight :D).

I like to year the more abroad view of Prechter one thing I think he's good and makes good points.

Thak you very much.

Is it true he trades along with his subscribers ?

60% YTD with a no margin acount that's really good...

thanks for the input


In my opinion, Prechter churns through subscribers. His advice has been worthless but his sensationalistic marketing and unusual name manage to lure the lemmings.

Neely, on the other hand, actually has a positive track record.

My advice is to stay clear of both and diversify into gold, cash, intl stocks and bonds. Don't worry about investment profits, just try to hold onto purchasing power and realize the world is wacky and there will be ups and downs. Find something that adds value to the world --not this zero sum whackoff stuff-- and draw your feelings of wealth from DOING not having.

Forkoholic Serge of Elliott Wave Forkology

Hey All! Quick poll about log scale. Use link to vote. Thanks
Do you use log scale chart for intraday trading?


Junk bonds, if any indication for equities, powered-up with the largest gain this week.


I think EN mentioned some time ago (maybe weeks ago - he's sharp!) that this rally could make a stab at the 200dMA. The bullish triangle scenario I mentioned fits with that. I don't like the way some things like the McClellan look, but the stop on the trade is close-by.


NeoMan... thanks.

I've only been subscribed to EWI 1 month and even so got my money back... but really liked to read the THEORIST. Other than that, STU was worthless in my opinion...

Just took a look at Neely's and is exactly what I was looking.

Don't worry I have profited a lot during 2008 where I dedicated my whole time to the markets shorting stocks and shorting more stocks.

I will now won't be able to follow so i was looking for some trading setups... will only use 10% of my capital for speculative investments such as futures... no worries there. As for silver and gold I have plenty, bought some back in 2003-2004 when I was living in the States...

Thanks once again


Salvador, when you trade you only profit when someone else loses. We all do it. Just having a bank account is a sort of trade. But making it a big part of your life can rob you and the world of your creativity and talents. I hope you have found and will continue to find time to help others. Best wishes to you, friend.


Did someone actually ask whether Neely or Prechter's better? Wow that's a good way of starting an explosion on an Elliott blog. Goody! First keep in mind when starting out that they both wildly exaggerate their reliability so you have to be careful not to take too much risk on any of their forecasts, which goes for both of them. Having said that I think you pretty much answered your own question - yes Prechter's a more interesting read from an economic point of view, so if you like his stuff why not just subscribe to the Theorist or GMP? Also they've just launched the Socionomist which should be awesome if you're into that kind of thing. On the other hand if you're looking to profit stay clear of STU there's no comparison. Neely's service is the only one that gives clear entry and exit levels and has a long track record of profitability, with low drawdowns too provided you're careful to follow his instructions properly. Specifically not risking more than one to two percent of your trading capital on any one trade. So if you own 100,000 and you trade with 10 percent of that then you will risk 100 or at most 200 per trade. That is absolutely vital as whilst sooner or later you WILL get emergency updates telling you in hysterical tones that the market is about to crash to dust you need to take care not to allow yourself to get worked up by that and bet the car on it/withdraw your life savings from the bank/run away and hide in the mountains as he does this the whole time and the odds are that within a day or two he'll send out another update informing you no less authoritatively that the markets are about to quintuple instead. The point is that everyone is vulnerable to emotional reactions to volatile markets including Neely, so you just have to keep placing all the trades like an automaton, following instructions exactly as given and taking the same amount of risk on all positions. Do that and he'll serve you well.


As far as I'm concerned nothing's changed for months now - we're still in wave 4. For some markets last year's decline is over though and the coming decline will just be a wave 2 pullback. More specifically my ultrasecret infallible superindicator now tells me that we're at 11:00. Time for profit taking.


Oh and dump gold during the next rally - it may shoot up one last time to new highs. This will work perfectly just to bring all the gold bugs crawling back up out of the woodwork before the dollar's return. Time to get a ringside seat to watch the Useless Metal crash down through the floor and squash those damn bugs.


Y: Looking at the cycles as above, the right shifting in 1987 seeems to have got adjusted to 1990. A right shifting in 2006-08 may still get adjusted to 2010-11!! And the last leg down in asset prices could well be accompanied by USD weakness and stronger demands for an alternative reserve currency or Gold.... This also seems to fit in with the Neely view on one last round of bullishness in gold....

Kevin Smith

Hulbert Financial Digest tracks Pretcher. Long-term results are not good. My gripe is that Pretcher is very good at touting his good calls while ignoring his bad calls. He called the top in gold within a day, but fails to mention that he was calling for the top from $300 to $1,000 as well.

I actually subscribed to all 3 Flash services for a couple of months, thinking I would have them tell me exactly when & what to trade. Granted it's a short time-frame to judge, but there were just too many whipsaws. The Short-term Flash service once sent an S&P buy reco, so I bought immdeiately. Less than 60 seconds later, I received a sell reco.

I seriously wonder if any of the staff at EWI trade on their own advice.

Regarding Neoman's advice in the above post about enjoying life and not getting completely absorbed in the markets, I agree. I used to follow several EW blogs with differing wave counts, and spent way too much time trying to figure out the right count. No more. I market food products for a living. Neely analyzes the markets for a living. I just follow his advice now.




Sounds like Pretcher should become a politician then.

Hank Wernicki

Does anyone know the track record for the Flash Services at EWI?

Is it posted on their website ?

Is it disclosed to the public ?


Glenn Loser Neely.


I am back!!

Glenn Loser Neely

Kevin Smith

I asked EWI for their Flash service performance record. They claimed they do not keep track of their trades as it's too cumbersome. That's a convenient excuse.


long or shorts

for people who subscribed Neowave for many years.

What is Neely's trading style?

I noticed that he trades front monthly only due to liquidity issues even if the front month would expire shortly. I also noticed that he's been looking for going shorts while he expected significant market rally. If he thinks S&P could/would rally 100-200 points, why doesn't he go long (with some protective stop orders)?

christ jesus that's a Man

Don't try to pin Neely down. Neely does what he does. Period. He's not an "Elliottician" and he's not a "Guru." He doesn't fit neatly into one of your simplistic boxes. Label him if you want. If it makes you feel better. Then throw away your labels and watch, mouth agape, as he makes call after call after call...

Magic. Neely Magic.


Wavist, You said "As far as I'm concerned nothing's changed for months now - we're still in wave 4. For some markets last year's decline is over though and the coming decline will just be a wave 2 pullback. Time for profit taking. Oh and dump gold during the next rally - it may shoot up one last time to new highs." Well, I completely agree with your scenario. Thanks for your input.


Salvador :
I have been following EWI & Neowave for a while now (thru this site and EWI's free weeks)and recently subscribed to Neowave service. I think Neely is way ahead of the pack (especially since he has a clear trade plan and gives importance to risk management)

Though I wish he underplays his successes and be modest about it. Whatever be the system one follows, I think it is important to accept the human fraility

On technical analysis and EW, I saw some observations in the previous post demanding accurate predictions and a comment that following a traditional TA is beter than EW. May be, most of the times, the conclusions are similar except that in EW, perhaps one tends to anticipate a structure and a wave pattern. To me somehow EW does seem to fit with traditional TA, Cycles, Austrian theories,Social Economics et al

Michael Lomker

>can rob you and the world of your creativity and talents

If you make a car then the metal, plastic and other components are not available to make something else. Who decides whether or not the highest use of those materials is a car? The implication behind your comment is that you know better than the poster does. Rather arrogant, isn't it? That's the base reason why libertarians find liberal philosophy so problematic.

> So if you own 100,000 and you trade with 10 percent of that then you will risk 100 or at most 200 per trade

I subscribe to both services. EWI is theoretical and far too after-the-fact to be of any use to a trader (imo). I like the Theorist a great deal but the list Financial Forecast spent half of the pages discussing sun spots. Seriously? I fully expect his forecasts to include tarot cards and crystal balls at any moment.

Neely's 1-2% trades are also fairly ludicrous. Even on the hourly chart he's often putting in 20 point stops ($1k). Does everyone have a $100k+ account for futures trading that they'll only trade one contract on? Nobody that I know of, frankly. I've been trading it at $20k/contract and the account is up 50% in six months or so. Quite impressive if traded at a reasonable leverage.


If he thinks S&P could/would rally 100-200 points, why doesn't he go long (with some protective stop orders)?

Posted by: long or shorts | Friday, May 01, 2009 at 05:33 PM

I agree with you here and in my own trading, I apply the NeoWave rules in real-time and will often trade without a recommendation. If he was expecting a 50 point or less rally, I could see standing aside if there wasn't a good risk/reward ratio.

Also, I'm not convinced that his count is right at this juncture. He's got the move off the March low labeled, tentatively, as an expanding triangle, but B is not larger than A and D is not larger than C. My own chart of the SPY indicates that we're in a diametric or symmetrical formation from the April 1st low and this formation is wave C of the original Neely count of a contracting triangle with reverse alternation. The alternative that makes the most sense, taking into consideration that the S&P made a new high this week but did not accelerate, which is what would be expected in Neely's current scenario, is that we have been in a running correction since the drop on April 20th and that we will end that correction soon and then accelerate, bringing on the 100-200 point rally. That just seems less likely to me, though.

Neo Guy

Michael Locker wrote: "If you make a car then the metal, plastic and other components are not available to make something else. Who decides whether or not the highest use of those materials is a car? The implication behind your comment is that you know better than the poster does. Rather arrogant, isn't it? That's the base reason why libertarians find liberal philosophy so problematic."

Your point is well taken. Let me paraphrase it by saying We don't know for sure the consequences of what we do.

However, I believe we can make slightly reasoned guesses. And we should try to anyway, whether we can or can't! And trading is pretty zero sum. Your brains and creativity could, in my estimation, be used for better things. Making cars? Maybe. Maybe, say, making more efficient cars or safer ones or something. Anyway, I think it's important to have other, more productive things going on in your life than trading.


I read a quote attributed to George Bernard Shaw that said "If all of the mental energy applied to the stock market were applied to fixing society's problems, those problems would be solved by noon the next day".

Life is essentially one big "prisoner's dilemma", though, because what makes sense for everyone collectively (solve society's problems) doesn't make sense individually (who wants to be the first to volunteer?). What I always liked about libertarianism is that it seems like the only political philosophy that jibes with game theory and I think game theory is the most accurate way of analyzing human interaction.

I do think some people are born to be traders. If you read "Reminiscences of a Stock Operator" and find it fascinating through and through, you are probably one of those people. This can be a blessing, since some traders can accumulate life-changing amounts of wealth, or it can be a curse and lead to financial ruin. I read the other day that 10% of traders go bankrupt, for example.


DG, love your comments and this Geo Bernard Shaw quote. But what he didn't reflect upon is the energy is on both sides of the market, and so would it be with fixing society's problems - huge gridlock! Like, well, like we have in normal politics!

It is a profound mistake to believe that a bunch of smart people would all agree on the same solution. Instead, they would behave as we see today - trying to use 'science' and the appeal to authority to stifle debate and discussion, and ram policies through the political process which are in no way proven by any sort of real scientific process. As an example, however you feel about global warming, you have to hold onto your wallet when you hear claims of a 'scientific consensus' next to fear-mongering about water levels rising 20 feet within a century. (The scientific consensus as represented by the IPCC predicts a mere several inches, not anything like 20 feet.)



Glad to see you chiming in here in the comments section. Shaw was one of those humanistic socialist types who thought socialism would solve all our problems, of course, so I can see why he'd blame everything on the bastion of capitalism.

You're correct, in my view, in what you say about gridlock and the appeal to "science". As much as I think libertarianism, or some modified version of it, is the answer to the question "How does one best organize society?", I'm continually reminded by the day's events that far, far too many people simply don't want "liberty". Our founding fathers created a government for men like themselves: go-getters who saw every new day and new challenge as an opportunity to test their mettle against the worst the world has to offer. Very few people are like that in real life. So, my libertarian leanings are balanced out (and then some) by others' leanings toward dependency on the state.

As far as appeals to "science" go, scientific studies have definitely outstripped the layperson's ability to understand them. The public gets "vulgarized" versions of science, as fed to it by the corporate/government/media establishment. And, of course, over time, consensus breaks down. My favorite science article was one that showed that about 1/3 of all scientific studies are debunked by later studies, primarily due to data quality and sample size issues, which aren't necessarily the fault of the scientists doing those debunked studies, but the way the media touts each study that fits its agenda, knowing there's a 1 in 3 chance that study will later be debunked, is ludicrous.

Regarding global warming, there was a poll of economists back in about 2003, in which they were asked which social problem would get the biggest payoff from solving. AIDS came in first place and global warming came in last of 10. It's a "pseudo-problem", but it is also something that would hand over massive powers to the authorities to regulate the human race back into its traditional poverty.


Thanks Optionist, always good to know.


Agreed, Shaw was expressing typical Enlightenment thinking - that enough time and energy will resolve everything, where in reality noone will agree on what society's problems are, let alone on how to go about resolving them, if indeed that's even possible. The best political system is the same it has always been, an apolitical monarchy appointing ministers from the nation's most talented in their areas, held in check by an upper chamber of aristocracy and a lower parliament that is elected by universal suffrage, which serves the invaluable social function of encouraging opinionated individuals to channel their energy towards fighting to get their favourite politicians into parliament, thereby defusing popular outrage and ensuring that no fundamental changes can occur whilst keeping the mob at arms length from serious decision making.

vipul garg

can you come again on the expanding triangle count since march lows?

neely at no time said that structure since march 09 lows is an expanding triangle.neutral or contracting with reverse alternation has been his forecasts..

its an expanding triangle since october 08 lows .. and E wave is in progress.
and the structure of E is really not identifiable at this point( to me )

Neo Guy

Seems to be some bullishness around here. Anybody think we're going down soon? I do. No Elliott labels. I just have a feeling, albeit informed by the sentiment I sense in friends and acquaintances and the info I infer from insiders' decisions.


Neo Guy, I think we might have seen the top last week.A few markets look set to also change direction.It would look we have a coordinated move coming from many markets at once.
I did send here last week a new article for posting that reveals the main reason for the coming weakness in stocks.




Check out yesterday's trading update. His labeling implies that we are in wave e of an Expanding Triangle from the March lows. Up until now, yes, he has had a Contracting Triangle with Reverse Alternation or a Neutral Triangle count, but he changed it yesterday to the Expanding Triangle.

I still think wave E of that Expanding Triangle from the October 08 low is a Contracting Triangle with Reverse Alternation. I think the fact that it has surpassed 875 is not really all that relevant because it has not accelerated upon passing that point, at least not yet. I think wave c of that triangle is still in progress and it is a diametric that began on April 1st. This would require that we soon top out and begin wave d down and then wave e up to finish the correction from the October lows.


DG, Peter Huber (of the geodesic network back in the information superhighway days) has a trenchant analysis of GW. His main point is that the developing world (China, India, Brazil etc.) with 80% of the world's population has already exceed the developed world in overall carbon emissions. Hence if the developed world truly tries to reduce emissions by 80%, it will be more than made up by the developing world continuing to grow. Worse, any such attempt will require huge taxes on cheap energy (oil, coal) and will perversely lower the cost of cheap energy even more to the developing world, accelerating their use of it. Put simply, if we use less oil and oil prices drop, the demand for oil will increase in 80% of the world. Again, increased carbon emissions is the consequence of our reductions. And of course as the West commits economic suicide, the Rest will be happy to pick up the slack.

Another perspective comes today from a calculation of how much we can lower our carbon emissions, and what impact it has on temperature. Their core insight is if you believe the argument that CO2 increases temperature, you can estimate your impact on global temperatures. We have had a 100 ppm increase in 150 years in CO2, and world temperatures increased 0.8 degrees C. Hence around 125 ppm = 1 degree C. They figure out that 1.8M million metric tons of CO2 raise temperature by 1 degree. That is million million metric tons - we are in the trillions here. A typical household emits a mere 24 metric tons a year, so going completely non carbon lowers temperature by about one hundred billionth a degree. Lowering the whole US by 83%, which is the goal of a law winding its way through Congress, would reduce warming by about 0.0028 degree, or less than one three thousandth. Not very meaningful! Especially if we destroy our global competitiveness in the process.

Now, I think the normal citizen can get these types of analyses. It is just that the scientific class wraps up such simplicity in mumbo jumbo jargon and impenetrable nonsense that it confuses and people (as you point out) tune off. So the challenge is not to accept the scientific priesthood's word as gospel, but for the skeptics to translate mumbo jumbo into easy to understand stories and numbers.


DG, the update reads, "As part of an expanding Triangle wave-E is typically 161.8% of wave-A or wave C. That projects a move to 1000 by mid/late April." Since he is using capital letters to denote the waves, I think he's referring to the larger correction since Oct' 08, which on his plot also using capital letters. The rally off the March lows is in lowercase letters. Also, if you focus on the larger correction since October, and take 161.8% of wave B as a projection for the end of wave E, you get 993, which fits well with his maximum projection for wave E of 1000.

But I do agree with you that how you label the correction from the March lows is unclear. If it's an expanding triangle, the waves should expand from (a) through (d) which it hasn't done. It looks to me like an upward-slanting contracting triangle at this point similar to how he initially described the correction off the Nov '08 lows way back on his 12/21/08 trading update. Wave (e) terminates at a higher point than (a) and (c), while (d) terminates higher than (b). The problem is, if it's a contracting triangle off the March lows, wave (e) cannot be that large, am I correct? I thought it was supposed to be one of the smaller waves, if not the smallest and if that's the case, any upside here on out should be limited.

My suspicion is that Neely may not know to categorize this move off the March lows yet. One part of him wants to hold out the possibility we will shoot up to 1000 in a couple weeks and the larger expanding triangle pattern since Oct' 08 allows him to make that statement(based on the 1.618 relationship of the waves). But in doing so, it would put a wrench to how he's labeled the move off the March lows so far, so maybe he just drew in the waves with the lowercase letters for now and will worry about it later. In all likelihood, any further upside should be limited which would allow him to stick with the contracting triangle intrepretation.

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