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« Bear Market Mov(i)es | Main | Gurus Go Quiet, Like The Market »

Tuesday, March 16, 2010

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Guy who likes to reinvent stuff like wheels.

I can understand, then, why a commentator with an exquisite wit posted a link to this video as his view of gurus and their adherents

Yeah, I totally agree. No one should ever try to learn from anyone else. If we did, how would we get to reinvent the wheel every generation and remain stagnant as a species?

Guy working on a new secret invention, tentatively named "the telephone"

Yeah, I totally agree. No one should ever try to learn from anyone else. If we did, how would we get to reinvent the wheel every generation and remain stagnant as a species?

Dude, you took the words right out of my mouth. I don't need to learn nothing from nobody!

GlennLoserNeely

What I've learned is that anyone that goes 200% short for 3.5 months with no stops whatsoever is an idiot. Sound familiar?

jeff

Following the Halloween 2009 rally,

We had the Valentine's Day 2010 Low.

Now we can all look forward to the "April Fool's Crash".

Jeff Clark

David

I have posted an spx update for those interested:

http://www.tradeyourwayout.com/2010/03/spx-60min-chart-update-running-out-of.html

Whitebear

If garbage such as CIT can go up afterhours after losing 1B, you bet how the PPT is losing no steam popping this market up day and night. Top? What top are you talking about????

Hockthefarm

Yelnick:

I've legged my 401k into Bill Gross' Total Return Bond Fund(PTTRX). Duration is currently about 8 years.

If you pull up a chart, performance has been outstanding.

Just hoping to hit a few singles.

It seems to me that Economists are either consumer based or economy based. Results in quite a range of future outcomes. To me it is very confusing, thus PTTRX.

Hock

Hockthefarm

Yelnick:

I'm not so convinced about munis.

Bill Gross speaks about the implications of the new normal here:

http://www.marketwatch.com/story/pimcos-gross-no-guarantees-with-government-debt-2010-03-01?siteid=yhoof

If countries are in for a rough ride, it can't be good for states and municipalities. Some munis are not very liquid and can be hard to price and unload.

Thoughts,
Hock

Hockthefarm

A good one from Andy Xie:

http://english.caing.com/2010-03-15/100126807.html

Hock

yelnick

Hock, Gross seems to have been talking about sovereign debt, not muni debt. He was worried about central banks assuming more and more liability in an ill fated attempt to restart their economies, and when the economies sputter, getting themselves in trouble:
 "Government bailouts and guarantees such as those evidenced and
envisioned in Dubai and Greece, as well as those for the last 18 months
with banks and large industrial corporations across the globe, suggest a
more homogeneous 'unicredit' type of bond market," Gross wrote in his
latest Investment Outlook, published Monday.

"If core sovereigns such as the U.S., Germany, U.K., and Japan 'absorb'
more and more credit risk, then the credit spreads and yields of these
sovereigns should look more and more like the markets that they
guarantee," he added.

"Sovereign yields will narrow in spreads compared to other high-quality
alternatives. In other words, sovereign yields will become more credit
like," added Gross            
... Gross' worries over some sovereign debt issuers is part of his broader
view of what he calls the "New Normal," in which aggregate demand and
output will be at lower levels than in recent years, and unemployment
will be higher.

"A deficiency of global aggregate demand and the potential impotency of
policymakers to close the gap are evolving into a life or death outcome
for the weakest sovereigns, with consequences for credit and asset
markets worldwide," wrote Gross.

monk

when will USA lose AAA rating?

forex-cat

Good analysis!

Michael

II Bullish Consensus came out today at 46.1% Bulls for newsletter writers and 21.3% Bears. January 13th saw numbers at more of an extreme, 53.4% and 15.9%

Hank Wernicki

Excuse me, the Parent-Child Concept is called the "Wernicki Fractal Pair Set."

Give credit where credit is due !

Hank Wernicki

cribrange

I think you have to feel for Glenn Neely. After announcing triumphantly he is launching his fund after a stellar performance in 2008, since mid 2009 he has been slapped around like a red headed step child. Today, for the umpteenth time, he has been stopped out on all 3 time frames. To make matters worse, because he has lost money and credibility, he has fallen back on the oh so secret MOAT oscillator.

Sorry the what? Ah. Old and probably very poor subscribers would know about this secret weapon of his. Allegedly. Hands up who think he's looking at the RSI readings off Yahoo Finance? I have read his book, followed him, traded off him, tracked his performance (although I am now giving it up as I have taken up Hamster breeding instead) and I am now sick of it. It's not so much that he has got so terribly wrong. It's the way he presents himself. I love the long term charts he shows with the forecast he made in 2008 of a bear market. Great call. And he keeps it there to show everyone how clever he is. However, he fails to illustrate the complete and absolute shocker in the summer of 2009. Something along the lines of 'rarely in my career do I ever make these kind of statements, but the top is in and ...'. Wrong. Wrong. And wrong again.

Cribrange

Michael

DG in 3 . . . 2 . . . 1 . . .

MHD

Why stop with Neely? It has to be quite obvious to everyone who follow ewavers that the theory cannot predict the irrational, illogical behavior of humans. I've found it isn't any better than a coin flip. The reason I've followed it for years is to see if the probabilities could be increased with ewaves, but my experience is that it doesn't work to increase your odds of being on the right side of a trend, or warning of a new trend.
Anybody new to ewaves should not invest money with these knuckleheads, but instead "pretend" to invest with their calls and see how you would do after a couple of years.
Someone like Neely, who has been stopped out so many times I've lost count, who thinks the low is in for this bear market, is really funny. The guy can't even predict short term moves, let alone announce that the bottom is in.
Maybe the bear market is over, or maybe we're headed for Bob P. depression lows. The E waves are not going to tell you where we're heading.
We all would love to have some "system" that gives us an edge over the other greater fool, whether it's horse racing or the stock market. Follow, but do not invest with their calls. After a while you will determine whether they are worth subscribing to long term and with actual money.
From my experience, you'll be glad you used pretend money instead of making that call to your broker!

DG

It's not so much that he has got so terribly wrong. It's the way he presents himself.

I think that he should tone down the level of certainty in his commentary.

To make matters worse, because he has lost money and credibility, he has fallen back on the oh so secret MOAT oscillator.

I also thought this was more of a CYA move than an actual value-added indicator. Obviously, there was a reason he stopped using it before.

Neely's biggest problem is that he doesn't really analyze his trading strengths and weaknesses, except in a very superficial way, e.g. he knows that during "wave-(B)"s, his trading suffers. He is great on the risk management side and I don't know of any better risk manager out there on the trading side. Where he lacks is in his ability to judge trading entries. When you categorize his trades by "type" (short on strength, long on weakness, short on weakness, long on strength, the various timeframes and their accuracy levels), definite patterns emerge which indicate that there are many "false positives" triggered. Once you eliminate those trades, what you are left with is quite robust and profitable. Neely's never marketed his process as a "day-trading" method, so I don't think that cutting down on the number of trades by eliminating those more likely to be "false positives" would alienate customers. In my opinion, he should only operate on the Daily and Weekly timeframes because that's where he beats the market, especially the Weekly. It does subscribers no good to trade more often if those additional trades are likely to be losers.

His next biggest problem is that he doesn't TRULY follow his own rules regarding the logical implications of market price movements outside the boundaries of the "current" wave count. He allows himself to get biased by a particular view of what the market will do next. When the market really is near an inflection point, "sticking to your guns" is fine, but when it isn't, "sticking to your guns" is a recipe for multiple sequential trading losses, which are the bane of the trader's portfolio. The problem, again, is that the market which seems to be near an inflection point and the market which actually is near an inflection point look the same, i.e. no one has a crystal ball. There are subtleties involved in this issue, e.g. anyone trading the various breakouts over the past year would have been slapped back pretty hard on almost each one, but, basically, there has never been a reason for Neely not to recommend long trades during the past year, especially once his initial hypothesis that the June 2009 high was "the high" was proven false.

There are other optimizations I've made to Neely's techniques which are more complicated, which, when backtested over the past year, would have led to 36% returns (April 2009 to present), even with just Neely's standard 1% at-risk on each trade. I've been using these methods since the beginning of the year and I'm up 7.5% since mid-January, when I completed the development.

Like anything, you will get out of NeoWave what you put into it. If you're willing to do the work, you can definitely use it as a more swing-oriented trading method by refining Neely's recommendations into the ones most likely to work and if you are really willing to work hard, you can make it into something sort of like a day-trading method (although, really, the only thing I do which is similar to day-trading is that I will enter and exit a trade on the same day if structure works out that way).

DG

DG in 3 . . . 2 . . . 1 . . .

Yeah, of course I'm going to comment on a post like that. What I posted in response is a completely evenhanded and objective assessment of NeoWave's strengths and weaknesses and actually echoes things I've posted on my blog and told Neely via e-mail as well, in the hopes of convincing him that he needs to modify his approach as market conditions warrant. He's a free man and can take or leave my advice, obviously.

DG

It has to be quite obvious to everyone who follow ewavers that the theory cannot predict the irrational, illogical behavior of humans.

If you simply make the assumption that the market is irrational and illogical ALL THE TIME, then worrying about the rationality and logic of the market at any given moment goes away.

Even from a probabalistic perspective, in any continuous distribution of prices, the odds of the market sitting at EXACTLY the "rational and logical" price is zero, just like if a friend asked you to guess a number he was thinking of between 1 and 100 trillion. You'd never guess that correct number. In the same way, the market is never at the "correct" price for more than an instant and, even then, it is more by accident than by design that it got to that price.

DG

While we are inundated with that old refrain about “not fighting the tape”, in our view, this is just a glib excuse to stay long the market because of the herd effect, and to be honest, we heard that same trite rhetoric over and over again back in the spring and summer of 2007.

This is not the time to live in the moment but to plan for the future. It is a time to reflect not what the talking heads have to say on bubble-vision but on what history teaches us in the aftermath of a busted asset and credit cycle. The Nikkei enjoyed 260,000 rally points during its post-bubble era and yet the market is still down 70% from the peak; the rallies were to be rented, not owned.

vipul garg

what happened to 'kenny gets the prize' nested ending diagonal wave count.
1166 or thereabouts was the cutoff point as i remember.

Michael

Kenny is admittedly . . . totally lost. And his followers have been completely devastated.

yelnick

vipul, in the post after the Kenny Prize posted, I said my version of Kenny's ED would have started at a later point:


I just posted Kenny's view that the Hope Rally is terminating in a large ED. If this turns out to be correct, it would give a high-confidence shorting opportunity. Some comments to the Kenny Chart criticize it, but with one change it is relatively easy to remove the most important criticism, that it begins with an ED: shift where Kenny has a green [b] ending to the next low point, and the ED starts from there with a corrective 3 waver that runs from Sp990 to 1101, drops to 1029, runs to 1150, and then drops to Sp1045.  Still, to confirm this, we need to see a sharp reversal that retraces the rise in half the time. 
That change makes 3 longer than 1, hence saves the ED even if 5 busts 1166. In an expanding ED, it shouldn't surprise that 5 is the longest. 

MHD

DG.... ewaves try to predict the herds next move. MY experience(maybe not yours) is they don't consistantly predict anything over the long or short term. Let's take Neely since 2007. He started warning of dark clouds and possible depression ahead. Doesn't take a rocket scientist to see a credit bubble that was going to pop in the not too distant future. OK, so it pops and heads toward 1000 on the S&P. Neely says that we should get a huge pop up from there. Nope, slide toward 667 continues. Slide ends and Neely says his "wave theory" puts us to 800 or so on the S&P. From there he tries to short the market many times even as he admits these are the most difficult times to short. Says market could even go to 1000 and it does and some more shorting. Market now at 1160 and climbing.
As I've said before, it's a good thing he has stops!!!
I could go on about Tony Caldero and his Dow 39000 call before the credit bubble blew up, and the his call for 400 on the S&P as the MOST likely low in this sure thing bear market, until it doesn't turn when I think it should and now I throw that chart out the window and think a new bull is on.
Now let's talk about Robert P. during the early 2000s. On second thought, let's not.
I could go on about many other Ewavers, but why bother. If you follow them long enough, you,ll come to the same conclusion.
If the Ewaves worked in the past, and seem not to now, the government might be the answer. These are not "free markets" anymore. Hard to be short when you're playing against the bulls and the printing press. What the end result of all this government stupidity will be is anybody's guess, but history shows it should not have a "happy ending"!

Mamma Boom Boom

Strange. A continual barrage of insults on peoples ability, but few offer anything positive.

--My offering: "A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy..."

Alexander Fraser Tytler, Scottish lawyer and writer, 1770

Mike McQuaid

SPX, weekly chart, 62% retrace of '07 high to '09 reversal at about 1228 as resistance. Trend is up.

Mike McQuaid

NDX, weekly chart, pushing past chart congestion resistance in '08. Resistance at 2055 and old high at 2239. Waveform is robust, trend is up, resistances are vulnerable.

MHD

McQuaid.... agree that 1228 is the line in the sand between bear market rally, and a new bull market. If we get past 1228 I think a new credit bubble is forming and the markets can smell it. They plugged the hole in the bubble and are about to blow it even bigger than before. Doesn't seem possible but a new bigger and better credit bubble is the only explanation for a new bull in stocks.

marketman

Funny how Kenny now posts a daily SPX chart with a 13day/34day moving average crossover and notes that it recently gave a BUY SIGNAL earlier this month.

After all of the "counting" of the waves (along with the typical "alternate" counts) and his followers claiming that "Black Monday" is right around the corner for the last 25 weeks straight, we now have an E-Waver that serves up a TREND FOLLOWING indicator!

And many of these guys (E-Wavers) have been the biggest critics of the classical trading motto . . .

The Trend is Your Friend!

:)

DG

MHD,

Well, I have shown the "big picture" calls Neely has made over the past 4 years. You say it's no better than a coin flip, but if you go back, you clearly see that he's been right about 70% of the time. Yes, that 70% does not take into account the "magnitude" of what he was saying, e.g. does the one call where he said the S&P was going under 400, which was off by hundreds of points, negate 10 other calls which only made 50 points? That's for each person to decide.

I guess what I never really understand is what it is people are looking for in a trading method. What kinds of "winning percentage" do you want to see? What kinds of "win size to loss size" ratios do you want to see? I'm sure you've seen the studies showing that a trading method can have 80% winners and still be a losing method because the losing trades are so much larger than the winning trades. Or the reverse, with trading methods giving a trader 40% wins and still being profitable due to the large size of the wins vs. the losses. It's impossible to have a reasonable discussion without taking these variables into account.

I get that people are dissatisfied, but what would it take to be satisfied? The more quantitative you can make your answer, the better. As I've said again and again here, the main problem in having a discussion about methods is that no one is using numbers, they are just talking in vague terms or are cherry-picking a few trades here and there and trying to make a statistically-valid argument when everyone knows that you need AT LEAST 30 items in a sample to have the bare minimum of statistical validity.

MHD

MammaBoomBoom.... not insults, just real life observations on investing with so called investing experts. It's just a watch your step before jumping in advice!

kong

I just turned off the option to automatically renew Neely's trading service. I suggest you all do the same. The guy and his methods are a complete joke. What a waste of time and money.

marketman

DG,

You can talk all you want about statistics and the appropriate sample size of data. I get that.

However, the fact of the matter is that Neely has been God awful as have been most of the other E-Wavers like Prechter and all of his "blogger" buddies that have refused to incorporate some of the most classical technical tools that identify and confirm the trend.

Instead, they conveniently ignore classic internal market indicators like the cumulative A/D line and would rather use DSI numbers that rarely have shown any predictive value whatsoever.

By the way, the cumulative NYSE A/D line broke out above the highs that it made in January in late February! You would have to be in total E-Wave denial (like Prechter and Hochberg as well as others) to have ignored the strength of this key market indicator:

http://stockcharts.com/h-sc/ui

Instead, the E-Wavers simply chose to emphasize low volume...and ignore the A/D line because they only wanted to see what they wanted to see that "fit" their bearish stance.


DG

"Strange. A continual barrage of insults on peoples ability, but few offer anything positive."

My positive contribution is: Use Neely as a guide, but do so "strategically" by understanding his method's strengths and weaknesses. The absolute number 1 thing to do is ONLY trade his Weekly recommendations when they make "contrarian" sense, i.e. when he makes a Weekly recommendation to go long on weakness or short on strength and don't trade when he's got the market in a "wave-(B)". Just doing that since August 2006 would have gotten you 50%+ returns with 1% at-risk on any given trade.

You have to be a savvy consumer of these services, undoubtedly, and do some work to understand what's going on in their decision-making processes. I do agree with what the critics say, which is that the market's not just going to drop money into your lap because you shell out for some outside advice. Ideally, Neely would read my critiques of his methods and make the necessary adjustments. But, if he won't, that doesn't mean I can't make them on my end.

cc

Mission Accomplished moment for the bulls. I expect a spinning top over the next couple days not to exceed 1170.86. (Gotta pickup the stops at 1170+ those greedy bastards)

http://content.screencast.com/users/texana44/folders/Jing/media/31187089-b33c-448b-8c49-6689a7898896/2010-03-15_1659.png

marketman

Paul Volker to the Bears rescue!

MHD

Ben must be holding up a fresh bale of hay, because the herd is sure on the move to where he wants them to go.

DG

"However, the fact of the matter is that Neely has been God awful as have been most of the other E-Wavers like Prechter and all of his "blogger" buddies that have refused to incorporate some of the most classical technical tools that identify and confirm the trend."

I've said before that I have done the due diligence on Neely going back to the mid-1990s and his track record is quite strong. In that context, I don't want to "throw the baby out with the bathwater". One of the things you find with unsuccessful traders is that they run from method to method, looking for a "hot hand".

"By the way, the cumulative NYSE A/D line broke out above the highs that it made in January in late February!"

You may recall that on February 12th, I was already saying I was a "worried" bear because the Russell was looking so strong! On an Hourly NeoWave chart, it was clearly consolidating in a Triangle at a higher low. The subsequent burst upward completely validated that view.

Have I traded the short side since then? Yes, because I have a specific set of rules and when the trade sets up, I most likely am going to take it if it is in the direction of my bias. But, I've also traded the long side since then, too, using the logic I developed specifically for situations where the market moved against my bias, like it has been.

Again, I've laid out all of these facts for Neely and suggested specific changes he should make, but I can't force him to make them.

vipul garg

yelnick,

for better assessment of what you are saying is possible if you place a chart with all the labels of not just the terminal impulse/ending diagonal but prior to that also. ie that whole a-b-c.

just to preempt,
if you are starting your a from 872 to 1018 or 1035 and b from 1018/1035 to 992, and terminal c from theron as you mention in the post,i am afraid it will not be correct and willnot work.

Mamma Boom Boom

>Use Neely as a guide< DG, assuming that that is correct, and I do agree it is, it brings up an important question, "What is his service worth?"

Michael

Am shorting all coal and steel stocks here.

DG

Mamma,

If used correctly, I think it's value is pretty high. Of course, one thing required to use it correctly is the ability to NOT trade. I posted the Weekly data a couple of weeks back showing a 35% return from August 2006 to now, with 1% at-risk on each trade, maximum 2%, with the S&P down more than 10% over the same time period. That was the result taking every Weekly trade recommendation. You could have "optimized" the Weekly even further and bumped your returns even higher that time.

One thing to note is that when I say "optimize", I'm not just throwing random losing trades out of the track record, I'm removing each "short on weakness" and "long on strength" and "trade recommendation during wave-(B)" (Neely started using the wave-(B) label for the current wave last year and warned ahead of time that trading it would be difficult) from the record, so it's a systematic optimization, not a random one. Now, you would have had to know in advance which trade recommendations to avoid to get that higher return, but going forward, if you avoid the ones which have low historical probability, who knows what returns you'd get. Past performance and future results and all that. A lot of that obviously depends on how volatile the market is and how much return is actually available.

The most relevant comparison set, I think, is the universe of long/short macro hedge funds. Neely's trading methods fall under that category, although he obviously doesn't do things like short MBS or do a carry trade or something similarly off the beaten path. Nor does he use leverage, other than what's built in to futures contracts already. Show me an apples-to-apples comparison of those guys' returns to Neely's and you'll get your answer of what Neely's service is worth, in my opinion.

GlennLoserNeely

While you guys are all talking about Glenn Neely, the market is making some incredible intra-day moves!

Guess there really aren't any TRADERS here . . . just a bunch of academic theoriticians.

Chabazite

"But, of course, for the true bears, this is all the perfect set-up.

Despite the Fed’s relatively cheery outlook yesterday, its compulsion to keep interest rates on the floor is a telling sign of just how strong this recovery truly is (not very). And the lack of broad participation in the stock rally is a sign that a lot of folks still have their doubts about the recovery as well."

WSJ Article - http://blogs.wsj.com/marketbeat/2010/03/17/dow-keeps-rallying-sp-closing-in-on-1200/

DG

"Guess there really aren't any TRADERS here . . . just a bunch of academic theoriticians.

Posted by: GlennLoserNeely | Wednesday, March 17, 2010 at 12:42 PM "

Wow, now you're even pretending to be GLN? Weren't "JT", "Dave B", "marketman" and "Michael" enough usernames for you?

Forget "sockpuppet chorus", this is more like a "sockpuppet orchestra".

My question to you, then, is how you find time to TRADE in between using fake usernames to POST?

Newbie

DG,

Can you please tell us how much of a commission you receive for promoting Neely's services?

Dave B.

I thought that I'd seen it all on these blogs until DG's constant defense and obsession with Glenn Neely. He must be related to Neely or something. No one in their right mind would continue to go on and on like DG has.

Bizarre.

Mamma Boom Boom

>If used correctly, I think it's value is pretty high.<

Ok, I thought you were down on him, at this point. Just asking. I enjoy reading his stuff, too bad he's had a bad streak of luck.

DG

"Newbie" now too?

Well, "Newbie", I mean "Michael", I mean "Dave B", I mean "JT", I mean "GlennLoserNeely", to answer your question, the answer is "nothing". I have no connection with Neely's business whatsoever.

If you actually read what I posted, you'll see that it's quite a "qualified" defense of Neely, where I basically say that in order to really profit from his service, you have to use it the right way and not just jump into every trade he recommends. I go on to say that if you did that, you'd be up rather nicely over the past three years, having risked very little in the interim.

Finally, I concluded my "defense" with the statement that no one knows what will happen in the future, but that certain types of trades Neely recommends have, historically, low probabilities of success, so a subscriber should avoid those trades, either trading some other methodology in the mean time or simply staying flat during the times when no good NeoWave setups are available.

Frankly, that all seems pretty normal to me, regardless of what you and your ever-growing army of sockpuppets thinks.

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