Pushing the Envelope on Market Fractals

Mother Market is a perverse lover, always trying to fool. As we begin to understand that Mother Market is a nonlinear chaotic system, we can appreciate that fooling the herd is her essential nature. Chaotic systems always seek order, and occasionally find it. When they find it, markets react crisply and quickly - think Flash Crash. As they seek it, they live on the edge of chaos and jink and jive precisely to fool their followers: as too many take a position on one side, the market will jink to the other. 

The whole field of technical analysis comes from the classical world of linear thinking: patterns that emerge and behave consistently. Markets are fractal in nature, and behave with a constantly shifting underlying order which we can barely discern if ever understand. The fractal nature of markets was first recognized by Mandelbrot (the picture is the visual representation of the fractal Mandelbrot Set), and initiated furtive investigations of fractal finance. The herd instead believes in the Random Walk theory and follows the Efficient Market Hypotheses. If the market is fractal, it is non-random and potentially predictable via technical analysis. The leading Elliott Wave practitioners recognized the fractal nature of wave patterns a decade ago, but have not pushed the theory into the world of Chaos Theory. Zoran Gayer was making strides in this direction when he unfortunately passed away. 

Hank Wernicki of Elliott Fractals is going where no one has gone before, constantly testing fractal patterns as predictors of future market moves. He posts often in comments to this site, and exposes his work in realtime for success and criticism. I deeply respect that process. One of the great improvements in human knowledge from the Internet is to treat the community as a test bed in itself. Companies are being launched today using rapid iteration from realtime feedback and deep analytics to figure out what customers respond to. Hank is pushing the envelope on the usefulness of market fractals by field testing his fractals as he goes, and improving their accuracy and predictability. 

Over the weekend Hank got endorsed by Bob Prechter's EWT:

Fractal analysis: After watching Henry (Hank) Wernicki for a year or so,  I think he is onto something. Wernicki visually scans past short term patterns in the S&P for ones that look like “now,” and on that basis he attempts to forecast the market’s next move, usually a few hours or days ahead. When the market stops copying itself, his opinion is stopped out and he moves on to another picture. Hank makes bold calls, so if you are a day trader, you might want to check out his work. You can find him at www.elliottfractals.com.

He tells me his site was overwhelmed Monday, so I held off a day to publish this. Everybody loves Hank! Kudos! 

Comments

[Account Deleted]

SP 500 Trading near important support zone
http://niftychartsandpatterns.blogspot.com/2010/06/sp-500-near-important-support-area.html

[DG]

While I fundamentally disagree with Hank's approach, primarily because I think the amount of leeway he gives each trade (2 and 3 point stops?) is indistinguishable from random noise in Corrective environments, at least he does have the guts to post in real-time (as much as allowed with his subscription model).

[Mr. Panic]

Nice June 2 to June 19,1930 fractal we have going now.

[JT]

Carl Futia NAILED it again this morning... calling for 1093 SPX.

[da bear]

how is the June 1930 fractal holding up? what is it showing?

this current wave 2 rally is hanging on by a thread. wave iii high was at the open yesterday, this wave iv (or wave d) is about to violate the price level of wave i (or a). So this really is make or break. A final pop up into Independence Day would be the perfect place for a wave 2 top. Then the fireworks start. In more ways than one!

da bear

[da bear]

There is a good wave count on GLD based off the Fall 2008 lows with the Wave 3 high at 120 then an a-b-c Wave 4 correction. Now gold is in its wave 'v' of 5 of B. A good target would be around 130. Time: fairly soon.

da bear

[upstart]

I was expecting another pop after a 2.5% correction or so, but we're so close to decline-time now and had a deep retracement of June's downbar, so I'm not counting on it. I have to assume yesterday was the high and position further short on any rebound.

[the general]

It's a comin'!

Float like a butterfly,
Sting like a bee,
Get out' yor' longs,
cause it's super wave.....

Don't look so surprised.

[Mamma Boom Boom]

Yesterday and todays action satisfies all my requirements for the correction. Ideally, in the morning, we would drop 6 more handles. But, any point in this time frame is acceptable.

BUY .. BUY .. BUY

[Mamma Boom Boom]

"The week will end with a lunar eclipse on June 26. This might be an important eclipse because the Moon will be in Capricorn, conjunct Pluto. In fact, this entire week will find the Sun filling in the open point of a grand square between Jupiter and Uranus in Aries, Saturn in late Virgo, and Pluto in Capricorn. It is a translation of the Cardinal Climax, as we enter the fifth and deepest layer of this phenomenal once-in-a-lifetime cosmic pattern in late July through early August."

[Mamma Boom Boom]

For anyone who likes pure gambling: gold could be near an air pocket.

[RT]

Lunar eclipse is looking very bullish and should kick off a wave 3 up structure.

Todays low is looking like a minor wave 2 low off the June 8 lows

[Wank Hernicki]

The market (stock) is going to ROCKET HIGHER from here. The economy is FINE. Mobile device and service companies, along with green-energy companies, are booking monster profits right now, AND they're all HIRING PEOPLE LIKE CRAZY!

Think I'm full of crap? Here just ONE site, with tons of hi-tech U.S. BASED jobs...ALL HI-TECH:

www.Broadscape.com

You doomers and deflationists are starting to sound like a broken record. LOL!

[Woodchuck]

Prechter is predicting 3000 year bear market!!!!

http://www.technicalanalyst.co.uk/TTAAUG2006_2834.pdf

[Wave Rust]

Is Neowave the child fractal the parent fractal Elliott Wave?

If it is, what does that make WernickiWave?

A grandchild or grandparent fractal RN Elliott wave?

and, which fractal is always bullish like R.N.E.

wave rust

[Wave Rust]

Gen. McChrystal article in Rolling Stone

http://www.rollingstone.com/politics/news/17390/119236

[Tre]

Cop punches a lady in the face for jaywalking!!

http://www.youtube.com/watch?v=JgA1P_NGRuc

[the general]

Tre,
The punch was not for jaywalking. The "lady", as you call her, was physically interfering and pushed the officer while he was trying to put cuffs on her freind who was resisting arrest.

[MARKHOLSCHER]

MARKET TIMMING SOLVED!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
http://knol.google.com/k/mark-holscher/market-timming-ii/13nmdnwfdknux/198#

[Harry]

so depressing that Prechter/shyster has lots of sheep following him off cliffs

hank you seem like a nice guy hope your track record will be good enough that you are soon content to trade your own pile and not sell snakeoil like some

[Joseph W Kilcullen]

Hello Yelnick,
Do you have any thoughts about the some of the work published in this blog?:
http://fibonacci-financial.blogspot.com
Your blog has filtered thru a lot of the material out there and find some great stuff. thank you for that.
I was curious if you had any thoughts about that one?

[Chico]

MARKET TIMMING SOLVED!

Yeah right...moron can't even spell!

[Chico]

The bottom line with Elliott Fractals, as with everything else, is does it make money? I give Hank credit for posting his forecasts, and I've seen some good calls and bad calls. I asked for a track record a while back but never got one.

[Roger D.]

Before all you bulls get too giddy. I'm afraid that AAPL's chart forecasts a price of 60 in about 13 months. The LT bollinger has been pierced and there is 5 waves up. The last 3 times this criteria has been met the stock falls to the lower band.

Better get your bungy cords out.

Roger D.

Parabolics never end well.

http://www.screencast.com/users/parisgnome/folders/Default/media/2d6f103d-90d2-436a-90e2-d926828197bb

[Account Deleted]

U.S Markets view before opening bell
http://niftychartsandpatterns.blogspot.com/2010/06/us-markets-view-before-opening-bell_23.html

[Hank's a nice guy and deserves better]

Poor Hank!

Getting endosed by Prechter...

...Not such a good thing.

Prechter can't time the markets if his Mamma's life depended on it.

Hank's a nice guy, he deserves better than that (I think).

This is like the mafia godfather endorsing a cardinal or something.

Weird...

[Hank's a nice guy and deserves better]

"Prechter: The Undisputed King of Elliottwave.

—Technical Analyst July 2006"

Well, as you know Magazines have a tendency of getting it wrong and this is no exception. The headline, if acuracy matters, should've read:

"Prechter: The Undisputed King of Getting It Wrong With Elliottwave"

Some things just never change...

[usdollar]

Looks like the top is in, Secondary top to short for the end of the week.

[Account Deleted]

Dow jones trading close to an important support zone
http://niftychartsandpatterns.blogspot.com/2010/06/dow-jones-technical-analysis.html

[da bear]

The general,

Looks like Muhammad Ali is giving his signal for Circled Three. lol

da bear

[Mike]

This is for all you Precther bashers..... He picked THE TOP in the markets in 2007, not a month before, not a month after. The actaul day of the top. I know, because Im a subscriber. He called for a bottom 2 weeks before the market bottomed in March 09 when everyone else said the world was ending. And he said to expect a powerful multi month rally. What you are seeing since then is THE BIGGEST SHORT SQEEZE in mankinds history. When its over....look out.

[Account Deleted]

Eur/Usd hour chart and daily chart analysis
http://niftychartsandpatterns.blogspot.com/2010/06/eurusd-hour-and-daily-under-cloud.html

[usdollar]

Mike I believe he is much better at what he is doing in a bear market. He normally fails with most of his near term forecasts. He has a lot of great stuff in his books, I have read most of them. I believe we are about to go down in the shit right now. I also believe contrary to most other people here, that this Grand super cycle wave is a Z wave, we might get back to the stone age (pole shift and crust shift possible). I have read that this is one theory of it. March of 2012, the sun will kill all power/solar storm. The sun will make the inner crust of Earth to rotate like a spring, and when Earth moves through the inter galactic plane, it will change poles. ie change rotational direction, which will make the centrepedal force to stop and move very slowly just before and after the turn/or pole shift. This is when the crust slides in one direction about 30 degrees.
Using webbot for dates are very helpful, small tipping points, 9/11/2001, 10/7/2008, 5/6/2010, 7/12/2010. Huge tipping point Dawn of 11/8, 11/9,/11/10, 11/11 2010, 1.265 billion people are supposed to leave us. Then nothing until March of 2012, there is an information gap until July of 2013 (empty space)Has been so since he started in 1999?.

[da bear]

Mike,

the irony of that 2007 top is that if one had simply done an elliott wave trend-channel from the 2002/2003 lows one would have come to a B wave top around 14,300 or so. Believe me, I did this in early 2006 or so and that is what I got.

He has been better during the bear market; I think his count is off. I believe that we are in a MILLENNIAL wave 4,and have been in GRAND SUPER CYCLE C down since the 2007 highs. We are fast approaching the 3 of 3 of C down, which will be similar to the summer 1930 to summer 1932 collapse -- only one degree bigger. That is how you get to a DOW Jones below 1,000 (or around there).

When comparing this bear market to the bear market in the thirties it might be better to count the 1928 high as the orthodox top as one of the old Elliott wavers did. That way the 1929 top is a B wave just as the 2007 top was a B wave. That would then make the October 1929 crash and the Fall 2008 crash both Wave 1 of C down.

Coming of the next low we should get a "fill-the-gap" bounce like we did from 1932 to 1937. That was a wave 4 of C. The 1938 secondary crash was the final 5 of C.

That would explain how we could get a 1930 to 1932 collapse AND have a low in the 2016/2017 time frame.

da bear

[usdollar]

I do not think the stock market will be opened past end of 2012.

[Min]

MIKE POSTED:

"This is for all you Precther bashers..... He picked THE TOP in the markets in 2007, not a month before, not a month after. The actaul day of the top. I know, because Im a subscriber. He called for a bottom 2 weeks before the market bottomed in March 09 when everyone else said the world was ending. And he said to expect a powerful multi month rally. What you are seeing since then is THE BIGGEST SHORT SQEEZE in mankinds history. When its over....look out.

Posted by: Mike | Wednesday, June23,2010 at 10:17 AM"

Mike —is he another newby on his way to the slaughter house?

Or

is he EWI Public Relations damage control?.

IF THE FORMER:

Just be happy you didn't run into your hero in 2003 or 2004 or 2005 or 2006 because he was calling the top then as well. I know because I was a subscriber untill early 2005!

And! there are others, much older and wiser, with similar experiences going back to the early 1990s.

I tabulated all EWI calls made from 2001 to 2004 in his STU EWFF EWT and found only 1 in 10 calls profitable if traded.

Yeah I know you think I'm an insane nut with an even bigger bias than he (if that's possible).

Well check out his ACTUAL track record from an independent neutral 3rd party, at this link

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

sorry to burst your bubble Mike.

AND IF YOU ARE EWI PR damage control:

GET A LIFE AND OWN UP TO YOUR DISMAL PERFORMANCE.

STOP MAKING THE TOKEN GOOD CALL SEEM PAR FOR THE COURSE.

PIGS WITH LIPSTICK ARE STILL JUST PIGS.

[yelnick]

Joseph W Kilcullen, have not seen http://fibonacci-financial.blogspot.com before, but will check it out

[MARK HOLSCHER]

MARKET DROPPING LIKE A ROCK!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!