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« Dow 10K in Sight | Main | Play Global Remembi: Dollar, Gold, Treasuries »

Saturday, September 12, 2009

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min

Yelnick,

You meant a truncated wave 5, right?

If we give Prechter the benefit of the doubt (I know I know it is very hard for me to write this) and recognize this as a Grand SuperCycle correction, comparing this to 1938 or even 1929 isn't going to be too useful.

This puppy needs to be compared to itself more so than anyhting else as the last time there was a GSC correction was a very long time ago.

If we take the prior down leg of 17 months, we get .383=6.5mo; .500=8.5mo; .618=10.5mo. your October window is pretty close to the .383 timeframe, but it could be one of the other 2 time frames as well.

There are some important cycle measures lining up for end of year as well. A pretty wide margin of time to try to time the end of this rally if the objective is to short it effectively.

This is one of the reasons why I will gladly miss the first downleg of the next major move down and will only consider shorting on a failed high after that next move down corrects.

This proved a good strategy in 2008.

One of the nice things about a GSC correction is that the component legs are broad enough to allow for positional, "low stress" trades on the corrections. This has worked well in 2009.

You can bet I will be trading like a mad dog after the first failed new high presents itself —at that point it will be worth the stress to do so. Any way just another way of looking at things for what it's worth.

john walker

Yelnick, Two questions, please:

1. why do you believe any historical parallels are predictive?? So the market traced a similar pattern from A to B .... so what? (I understand that you respect EWT, but I've never heard anyone seriously argue that finding a "similar" chart pattern is predictive.)

2. what has this continuing rally done to your longer-term forecast (which was a high approx June, low year-end, etc)?

Some things (the tax hike due beginning Jan 2010, the election year, etc) haven't changed, and it would be most welcome if you would discuss /your/ outlook (not Prechter, please!) on the market cycle.

Merci d'avance.

da bear

wasn't I the one who thought that this bottom looked like the 1938 low?
the key question here is why does prechter not read this blog?

da bear

yelnick

yep, da bear started this trend! let me know your latest update

john walker, I don't find historical analogies particularly predictive, but they are fun. My view remains that we are in a large corrective pattern into 2010, and should go down but not break last March then go up into summer 2010. the bigger drop comes after a Summer of Disillusionment in 2010, and hits a lower low in 2011, with a lasting low in 2014.

yelnick

min, I mean truncated fourth. Since truncation is not usually used for a short fourth, let me say it this way - it is a virtually non-existent fourth. The wave action down into Mar6 broke as a 3 not a 5 wave, and yet to complete a fifth wave down Prechter's group found both a small fourth wave and an analogy to 1938 where a similar thing happened. That is why they brought up the analogy - not, john walker, to be predictive - to support their very odd count.

What does this mean? Prechter counts five waves up from 1932 to 1937, but it is much easier to count only 3, and Elliott himself took that position back in the late '30s. It makes a huge difference in Prechter's long term view to have 1932 be the bottom, not 1942 as Elliott thought or 1949 as I think. It means this is the five of a five etc., the end of days, not a serious correction with more upside to go. It pervades Prechter's think and I think is why he called it too pessimistically since 1987, unlike Neely.

If you count the drop to Mar as a 3 wave, then the count shifts: Nov21 was the bottom of the large wave down off Oct07, and we are in a lengthy correction from that moment. Possibly it is a fourth wave flat, except the rise from Mar6 is virtually impossible to concoct as a 5 wave. More interesting is that it is an X wave connecting a 3 wave down off Oct07 to a future 3 wave drop. This would maintain a count from 2000 of a large fourth wave triangle, and we are in leg c of that triangle, likely to bottom in 2011. The triangle has a downward slope - a descending triangle - and the trendline from 2002 through Mar09 is likely to also touch the 2011 bottom and the eventual 2014 bottom, giving guidance to where those bottoms could be. Then a very strong fifth wave follows, to new heights.

min

Got it.

You are using truncation in reference to a very short/almost non-existent time frame.

The historical analogies are for fun. Understandable, this trading game can get very boring at times, so this is also a creative way of keeping alert.

I have other things I do, and even so, at times I still could pull my hair out.

My long term view is similar to yours with a similar end result but it's playing out a little different among the component legs.

Glad to know you aren't buying into Prechter's armageddon scenario. Barring some unforeseen freak development I just don't see that happening.

I find it hard to believe Prechter believes his own Armageddon scenario either. It's a macabre marketing devise he uses to create controversy and keep attracting attention to himself and his services. An established marketing position trick he has profitably used for a long time.

If some freakish unforseen event comes up, BAM he's a hero with seemingly magical powers. If it doesn't work out he'll just find a logical and oblique way to explain it all away to where he "proves" he was right anyway. All the while people remain curious and wondering and continueing to subscribe to his cash cow services.

MHD

min.... EWI in the early 2000's had made many bad calls. They were bearish for most of the bull move up. However, Bob P. gloomy outlook is not completely insane. A country that lives on credit and has as much debt as we do does not have a happy ending. How bad has yet to be determined!!!!!

yelnick

min, one other comment on historical analogies. I think the one area they have use beyond fun is when dealing with rare events, like crashes and bubbles. Let me explain by referring to fractals. 'fractals' mean self-similarity at all scales of time, but do not imply specific recurring patterns. in casual analysis I will refer to a fractal when I am really just noting a self-similar pattern. I think the fractal of the market is a thrust and a plateau, and it can cascade into a multi-fractal (mandelbrot's term) of many shapes. in normal markets you can find all sorts of recurring self-similar patterns, which are made up of these multifractals. in themselves they have limited predictability; this is why wave theory tries to extract the underlying order and not get fooled by the patterns themselves. Man is very good at pattern matching and therefore can easily see prediction in mere coincidence. In the case of rare events, however, the market pattern may have more than normal predictive value precisely because the events are rare. Bubbles all look parabolic; crashes all look like a falling knife with a dead cat bounce.

min

Thanks Yelnick;

I can dig it.

At these junctures there is heightened emotions. Judgement and discipline gets tossed out the window; you pull one of these similar prior events and you have some sort of road map which gives you something to help put a bit of order and perspective back in. I can see how that would be useful.

min

.MHD:

Have no qualms there and that needs to be taken into account OCCASIONALLY in very long term decisions; however, by focusing too long, and too fixedly on these long term possibilities you can get, as a result, what Prechter has gotten —many years of bad market calls and gross mis-timing of events.

Also, somewhere in his writings he makes reference to how E-waves best measure activities with broad participation and how small groups and individuals don't necessarily follow along E-Wave patterns.

In his writings he never, to my knowledge, acknowledges the possibility of a strong individual coming along with the personal, desire, charisma, intelligence and know how to engage the masses in a plan that can begin to set things right and along a more constuctive path. Ocassionaly, throughout history Individuals like these do come along and cause what are known as Golden Ages.

He should devote at least 50% of his time writing about this as it is just as valid as his armageddon orations.

None of us truly know how bad this correction will end yet pretty much all you here from Prechter is one shade removed from near total anhilation. Why so much the overwhelming conviction on the worst possible outcome?

E-Waves deal with probabilities not foregone conclusions, yet if you read his stuff doom and gloom is 99% of the vibe he puts out. Why? It probably sells more subscriptions I think.

One day the U.S. empire will be no more like every similar entity before it but I don't see that happening for quite some time. As bad as things are here some of the emerging nations now getting a lot of attention and rosy expectancies have a long way to go.

Cultures change, but slowly.

The biggest plus I see for the U.S. is that there are still a lot of good people here with good core values, integrity and the ability to change things and set things right. For the most part, we are not the decadent, corrupt, lawless society that the News and media portray us to be. It's the people running the show and a relatively small minority that, for the most part are screwing things up.

Given Prechter's poor track record, his scenario has an excellent chance of not becoming reality. I'm not saying fun times are ahead but dow 400 or even 1500? Forget it.

Back to trading though, I read Prechter's and Hochberg's stuff for about 4 years. I based my trading on their writings and it was a total utter disaster and I am not exaggerating one bit. It took me another 3 years to recoup my losses and the last 2 years it's been a dream. The biggest change I made 3 years ago is to shut out EWI completely.

In the end, for me, E-Waves is about trading results enhancement of. I purposely stayed away for most of 2009 to not begin second guessing myself on my bullish positions and they are super-profitable. Maybe I didn't need to do that but didn't want to chance it any way.

In 2008 I was here a lot —at times a bit obnoxious and I apologize for that, but that worked out also. For me, it's just about better trading results nothing else. If Prechter helps some of you trade better stick with him but his outlook caused him to miss out on many years of easy trading bull markets so I don't know how any one could have benefitted much, save for last year.

Prechter's gloomy outlook is not insane, I agree. Indeed not looking down the road to see a semi truck is in your lane and headed towards you would be insane. It's his unbalanced fixidity and conviction at the exclusion of other less dire outcomes and possibilities that is disturbing.

george

talking about fractals....
i have a pattern i would like
you to look at.
using a weekly price sp 500 chart
line chart (not bar chart)
note the following inverted
head and shoulders bottom
formation(bullish pattern)
left shoulder the middle of
november low
head march low
right shoulder end of june low
draw a line across the top of the
pattern and we have had a breakout.
if this is an inverted head
and shoulders pattern it could
pull back to
the breakout line (it doesn't have
too) or continue
higher. if you take the breakout
line level and subtract from the low
of the head and add it to the breakout
line the market could have much more
upside to go.

manav

I dont know why so many people here blame others, Prechter or Neely or whoever. They dont exactly stick a gun on your head and ask you to subscribe, do they ? Blame yourself and no one else if you screw it up --- I suppose you will congratulate only yourself if you get it right !!!

trader

George, that would be a very "crooked" inv h/s.. not impossible, but if it were, I would have assumed a mucher lower July low

yelnick

george, a lot of basic TA fails a lot of the time H&S are often seen and seldom realized. what attracted me to ewaves is the promise that the underlying order of a chaotic market was being glimpsed. when we get beyond the heavy discretion in ewave analysis we might get to real predictability

min

Manav:

I was not "blaming" Prechter. I was expressing my opinion on his lack of ability to make good market calls (save for last year) based on personal experiences and an honest effort to really follow what he says.

If I had "blamed" Prechter for my mis-fortunes I would still be sitting there with big losses which is not the case.

Obviously you weren't able to distinguish between "blaming" and my opinion of his work based on first hand experiences so I will try to write things a little simpler for you next time.

Hank Wernicki

George, the Dow rally from the July bottom is the child fractal

It's parent runs from the March bottom to the June top.

This denotes a significant turn for the DOW

Market Fractals develop in pairs


da bear

funny how i got the 1938 low correlation from a graph in At The Crest of the Tidal Wave.

i still think that the disaster scenario portrayed in Figure 5.7 of that book is still on the table. it would basically be a repeat of the 1929 crash then the rally to 1930 then the final crash from 1930 to 1932. That scenario is of a larger degree and plays out over decades but the form is very similar. especially with a primary wave 3 down that is supposed to come soon.

I know yelnick has thought that this type of scenario bears watching.

da bear

kld

I dont know why so many people here blame others, Prechter or Neely or whoever. They dont exactly stick a gun on your head and ask you to subscribe, do they ?

manav, you are absoletely correct that no one is forced to subscribe! However, the difference is that both are selling a product based off their expertise and experience.

matthew

Yelnick,

I'm new here...but have been following for a couple weeks. Could you elaborate on this?

"when we get beyond the heavy discretion in ewave analysis we might get to real predictability"...

Matthew

yelnick

Matthew, welcome! You might click on my category "elliott wave theory" or "classics" to catch up. Elliott Wave has rules (four ironclad) and lots of guidelines. Neely extended the rules to (I think) 7 ironclad. Almost every ewaver uses other indicators to make calls. Tony Caldero claims to be the most objective, and he is a pretty steady hand. Several folks have claimed trading software but it does not appear their calls are any more accurate. I think a better prediction system could be developed, although unlikely it will become fully machine based. What I worry about is the biases that creep in. Prechter is notorious for holding hard to his positions on the longer term trend (his STU moves quickly as conditions change short term), and this probably led him to miss the 1995-2000 market! A huge miss.

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