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« Double Dip Countdown: "6" | Main | Australia is the Most Overvalued »

Sunday, July 18, 2010


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The outside limit of the nested 1-2 was Sp1100, the point at which the inside wave 2 was no more than the outside wave 2. (If the inside waves get bigger than the outside, this is likely not a nested 1-2).

It's not just the arithmetic size that matters, it's the percentage retracement of wave 1 at each Degree. On that measure, the second wave-2 is actually larger than the first.

Again, I think there is an error in the logic here.

I also find myself not completely convinced by Neely's count from the April high. That said, my count and his count could continue to be quite similar, behavior-wise, for the immediate future.


EWT works great, and I incorporate it into my position trading. It also influences my shorter time frame trading. BUT EWT relies upon human sentiment being reflected in the markets, and there is a difference between human sentiment and price action, particularly during a once in a century meltdown during which the fed, the treasury, all the big banks, and the media are doing everything in their power to influence the markets and the access of market participants to information.

We can kid ourselves the EWT is some sort of metaphysical force that always reflects human sentiment, and therefore, is always fractal, working on any time frame no matter how much volatility and manipulation is resident in a market, or we can be realists. EWT is a tool. It's a damn good tool. But when the markets are manipulated, or when they are in their death throes, you would be well advised not to rely upon the shorter time frame interpretations where the theory, even in the best of times, is still in its infancy.

Prechter has made me a lot of money, but I can't blame him where the tool he offers is ill suited to the task. Use EWT to position trade. Maybe use it for some swing trades. But if you think EWT is going to predict the day to day weather in a hurricane, you are just a brainwashed cultist.

[Not to imply anyone here is a cultist, I mean in general that the tool becomes less useful as volatility and manipulation increase on shorter time frames. All three variables are currently at max values, so beware of following the old rules and use common sense]



I don't think the Euro really matters that much right now - watch the AUD/JPY.


The wave down to 1041 shouldn't be counted as an impulse as wave "4" retraced almost all of wave "3". Makes more sense this was a flat to 1041 from the 1200 area off the high. Then an x wave and another a-b-c. This wave up to 1100 should be a d wave, the question is can it recover and break the b-b line (usually d waves of triangles do). If this is all a b wave like Neely thinks then we should finish with an ending neutral triangle with c the largest leg. So the current move down is e or still part of d. If the SPX started a new wave down from the 1200 area (and not a b wave like Neely thinks), perhaps a flat-x-expanding triangle combination could develop before the counter-trend move begins.


Has Neely turned bullish yet?

Hank Wernicki

Yes the market is a fractal and we go a nice one today !


Panic is for Losers

I seriously doubt the market is a fractal. But it's moot, because we'll never know.

I would hold a basket of good companies for the long run. If you've got more than a 10 year horizon, 50% stocks, 30% bonds, 20% cash.


sell your stocks, it is going to crash!


Ken, I don't know. I don't subscribe.


Yelnick..... I've always found EWI view of the economy and the big picture very interesting, even though I do not use Ewaves for trading. What is their current take on the almost sure thing QE #2?
And do they think once QE2 is announced that it would cancel their wave 3?

I reckon that the Elliott Bulls like Carl F. and Tony C. are wrong. This cannot be a bull market - the volume is running in a downwards direction.

I took several hours today to summarise the views of many Bearish forecasters, be they E-wavers, cyclical analysts, or astrologers. You can find it here:

MHD, I don't see how we can have a QE2 program this side of the election UNLESS the stock market crashes first. The first one did not deliver, and was very unpopular amongst those Americans who vote AND PAY TAX, and the taxpayers are likely to be voting against the tax and spenders.

However, if we do get a crash, then people may panic and be desperate enough to support another program.

In short, if you are expecting QE2 to save the market from a crash you are likely to be disappointed IMHO.

Account Deleted

Head and shoulders formation of apple inc


Panic for Losers, recent analysis of the market pretty well confirms it is a fractal structure from a chaotic nonlinear system. The randomness of the Random Walk and Efficient Market Hypotheses would not have the underlying self-similarity of the market, which means it is not random but obeys some underlying order. This is a huge insight since it means the market is not a series of independent events like rolling dice but has memory - the past effects the future.


Ken, is NEely bullish? Term needs to be defined by which time frame."
- Neely thinks we are in a corrective wave so in a yearly frame is bearish
- He does not think we break the Mar09 lows, so in a decadal frame is bullish
- He thinks the current move should reverse up and may make new highs, but may simply come close to recent highs. In a monthly frame he is neutral.


MHD, I have not seen any interesting comment on QE2. Prechter maintains his view that the Fed cannot prevent deflation. You may have previously seen an excerpt form his Conquer the Crash book on this in my blog. If you join Club EWI (click here) you can see a bunch of recent articles on related topics, but not on QE2 in any depth. Here are some:

signs point to deflation

Fed not in control

Understanding the Fed (35 page ebook)

Conquer the Crash: 8 free chapters

Can the Fed Stop Deflation?

The Most Important Investment Report You'll Read in 2010


Dr Bubb - great summary! thanks for sharing.

Panic is for Losers

Yes, the market isn't random. And it's NOT a fractal. It is basically a log curve growing at 2-3% per year. There is some randomness to it, however that causes deviations from that curve.

If you had heeded my stocks 50%, bonds 30%, cash 20% this morning you would be doing quite nicely today. Live long enough and follow that advice and you'll be megarich.

Wave Rust

the turnip is at hand.

a turnip in hand is worth two in the bush.

buy it?

wave rust

Wave Rust

wave counts tend toward randomness

buy now
sell aug 24-26

big down to christmas ,,,, reeelllly big

wave rust

Mamma Boom Boom

>The most important question is, "Do we form a consolidated bottom, or is it a 'V' bottom?" ......

Posted by: Mamma Boom Boom | Friday, July 16, 2010 at 11:18 AM<

I think that has been answered.

da bear

I pointed out what EWI pointed out before they did.
Down trend? yeah, I pointed that out. I said that the Corrective 2 COULD BE OVER.
same as them. so do I get points for this?

they should still count the last rise from 9,600 to 10,400 as wave e of 2. That would conform with their alternate count from their previous EW Financial Forecast.

Can't wait for the next EWFF.

da bear

da bear

Is Proverbs 7:22 warning us to stay out of stocks this Thursday (7/22)?
You be the judge!

da bear

Wave Rust

Dr Bubb,

wouldn't want all them dudes in my canoe, leaning over the left side whilst i was the only one trying to keep the canoe upright.

bad economy = good stuff for stocks

bad for stocks = somebody finds all those saved jobs

wave rust


da bear - Proverbs 7-22: "all at once he followed her, like a bull (ox in those days) going to the slaughter, like a sheep (ram) hobbling into captivity". The siren call from Mother Market can lead us on the road to perdition. The rest of it also fits: "... and not knowing he is drawn like a fool to the bonds". Good double entendre there!

da bear


the King James version says, "He goeth after her straightway, as an ox goeth to the slaughter, or as a fool to the correction of the stocks;"

da bear

P.S. Funny, because I think I know who that chick is. lol


da bear, I like some of the other translations, especially when the bring it up to modern idioms and use 'like a sheep to the slaughter"


How many times are we going to go up and down and all around DOW 10,000?


I am not a trader but it appears to me that bonds ignored the rally off the July lows.

I have noticed that through all the girations on teh stock market up and down the bond market has been trying to tell us something is terribly wrong with the economy.

As someone who has been in bonds since 2006 I can tell you that even I am amazed that they can find debt buyers at yields this low. It looks like Japan in the 1990's.

I was actually hoping to be forced out of my bonds and into stocks. I almost did back in May. But the notion of an economic recovery never seamed too real to me.

Thanks to Yelnick, Denninger and a few others I can get my news from reliable sources.


well after hours ibm panic, tomorrow crash day

da bear


you have quoted from the PPT Bible. You know, the real version tells you to stay out of stocks. The PPT version tells you to stay away from bonds (Treasuries) and implies that there is no danger in buying stocks on dips. lol

da bear

Daniel Goulding

"Yes, the market isn't random. And it's NOT a fractal. It is basically a log curve growing at 2-3% per year."

Maybe someone with a strong interest in mathematics can correct me, but does not a log curve imply chaos/complexity ergo fractals?

As far as I know a system can either be close-ended (deterministic) or opened ended (either self-oraganising or random). The scenario you point out doesnot fall into one of the three. The market is self organising and hence a fractal beast.

Again if anyone out there has some interest in mathematics and can see a flaw in my reasoning please point it out since apart from W, I am also interested in tyhe pursuit of knowledge.



Daniel, the market could be a fractal with an underlying trendline that reflects the growth over the long term of earnings. I think everyone would agree that weather/climate is a chaotic nonlinear system whose measurements are fractals, and the closest fit to the last 150 years of global temperature is that there is a 0.6C degree/century trendline and within it we have a 60-year oscillation due to the oceans, the so-called PDO in the Pacific. The 60-yr cycle has a +0.6C to -0.6C range, and the combination can make people think the world is heating up much faster than it is when we are in the up cycle, which goes 1.2C from the bottom to the next peak in 30 years, plus the 100 year trend adds another 0.2C, for a 1.4C swing. When it drops over the next 30 years, it falls 1.2C less the 0.2C trendline, or 1C. Within that dominant set of trends, the annual fluctuation is chaotic and fractal.


da bear, ROTL!!

The budget should be balanced, the Treasury should be refilled,  
public debt should be reduced, the arrogance of officialdom should be  
tempered and controlled, and  the assistance to foreign lands should be 
curtailed lest Rome become bankrupt. People must again learn to work, 
instead of living on public assistance.     
 -   Cicero, 55 BC


Yes, the market isn't random. And it's NOT a fractal. It is basically a log curve growing at 2-3% per year. There is some randomness to it, however that causes deviations from that curve.

If you had heeded my stocks 50%, bonds 30%, cash 20% this morning you would be doing quite nicely today. Live long enough and follow that advice and you'll be megarich.

Yes, but even most complicated fractals can be flattened to appear flat. Everything in the Universe of ours is a fractal, atoms, flowers, frogs, humans, and I bet human actions are a fractal too when looking at population as a whole.

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