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Monday, September 28, 2009


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The main problem with trying to correlate the 2007 US top with the 1989 Japanese top is that the move into the 2000 top is actually the most similar to the run-up in Japan. The 2007 top in the US was the culmination of a long grinding move higher, not the end of a sharp, nearly parabolic move, as in 2000. The same amount of distance covered in the 5 years following the October 2002 bottom was covered in 3 years in the run up to the 2000 highs. This is one reason why Neely has consistently said the move from March 2003 to the all-time S&P high was not an Impulse wave.

If anything, I would say that our 2007 top's closest analogue on that Nikkei chart is the move up after the first "X we are here label". I would label that X as A, the retest of the initial bottom as B and the move up as C in a C-Failure Flat. The "X Next Stop 2011" would then be analogous to our March 2009 low.

On the Neely blog, we've been discussing the potential for sideways trading over the coming months, so the period of sideways trading in Japan before they finally broke the 1992 low might be something we also see here, before breaking the March 2009 lows, which I think we need to do, just not in the way Ned's chart lays out.

Mike McQuaid

NDX gapped up today and only pulled back 25%, of the rally from Fridays low to todays high, into the close. The SPX rally off the March reversal is about a week shy of 7 months in length. This rally has legs, the path of least resistance is up, the trend is up.


This 7 month rally may ultimately have more upside but there will be some kind of a correction within the next 2 weeks or so if it hasn't already begun.

The degree of this bear market has to be appreciated though, there is no need to rush in or out it will take it's sweet time going up and down for many years to come and affords a bit of a buy/short and hold strategy at a weeks to months timeframe.

A 1970s style market but with a 4 and 5 digit Dow instead of 3.

Meantime our cash becomes trash while Precious Metals show their mettle.

Mamma Boom Boom


I have given this much thought, and have had many discussions concerning the technical structure of the market after 2000.

In the past year, I have come to the conclusion that the Kondratieff Winter, or Fourth Turning, actually started in 2007. The period of 2000-2007 was an X wave, a stall, or a period of levitation that will be an anomaly in history. The technical picture of the market is not as important as the damage or change that did, or did not, occur to society. And, we must admit, society treated that period as a bump. But in 2007, the real damage started being felt. And since then the damage has been severe.

Using my correlation aligns so perfectly with the fundamentals.

Of course, it's up to each individual to make their own determination. It's you life and your prosperity, that's at stake.


The period of 2000-2007 was an X wave, a stall, or a period of levitation that will be an anomaly in history.

Do you mean 2003 to 2007? 2000 to 2003 were pretty brutal years for those long the markets and optimistic about the economy, notwithstanding the damage from September 11th.

Mamma Boom Boom

>>2000 to 2003 were pretty brutal years<<

I simply mean that most people consider that period as a bump in the road. But, most people don't trade the markets, they are in for the long slog, and don't notice monthly or quarterly problems.

Mamma Boom Boom

More on J-Pan, today:

"Japanese deflation is accelerating. Consumer prices ex-food fell a whopping 2.4% in August, the largest decline ever since records began in 1971.

This beat even July's previous record-breaking 2.2% drop. It was the sixth consecutive month of declines.

Even after stripping out both food and energy, prices still fell 0.9% year over year, as they did in July. This is one of the largest drops on record, only surpassed by a few months during 2001.

Japan's never-ending horror story should serve as a warning for the US. Sometimes even easy money and massive stimulus aren't enough to keep deflation six feet under."


I simply mean that most people consider that period as a bump in the road. But, most people don't trade the markets, they are in for the long slog, and don't notice monthly or quarterly problems.

The markets were in the news a lot due to the dot-com bust, as was Enron, WorldCom, Adelphia, and other companies. You didn't need to be a trader to see the economic landscape deteriorating from 2000-2003.

I was just trying to get a sense of what you might mean by "x-wave". I do think something of significance happened in 2000-2003 and the "cure" to that something was another bubble even bigger than the prior one.

In Elliott terms, Neely has labeled the move from 2003 to 2007 as a B. B-waves are what are known as "sucker's rallies" in layman's terms.

Doroteo Arango

Neely's service is a waste of time and money.
Gleen is a loser. He makes his money from selling his publications.

Many people here defend him, but I know Glenn in person and the thruth is:
He is NOT rich, and he makes his money from his website not from the market.

I challenge anyone here to prove me that Glenn Nelly is rich from his trading.

Mamma Boom Boom


Your still missing my point, I'm talking about 'social damage', 'life changing economics'.

But ok, let's talk about the technical pattern of the stock market during that period. 1st, somewhere around early 2005, I decided that the rally off the 03 low was something other than a typical correction, it was dragging out too long. I didn't know what it was, but it was different. Ultimately, it turned out very different depending on what index you used.

I realize Neely has labeled it a B, using S&P, but I have trouble with that. So, since we have the X wave to fall back on, to describe what we don't understand, then I'll call it an X wave.

Clearly, our 200+ year old economy rolled over in the late 90's, our politicians turned traitor to the people. To explain what I mean, I think of a developed society as an ecosystem, or a vivarium, everything is there to sustain life. But in 1993, our elected leaders removed the jobs, an important element, when they signed NAFTA. That marked the end of our society. Within 5 years jobs left the country in thousands, and businesses failed by the dozens. All that is now picking up speed.

2000-2007 stalled the process, but it didn't stop it. I guess it was an X wave.



First of all, I challenge you to prove you know Glenn Neely personally. Secondly, here is a tidbit that, if you understand Neely's trading and risk methods, allows you to deduce in some way what his trading capital is:

My suspicion is that Neely has had a crisis of confidence, and little hints he made during the seminar about losing $70,000 US in a day makes me think that he may have recently suffered psychologically as a trader

Then, there is this quote from an interview he did online:

NEoWave™ evolved over years, but my first big trade - which you may have heard about in an informercial on TV - was a short position in the Australian Dollar. It was right before a major, six-month Terminal ended near the highs of 1986. The aussie dollar went through its most powerful decline in history and I was in right from the start and got out, 1.6 million later, a week from the low. Probably the most exciting trade of my life.

If Neely never risks more than 2% of his capital in any specific trade (I am 99% certain that the trade in question was the big drop in late February 2007), then, by deduction from the $70K figure, he is worth at least $3.5 million in trading capital, which is probably not his entire capital/net worth. Now, he might have put all his money into that one trade, I don't know, but that seems highly doubtful. I also don't know how much he put up to make the $1.6 million on the Australian dollar trade, but it would clearly mean that he'd made over $1 million trading, which is not nothing, especially if he's compounded that $1.6 million over the years. I can't "prove" that either of these two things are true and Neely hasn't sworn to them under oath, but they are out there as data points for the person who is willing to do the due diligence and use the Web as a research tool.

He is NOT rich, and he makes his money from his website not from the market.

His website gets less than a couple thousand hits a month (go to any website that tracks hits by URL and you will see what I mean), which means that he probably has less than 1,000 subscribers overall. If each subscriber subscribes to 1 service or even 1.5, that puts his revenue per subscriber around $400-600/year. Then, subtract out expenses (employees, rent, data feeds, etc.) and he clears MAYBE $100k/year, pre-tax. Even if it was $150k/year and he's been doing the newsletter for 25 years, that still doesn't put him in a position where risking 1-2% of his capital could lose him $70K in a single day. Again, I fully admit that he may not be following his own risk management and position sizing rules, but he seems like the kind of person who is very adamant about those things precisely because he has been burned in the past and wants to avoid that financial pain.

Please, tell me where I am wrong, using analysis, not simple assertions, none of which can be proven. I don't understand why people are so gung-ho on dragging the poor guy's name through the mud.


Also Doreteo, it's quite cowardly to claim you know someone in person and then hide behind a fake name. I do not claim to know Neely in person, so me using a screen name is a non-issue. I would be interested to know your real name so that I could e-mail Neely to see just how well you actually know him. There is a world of difference in defending someone based on their publications and track record, as those are known to the public, versus badmouthing a person based on an alleged personal knowledge of their finances and sources of income.

What I think I know about Neely and what is actually true may be two different things, but nothing you've posted here gives you any credibility in establishing that.


Today is 55 Fibonacci trading days from the July lows.

Check your indicators, start looking for shorts here.


A friend of mine collects all the stats from the exact trading signals given on the Neowave web site.
He is up something like 60% on the spx and 10% approx on other pairs.
I dispute that his web site is a waste of money.

Mamma Boom Boom


My guess is that Neely uses some different routes to get there, but how much different is my final destination than his?



In a weird sort of twist, Neely has become open to the idea of being less bearish. That was the e-mail he sent out a couple of weeks ago to float the idea. I don't know exactly what other feedback he's gotten on that idea, but I am not at all persuaded that the low is in, although I could see the final low being around 500 on the S&P, but I have a hard time seeing the March lows as "the bottom", so in that sense, I, at least, am in some agreement with your destination. In my first post above, I was more pointing out something I saw as a relatively small issue, but I agreed with your overall thesis, which I take to be that in an unwinding of the magnitude we are witnessing the first low, even though it is accompanied by extreme pessimism and promises of strong action to counteract the forces driving the market down, isn't the final low. I agree, but I'm not Neely, so that's just me.

I think if you had a gun to Neely's head, he'd say he just doesn't know if the low is in or not, whereas a couple of months ago, he would have said absolutely not. The oddest thing is that Neely's new scenario, as far as I can tell from my reading of all of his writings on the subject of Elliott/NeoWave, is not a "legal" scenario. I know he is open to markets evolving in ways that can't be predicted in advance, but it strikes me as a bizarre sort of twist at this juncture.

vipul may stop by and add his thoughts, too. He knows NeoWave as well as anyone.


What comes to mind, in absorbing the debate about how good NeoWave is, or how bad Prechter has been (but today's a new day), is that neither Neely nor Prechter is the issue. Nor is it the few hundred bucks that someone probably wisely decides to spend to get their view. The issue is whether elliott's theory, as presently guided by the experts, really helps me trade better or not. For one thing, I got pretty hyped up when Neely made his bold June call (credit to him to have the courage of his convictions). This time round it didn't help.

In general, one can't fault the wave theory any more than its pundits. For good or ill, it is how we think and speak about the markets. And generally speaking, the theory often holds true. The 3rd wave of an impulse move will be the strongest, wave 2's are often a good place to get long or short, the 5th of the 5th can be a beautiful thing, etc.

Many of us have spent years studying elliott, fibonacci, gann, andrews, and the hundreds of major and minor offshoots of these. Each of these tools can be stunning...SOMETIMES.

Expressions of order are ubiquitous.

In my on-going research, I find hints that there may be intrinsic structural relationships between the various theories. For example, I suspect that Gann's squaring of price and time can directly inform the wave count, if we knew where to look. Neely thought wave 2 was over on June 11th. But the low that followed in July was at a precise squaring with the March low. This often portends further highs and could have warned that the upmove wasn't over.

So really this is in support of the continued search to undertand. The tools are there in front of us. But perhaps they fit together in ways as yet unseen.

Newbie Ewaver

Neely is rich, and not just in money. Friends and health are riches, too.


Ned, your idea has merit. I have called the period 2003-07 the Greenspan Indian Summer, the extension of K-Fall to push off K-Winter. The Austrians believe the central bank can reflate and reflate to delay the inevitable deflationary depression, but eventually reflation fails and a worse crisis hits. That describes where we are today. Bernanke is trying to reflate one last time, but it is not taking. Read Mish's blog today on how bad deflation really is (Mish swaps out the CPI 'rental" calculation and swaps in the Case Shiller price index - BAM -6%). We all remember how badly Prechter called Oct02, and kept expecting the bounce in 2003 to end shortly. So perhaps it is best counted as some type of extension wave.

Let me ask you to refine your count. An X wave 2000-2007 is only a twofer. Perhaps the orthodox top of this market was in Jul98, and the action since the X? The first reflation was Y2K and caused the Naz to double from Oct98 - Mar00; the second was 2003-5 and caused the housing bubble.


Hi Bird

I am interested in knowing how the July low squared with the March low.

I understand if you do not wish to disclose.


Yelnick I just read this article the AP put out "-- To prevent inflation from taking off, the Federal Reserve will need to start boosting interest rates quickly and aggressively once the economy is back on firmer footing, Fed officials warned Tuesday.

"I expect that when it comes time to tighten monetary policy, my colleagues and I will move with an alacrity that, if needed, will be equal in speed and intensity" to when the Fed was slashing rates to battle the recession and the financial crisis, said Richard Fisher, president of the Federal Reserve Bank of Dallas.

Although Fisher has a reputation for being one of the Fed's toughest inflation fighters, it marked the second such warning by a central bank official in recent days. Fed member Kevin Warsh on Friday said the central bank will need to move swiftly when the time comes to raise rates."

I am confused, you keep referencing deflation, not inflation. Your thoughts!



I posted Neely's "Question of the Week" response dealing with Gann yesterday. Here is what he had to say about combining Gann with wave theory:

Are you keen on supplementing Wave theory with the works of W.D. Gann?

My answer to this question, sent in by Karun Verma, may jar some of you. During the first five years of my career, I spent a great deal of time studying concepts presented by W.D. Gann. I read his books - most of which were poorly written and organized - and tried to apply the ideas in real time. At first, the process appeared promising, interesting and challenging, but ultimately unfruitful. By far the most useless and illogical Gann concept is that of "Fan Lines." Moving up at a "45 degree angle" is different (for the same market) depending on the time and price scale employed, even if using the same Daily, Weekly or Monthly bar chart in each instance.

It wasn’t until many years later, after wasting at least half a decade studying the concepts, that I realized the problem with Gann’s work. Nearly all of his techniques produce a plethora of potential outcomes, but leave no certainty. Therefore, instead of narrowing down possibilities, his techniques increase the number of possibilities, preventing one from arriving at any logical or rational game plan for trading.

All good trading techniques must first focus on risk management and risk reduction, then stop movement and lastly position liquidation. No such process is clearly or logically spelled out with any of the Gann techniques I’m familiar with except his Swing Trading process. After 5+ years studying Gann, the only thing I came away with was an upgraded approach for following market advances and declines (based on Swing Trading). This new process I call the MotionLine and is a crucial part of my new NEELY RIVER trading technology, which I teach in my private trading classes.

Notice what Neely thinks are the key elements of trading, which I've bolded. He doesn't think that certainty with regard to trade entry is a key element of trading! I find this a fascinating perspective. Why? Because it means that it is very unlikely that anyone has an "edge" when it comes to entering trades, but that by using the other four elements Neely does identify (all of which are under your control, also), one can achieve superior performance. Thus, even a small edge in entries can pay off in a large way, if the other four elements are practiced correctly. Of course, the main problem with not having an "absolute" edge is that any one call (e.g. Neely's top call) has a positive probability of being wrong. There are no methods of analysis for which the longest "losing streak" is zero.

Here is what he had to say about his June 11th call (you may have already seen this one):

Question Of The Week - Library Of Past Questions
View More Archived Questions
The market has moved higher since you called for a top. Is that a failure of wave theory or did you make a mistake or misjudgement?
To understand the answer to this question requires a complex understanding of wave theory and its limitations. Most followers of Elliott Wave (EW) assume the theory is capable of explaining - in real time - all market action at all times. Unfortunately, that simply is not true. The world thought Newton had everything figured out until Einstein came along. Even though R.N. Elliott's Wave principle was the most revolutionary and comprehensive theory of its time, it had flaws, namely the absence of logic and self-confirmation (traits NEoWave brings to the table). But, even with the great advances NEoWave delivers, there are still "holes" in the theory. For that reason, there are times when EW and NEoWave analysts simply can't predict what will occur next.

For example, during the early stages of a correction (i.e., during wave-A), predictability will be high and both EW and NEoWave analysts can appear to have an almost supernatural ability to predict the future. This occurred for me during wave-A of the current bear market starting at 2000's high through mid 2003. Once wave-B got underway, day-to-day, week-to-week and even month-to-month predictability dropped noticeably, which always occurs during B-waves. The larger the B-wave, the longer the period of uncertainty. At best, during B-waves, one can hope to get market direction correct, but predicting future price action in detail is extremely risky and likely to produce embarrassment.

As wave-B ended in late 2007, structural clarity increased once again. By January 2008, as wave-C got underway, predictability returned and the ability to make specific forecasts was possible for the next 12+ months (i.e., during the first 25% of wave-C). With the first year of wave-C now history, and as the S&P moves closer to the center of an even larger correction, predictability has dropped to its lowest level since the start of the bear market September 2000. We can say with near certainty that wave-C will be a four year correction (i.e., it will last until 2012), but we can't say what type of correction it will be (i.e., whether a Flat, Triangle or complex Correction). For that reason we won't be able to predict exactly how the S&P will unfold the next few years. There will be brief periods, at major market turns within wave-C, when I'll be able to project future price action, but trading (based on wave theory) will be difficult until at least early 2010.

In early 2000, based on my knowledge that wave structure would become increasingly more difficult to decipher as the 20 year correction progressed, I began work on a completely new way of thinking about, dealing with and trading markets. I knew substantial portions of time would exist during that 20 year period where I would not be able to predict what was going to happen next, or that forecasting errors (and embarrassment, like what I experienced recently when I stated June 11, 2009 would be the high of the year) would become more common. As a result, a completely new way of looking at and dealing with markets, with a focus on trading technology and risk management, would be necessary to survive the next 20 years. That was the beginning of what has evolved into NEELY RIVER THEORY - a now crucial part of all NEoWave Trading updates.

There is always the possibility an analyst will make a mistake or miss an important concept when doing wave analysis. That does not change the basic fact that wave theory does not have all the answers at all times. It is for that foundational reason I missed more than half of the March 2009-to-present rally in the stock market. It simply was NOT predictable and could not be counted on. That statement is correct whether other EW analysts took the chance and stayed bullish on the market from March's low. Logically speaking, and from a certainty and safety standpoint, only 1/3 to 1/2 of the March-to-present rally could be depended on. The rest of the rally did not ruin or negate wave theory (structure could be adjusted to allow for it), but the rally could not be expected with certainty at the time the pattern was developing.

I know that some critics of wave theory will say, "No crap it sucks. Tell us something we don't know." The problem is that those same critics will then point to other tools or indicators and say that those are the way to improve one's trading. But, anyone who's ever tried to trade using, e.g., the RSI, knows that it is nearly impossible to get consistency from those methods. In my own trading, I used to watch the indicators at every day, which is probably the most comprehensive indicator site out there, but had very little to show for it from a P&L perspective.

What am I trying to say here? That filling the "holes" in wave theory with any of the other tools/indicators (even the one with my favorite name "The Ultimate Oscillator") out there is likely to be a dead end.

Where does that leave us, in my opinion? It means we can never be certain that our entry point is the right one, but that if we use the standardized patterns in NeoWave as our guide, we can always find the closest possible point in price or time to prove that our entry point wasn't the right one at the time we entered. The simplest example is, if you think you've entered a long trade at the end of wave 2 down, you know that if whatever you bought keeps going down past the beginning of wave 1, you were wrong.

It also means that sometimes, we'll enter at the right time, but for the wrong reason. In mid-July, I saw structural evidence that made me think we'd reach 1050-1060 and posted something to that effect on my own blog. Funny thing is, that count turned out to be completely wrong, but we still reached those levels and, since I had a long bias during much of this time, I was able to profit from that wrong count just as much as if it had been the right count. Even when I did change my count, the bias still turned out long most of the time and when my bias did turn short in mid-August, the risk management techniques in NeoWave still allowed me to make profitable trades in the short time that the market had turned down. So, even though I never really had the right count in July or August, I still made money doing my own trades with NeoWave. I've had the same count throughout September, more or less, and it's been profitable as well. The month is now coming to an end and I may have to change the count again, but I still made money off the wrong count this month, too. It can't be the counts, because they haven't been right, so by process of elimination I believe it is because I follow Neely's 4-step process outlined above.

Hank Wernicki

Huge Gap Down tomorrow on the Open


Some of you touch on similar experiences to mine. To this I can add that all TA tools have merit to someone at least.

From what I have observed, the TA tool is never the problem. It is the weilder of the tool where the "problem" lies.

If you think about it, people create the tools. The tools are incapable of doing anything but doing what they were created to do. How someone uses a tool however can vary significantly.

Everyone possess unique observational "powers". One's mood, emotions, personal experience, training and even one's IQ introduce wild variables as to how one will actually perceive what a TA tool presents and then how one will respond.

Anyone who has acheived consistent success at this trading/investing game has worked hard at it and has found a combination of ingredients best suited for him or her to acheive success.

All tools have some degree of merit. The combination of tools one can weild well are the one's that will help attain whatever objectives have been set and it's not always huge truckloads of money.

One of the reasons I think Prechter doesn't make many good market calls (if you think about it he should be able to) is because his true passion is closer to that of predicting human behavior (his study of psychology probably left him jilted in this respect).

I know very little about Neally and nothing first hand but whether he's rich or not matters very little as to whether NeoWave is legit or not. If his focus is on something slightly different from becoming super-rich, the Uber wealth will just not materialize.

We are all capable of accomplishing what we set out to if we; 1. Take the time to clearly state our objective; 2. Learn to use or construct the tools we need to get the job done. 3. Learn furthur by observing others with similar skills and objectives to ours.

If one does just these 3 things really good we arrive. Our own personal life force and IQ then more or less dictates how long it may take. We all know trading is not an easy game so why not simplify our task as much as possible?


dan, check out this post today at Mish's site: Bill Gross Bets On Deflation. Then scroll down and check out this one: Economic Madness Is Repeatedly Endless on Japanese deflation.

The Fed is in a box. They have monetized way too much private debt. They essentially are the mortgage market right now, and the commercial paper market, and so forth. How do they unwind those positions when the private economy is not recovering (government life support is not recovery)? They fear deflation but it will save them, since the USD will rise even with low interest rates. In any event the more they try to increase their cred for inflation, the more the smart money like Bill Gross are betting on deflation. Why else is the yield curve flattening? Normally in a recovery the yield curve steepens. If anyone out there really feared inflation, the yield curve would steepen as long rates would rise on anticipation of inflation.

In the Wizard of Oz, the characters were symbolic. Wicked witch of the East = JP Morgan. Of the West = SF RR barons. Wizard himself was the Prez. Yellow brick road = gold standard. The politics of the time wanted a silver standard and cheaper money, and their hero was the cowardly lion, Wm Jennings Bryan, who ran for Prez three times. This time around our Wizard is pushing cheap money. You can read more here:

Relevance? The Fed is engaged in a huge misdirection. Don't watch the man behind the curtain! All they have is their presumed omnipotence to maintain confidence that they can make their way out of the trap they are in. Lose that, and the wheels come off.


This is an excerpt from a post on how to "Trade Like A Scientist" and the mistakes some traders make when they don't do so. In my opinion, this is the way to treat a trade and I think trading is exactly like science in exactly this way:

3) Mistake #3: Not Knowing When You're Wrong - A scientist does not actually test his or her hypotheses. Rather, each experiment is framed as a test of the "null hypothesis": the proposition that variables of interest do *not* affect the outcomes under study. Scientists thus never accept their hypotheses; they at best only reject null hypotheses. Embedded in this perspective is the idea that it is crucial to know when it is necessary to accept that mull hypothesis and conclude that a view is not supported. Can you imagine a qualified scientist becoming emotional because an experiment produces no significant differences and then conducting numerous revenge studies?! Traders, however, sometimes do just that. They don't have rational stop losses identified and so can't terminate their "experiment" at a prudent time. That leads them to take on excessive losses and react out of frustration rather than understanding.


Taz, what is your email? (Yelnick, is there a way to share emails addresses privately?)

DG, Thanks for your comment. First, everyone is going to see some things and not others. That includes Neely. I could be wrong but I think he missed some relevant things about how Gann's theories might relate to wave structure. For one thing, and this is not what Gann did but maybe worth looking at, when price and time square, sometimes they do so via the golden section/logarithmic spiral. The "square" part is just a part--the part Gann saw. So fibonacci and Gann squaring and elliott wave could well be one movement. When price meets time at a corner of a spiral, you might just have an important piece of information as to the overall wave structure. At least sometimes anyway.

Mamma Boom Boom

>>Let me ask you to refine your count. An X wave 2000-2007 is only a twofer. Perhaps the orthodox top of this market was in Jul98, and the action since the X?<<

Yelnick, I would wholeheartedly go along with that. As you know, the economy actually started tanking in 98.

Mamma Boom Boom

TypePad HTML EmailI replyed at your site, this morning. Had to leave yesterday afternoon.

Turned out to be a decent discussion.

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