Last Chance is Not Done

OK, market is stress testing my Last Chance posts mercilessly, but has not yet blown the latest call. You can read tonight's STU during Free Week - they are hanging tough on their call but acknowledge that the market may blow it - or not - tomorrow. If tomorrow does not reverse down, today was a strong enough rise to indicate a continuation to new highs, specifically the 50% retrace at Sp1121 (Dow10334). Here is their analytical point:

[T]oday’s not the important day in analytical terms, it’s tomorrow, the “day after.” If the market remains internally strong through tomorrow’s session, then Primary wave 2 (circle) up from the March low will have a new lease on another rally phase. If tomorrow shows little or no follow-through, then today is likely a one-day short-covering squeeze that runs the bears out of the market just in time for the next leg down.

Free Week gives you a chance to check out a special STU tomorrow after the close.

Neely has been waiting and waiting to put out a position and this morning says the pattern suggests one more high (the final last chance). A break of Sp1102 confirms. His interpretation of ewave makes it very unlikely that retrace above 61.8% is a wave 2. Now, ewave rules allow a retrace of wave 2 up to 99%, but rarely will a wave 2 go beyond 78.6%, which happened today; and under Neely's rules it would have to continue in a corrective manner until it ends below the 61.8% retrace (Neely tends to end waves not at the high or low point but the break or bifurcation point). 

Final item of interest in the STU: they think Gold topped today. You goldbugs may want to mine the STU for their gold count. 

As to other ewavers, Walter Murphy notes that volume today, while high, is below the 21 DMA, meaning that unless we see a volume as well as price rise today (another big up day) he thinks this is more a blowoff top than a kickoff.

Daneric's closing post is interesting. He wonders if we are about to kickoff into a triple zigzag (rare!). An alternative is that the Dow (at least) is in an ending diagonal that is expanding. I will pose a third scenario that comes from Neely's experience (although not his current count): often after a double zigzag the next wave is a triangle. EWI would not expect a triangle ending a rising double ZZ, but their typical count would be a series of nested 1-2s, which I find they count way too often (it is their most often blown count). An ending terminal triangle looks like a nested 1-2 structure if it has a flat bottom and declining top. In any case the recent three week drop would be the X wave after the double ZZ up, and this would be the A leg of an ending terminal triangle. Watch for it, since it means the rise will not go much higher (eg. the 50% retrace) but the corrective nature of the market would extend out into Feb 2010 - consternating bull & bear alike! 

Comments

[DG]

they are blog/call followers, so they will only want 'right' calls all the time .they have no appreciation for the method .

I know that feeling very well. I used to be that way, too. Always looking for someone on a hot streak. You are right, though, that methods are what matter over the long run.

coming back to trading, though we converse quite often on your blog, but a great show with 36/5.Time and his own work are the only resources a trader controls.

Thanks, vipul. Your participation on my blog and postings here have been very helpful to me! I think your approach to trading is spot-on!

[majestic tiger]

it is difficult to come across an ewaver who respects neely and neowave as much as i do.

[TC]

"And your return figures are good but they -MAY BE - market directionality dependent – did you test your approach to other markets that may not be directionally moving & over longer periods?

I am ready to give you the benefit of the doubt but based on your record and your approach I wouldn’t be in a rush to shut down people who have been where you are now and may differ in their view. All of us would do anything to defend our convictions and you have the right to do so too but based on your saying I don’t see sufficient justification for your overconfidence.

---Greg | Tuesday, November 10, 2009 at 11:20 AM

Well said Greg.
Very well said.
:)

[vipul garg]

it is difficult to come across an ewaver who respects neely and neowave as much as i do.

[joe]

What I heard Prechter say in the begining of this rally was that he expected the rally to carry to 1000 to 1100 on the S&P. Frankly, from the time he said that in February - it did go up to 1100 - and that is amazing in retrospect. It may go to 1120 (I hope). How much precision does he really have to demonstrate here???

If it breaks in November he would be a few months off. SO what.

I really think using elliot alone on a down move is foolish, but that does mean that elliot is not useful as a general guideline.

The question is - If the market went up 3700 + points in one wave (impulse or corrective) almost straight, don't you think it has to correct back - in some fib configuration and if it is 38% or 50% or 61.8% - it is a big correction.

Let me ask this to anyone who has an opinion - say you were going to put diamonds - what month do you look at here? December options go off on the 30th and the January options on the 15th - its only a two week difference. There are no February options and March is pretty expensive. Would you go with December??

Joe

[Mark Davis]

"How much precision does he (Prechter) really have to demonstrate here???"

Posted by: joe | Tuesday, November 10, 2009 at 12:04 PM

Joe, I guess you forgot about the part where he told subscribers (who have capital to risk) in his newsletter dated August 5th to go short (50%) when the S&P was at 1000.

[joe]

I saw his August interview on tech ticker (I think) - and he was pretty clear to me that he advised going to cash, and that he was not sure where it could top - that it was too risky to bet on a rally further than 1000 on the S&P but that it could go higher in some more complex topping pattern. His original call however was up to 1100.

NOBODY is 100% right. And again, using elliot alone in a down market is just not a good idea. Seems to me elliot always works better in an up move.

Joe

[DG]

Greg,

Now, regarding your hard work ethic, it’s impressive but believe me, all guys who visit here follow markets closely too. Watching the futures and the FX after market closes is a minimum requirement for someone who wants to take himself seriously. As far as Excel, there are data providers who could help you import data. Entering data manually makes your research non real time and you are smart enough to finger out what this means.

Didn't mean to imply that I was out of the ordinary in some populations, but that the population of people complaining might want to think about their own time management and what it might mean to their ability to progress.

Your return numbers are about right on the macro-level. Where I personally thought the returns were more interesting was in the split between longs and shorts, which have been heavily skewed to the short side (70% of my trades have been shorts, in an uptrending market). So, yes, I've been swimming against the stream, but picking my spots. Once the tide turns my way, I expect the number of trades to rapidly decline. Ideally, down to a few per month.

I am ready to give you the benefit of the doubt but based on your record and your approach I wouldn’t be in a rush to shut down people who have been where you are now and may differ in their view. All of us would do anything to defend our convictions and you have the right to do too but based on your saying I don’t see sufficient justification for your overconfidence. As always, I stand to be corrected.

I can't shut anyone down, at the very least in the sense that everyone can post their own thoughts without my being able to stop them. There's obviously an experiential aspect to any trading method (you gotta "walk a mile in a man's shoes") and I just don't see any of that. I understand people feeling burnt if they pay for a service and it doesn't offer a return right away. I can even see why someone would walk away from NeoWave after the failed June top call and I'm sure even some longer-term Neely subscribers did just that, or at least "took a break" from trading with him (I know a few people who signed up for my blog did just that. It just got too stressful and I can respect that.) But, if you're going to immerse yourself in a way of thinking about markets that goes beyond the next couple of trades and tries to build a long-term discipline, you have to have some willingness to give it a fair trial. I'm not saying you should put up with Prechter's "lost decade" because that's insane and each person's going to have their own pain threshold beyond which they say screw it. But, as I mentioned, Neely's had about 30 "macro calls" over the past three years and has had about 80% success with them (I call it a success when the market moves in his direction about 10% in the way he said it would move, without an initial 10% or more move in the other direction. I also limit it to some reasonable time frame, typically about 1 month). Seems to me that's more than someone just getting lucky with market fluctuations. I haven't gone back and run any numbers, but those 30 trades alone would have led to some significantly market-beating returns. I'm having a hard time understanding why this is so difficult for people to accept. The information is out there and I have absolutely zero proprietary information about Neely. All I ask is that if people want to have a discussion, they have some direct knowledge of the topic of discussion, not "knowledge" derived from a pre-existing prejudice (against "gurus", against technical analysis, against trading itself, against EWI, whatever).

[DG]

it is difficult to come across an ewaver who respects neely and neowave as much as i do.

Posted by: vipul garg | Tuesday, November 10, 2009 at 11:56 AM

Sometimes I think it is that traders are too egotistical to allow the idea that someone else has developed something of value in the markets.

[Mark Davis]

Joe, trust me when I tell you that he told subscribers on August 5th (who had capital to risk) to go 50% short with the S&P at roughly 1000. That is a FACT and can be easily substantiated by anyone that is a current subscriber. The bottomline is that while Prechter writes well about social moods and sentiment, he just isn't very good as a TRADER. In fact, I think that he should simply terminate his "Short-Term Update" because it has been so God awful over the years.

In my opinion, Steven Hochberg and Robert Kelly have been horrible in regards to "counting" the S&P over the years and Steve Craig was totally useless during the Summer of 2008 covering the Energy Markets. They added very little value, and more often than not failed to climb on top of a move until the move was already 3/4 done. There wave counts were so "after-the-fact" that their analysis was rendered useless. I should know, I subscribed to them.

[Michael]

"Didn't mean to imply that I was out of the ordinary in some populations, but that the population of people complaining might want to think about their own time management and what it might mean to their ability to progress."

Then why not actually come out and SAY THAT instead of talking about how you manually input data into Excel spreadsheets and check on the global markets in the evening?

[DG]

Even if the market trends a small proportion of the time, we all know that according to Elliott, impulse patterns are not the only exclusive way in which a market can trend (up or down). Thus, I don't see this as validating anything that you have claimed above in regards to Neely. If anything, it does the opposite.

Posted by: Michael | Tuesday, November 10, 2009 at 11:32 AM

Eh, fair point about Impulse patterns. Still the proportion of time spent in moves that don't get retraced fully or nearly fully (over 50%) versus time spend in those that do is tilted toward the latter. If Neely's right, in his observations in collecting the data for Mastering Elliott Wave, the market spends most of its time in Triangle patterns, which essentially cover the same ground over and over again until they break, briefly, in one direction or another.

There are also more mathematical ways of showing that trending is not really a strong characteristic of markets. ARCH and GARCH and all the models built off those techniques show that pretty consistently. That is not my area of expertise, but I know enough to know the key points. Again, risk is omnipresent, trending behavior is not. This is why risk management is more important.

[joe]

I agree with you about STU Mark - it is pretty much worthess. I would never subscribe to it. I just get his monthly crap.

I believe you - but he did say the above too.

I think he has an "itchy trigger finger" and he wants to make sure he gets his call in before it does correct.

I'll tell ya though - I am getting an itchy trigger finger too -

Hope all is well with you.

Joe

[Michael]

Well folks... it's been an interesting discussion here but it looks like a pretty quiet day of consolidation ahead of Veteran's Day tomorrow. Market internals were rather tepid with NYSE breadth at 1228 vs 1850. Good luck to all!

[DG]

Then why not actually come out and SAY THAT instead of talking about how you manually input data into Excel spreadsheets and check on the global markets in the evening?

Posted by: Michael | Tuesday, November 10, 2009 at 12:47 PM

Because saying "people need to think about time management" is too generic, whereas saying what I said actually ties back "time management" in general to specific activities designed to lead to progress as a trader.

[min]

Joe and Mark Davis;

In the recent past I have had the sick pleasure to witness EWI be bullish, bearish and neutral simultaneously!

STU, EWT, EWFF, can be bearish while the analysis provided at his other site ewi.net can be bullish while he gives an interview of being neutral. I have witnessed this many times in the recent past. He has all angles covered so someone can always truthfuly stand up for the guy (pretty much like Joe is doing right now).

From 2000ish - early 2005ish I tracked his forecasts acurate 1 in 10 times. If you feel I am biased against the poor man check out his "report card" at this link —it is almost as bad but doesn't cover his calls made on STU, EWT or EWFF like my tabulation did:

http://www.cxoadvisory.com/gurus/Prechter/

I've used E-Waves to trade successfully in up and down markets. It works better when the market is tracing out impulsive waves (which can be up or down)it is not as good a tool when the market is tracing out a corrective wave and it's particularly weak in regards to timing acuracy. Overall it's a good tool if used i conjunction with other tools to shore up it's weaknesses and will always defend it.

BUT!

Prechter (and his minion Hochner) on the other hand is (are)an entirely different matter. He (they) would do everyone a huge favor to move on to a different line of work.

Those guys are bonafide shams as traders and detract from the soundness of wave theory as a useful TA tool.

[cloudslicer]

http://www.docstoc.com/docs/15724694/Dave-Rosenberg-11102009

This is an interesting piece by David Rosenburg.

[Michael]

Cloudslicer,

I LOVE reading Rosie!

He is an excellent writer in the way in which he presents economic data. Hist historical perspective and ability to cite and reference all sorts of economic data comparisions is literally unparalleled. Unfortunately, he has been biased to the BEAR side of the equation this year and admittedly been beaten-up pretty badly given the amount of EXCESS LIQUIDITY that is sloshing around the global monetary system.

I believe that he has a fair value on the S&P back down around the 825 level given $55 of earnings times a 15 P/E.

Great reading.
But take it all with a grain of salt given the amount of cash out there that has been the key DRIVER in this bull move in equity prices.

[Wavist]

I don't think there's anything exceptionally bad with making no capital gains over a period of seven months or even making a small loss for that matter. I think it's been pretty well established on this blog that following Neely's trades does produce fairly significant gains in the long term whilst minimising the amount lost during the periods of drawdown that everyone gets. Having said that he's done himself no favours in the way he's handled it, he should just be honest about what you can realistically expect from his forecasts in terms of accuracy. I do think it's horrendous that he first shouted from the rooftops that he had near certainty of an imminent decline to break March's lows only to post charts after it failed to materialise to the effect of our being in a period where the probabilities of any forecast being correct were always very low. Somewhere along the lines he must have started to lose his memory (to be charitable) and would undoubtedly lose a law suit brought against him for negligence, indeed his actions bring several fairly recent hearings to mind. At the very least he should have issued an apology for exaggerating probabilities and forgetting his own rules instead of blaming unwitting subscribers for not being sufficiently careful to manage risk.

DG's recent posts provide more support for Neely the system developer than Neely the trader. And the amount of work that he has to put in sounds utterly soul destroying and whilst I pay him my compliments for being able to achieve success through this method it again brings up my old questions as to Neowave's practical usability for the bulk of individual traders. I am quite certain that by making a system of high complexity you progressively reduce risk hence increasing profits but the question is as to whether such an exhausting schedule can be maintained over the long term. Again the fact that even Neely himself has been unable to suggests that it's just too much. Hence the popular appeal of the 'simple crap' that has been responsible for the success of most every trading success alive today.

[Danny]

Michael,

Just a note on your comments. I don't want to bring up Daneric and Kenny, but if I was them, I would definitely blacklist you.

20 years experience? Hahahhaa

And to think that I'm the one supposedly acting like a child. Grow up man...

Danny

[Mamma Boom Boom]

I have an intermediate term indicator, I call MaxHeadRoom, that turned down today. It had been showing strenght for the past 7-8 days and making me think I might have to switch to a more bullish posture. But it turned. SELL is still the position.

[John Amos]

This Prechter dude sucks at his job. He should preach sociecomics full time and stay away from making actual predictions. He should get a teaching job in academics. You don't have to actually show results, you just need theories.

[joe]

Ned -

I think (or hope as the case may be) that there could be a last little push up - at least in the Dow. Tomorrow has seemed like a good candidate to me for the last week or so - volume will be low for the holiday and all that.

If it does come above Dow 10300 tomorrow would you be a seller?

Joe

[Danny]

Ned,

You are great!

So let me get this. Pretcher says at around 9700 DOW that he would rather be in the sidelines and you think he is wrong, right? But wasn't Pretcher the one that called the bottom back in March, a few weeks before it bottomed?

I guess you want Pretcher to give you a personal call (on your cell) and say, "hello Mr. Ben, It's time to sell." or "hello Mr. Ben, It's time to buy" right at the top and right at the bottom (not one percent off)? WTF...

Do you think he has a crystal ball or something. I think he has made some good and some bad calls. Period.. Nobody is perfect, but if you were Pretcher, you would have shorted the DOW at 14,000, longed it at 6400, and would have sat on the sidelines at 9700. Now go on a calculated those returns and come back and talk crap. I think that's a great track record.

I cant wait to come and bash you apart if this market turns down. Oh man I cant wait.

Danny

[Hockthefarm]

mclaren:

http://tinyurl.com/yjqlcmf

How about a sideways market til September. If unemployment does not improve by then, down we go.

H

[Wavist]

I cant wait to come and bash you apart if this market turns down. Oh man I cant wait.

Well the first thing that came to mind when reading that was that someone seriously needs to get a life. Then I read what Ned actually wrote - that he thought he'd have to turn bullish but with his indicator turning can still stay bearish - and on balance I think therapy would be more appropriate.

[Mamma Boom Boom]

Joe, I don't follow the industrials.

----------------------

Danny, you have obviously escaped some kind of mental institution. Go back, you will get hungry.

[Michael]

Danny obviously doesn't trade for a living otherwise he'd understand that Prechter's calls have been extremely painful over the years. Danny was most likely in diapers during Prechter's "Lost Decade" when Prechter was WRONG from 1993-2004. He wasn't wrong for just a few weeks, or few months, or few years. He was wrong for an ENTIRE DECADE. Yelnick has even pointed this out!

Danny also conveniently ignores Prechter's call in 2008 that crude oil would never get over $70. But as we all know, it soared to $148 a barrel. Time to run along and go back to school, Danny. But don't let the facts get in the way of drinking all that Prechter "Kool-Aid" you've been drinking.

:)

[TJ]

I think that this post on Daneric's blog from last night sums things up pretty well:

Harry Lime 11 hours ago

"It must be beginning to feel like religion, that is, that you've spent so much time and effort studying and learning something that is of absolutely no value and no basis in reality. Time poorly spent. I enjoy your writing, but it is clear that coin flipping and dart throwing are at least as good if not better than EW. That being said, you do have an audience, so what the heck. Priests, ministers, rabbis, imams and monks still get paid, too, and obviously they all cannot be right."

[Jack Ryan]

In my opinion, Neely's service has sucked. This mkt has moved all over and he has done nothing. yet he sent out numerous "prepare...the end is near" messages. What hubris, that has probably slaughtered some of his "former" clients.