Fractal Finance Gets its Big Test Next Week

We are in the second half of the last preseason game between Fractal Finance and Wave Theory. So far Fractals are up 3-0. On Monday I posed the test: fractals predicted a bottom and a run up to at least 1074 if not a triple test at 1125-1130; waves predicted a fast drop "early" in the week from a nested 1-2 formation. Fractals won the first half of that game as the bounce came (off a triple bottom) and the nested 1-2 formation was blown up. 

While the nested 1-2 is gone, an alternative wave structure is stil intact: that the drop from Aug9 to Aug27 (or 30) was a complete five-wave down, a wave 1 down, and we are now in wave 2 - a single 1-2 not a nested 1-2. I discussed how the drop counts better as a three-wave pattern down, since the final waves (iv) and (v) are lost in the clutter along the triple bottom at 1040. The impulse waves (1 and 3) are also about the same length (60 pts) while wave 5 is a stub, which means no wave extended; a pattern characteristic of a three-wave zigzag not an impulse. (Under Neely rules, one leg of an impulse HAS to extend.) We have also blown past the normal wave 2 retrace of 50-62% and stand around 2/3 back up. This wave structure is well captured by AllAboutTrends, which expects a pullback next week: 

The next test is at 1111, the 78% retrace. Theoretically a wave 2 can go back 99% and not break the count, but it seldom goes beyond 62%, and almost always when it breaches 78% it keeps going. 

All in all, the STU is relying on a Hail Mary pass to save their count. 

Tonight's STU fights back to resurrect their count, with two interesting observatioons:

1. Back to 2008 again, we saw a truncated fifth where (at least in some indices) the bottom of wave subwave 5 (of the first wave down off 2007) was about where subwave 3 ended
2. This wave 2 has come back to the larger upper trendline of the drop off the April top, as shown in this next chart from EWTrends

We might therefore see a bit of a pullback as the trendline acts as resistance. Whether it will mark the point of a bearish reversal to new lows we shall see, but I think it unlikely. The STU has two bearish-reversal scenarios to consider:

1. a drop down right away or at worst by Wed next week; or 
2. a larger B wave down followed by a C wave up that should go beyond next week into the week after

If they get their B wave we may have the preseason game continue into some sort of overtime before it gets resolved. If you want to follow this a bit closer, EWI is running a Free Week promo next week, centered on their Euro and Asian STU services. 

The Fractal Finance view does not need to to belabor minute details of wave structures to make its prediction, but I know a lot of readers would like it translated into patterns they are more familiar with. Let me offer it below the fold.

The basic fractal of Fractal Finance is a Thrust and a Plateau. The Thrust is an Elliott Wave impulse or zigzag - a sharp move that runs in a channel. A Plateau is a sideways move that resolves as a flat or triangle, or a complex correction.

This fractal fits the pattern since the top in April: the Flash Crash was a thrust down which bifurcated out of the congestion at the top in the last week of April and the first week of May. From May25 forward we have been in a plateau between 1040 and 1130, with a brief False Break below on Jul 1-2 to 1011. 

Most ewavers saw the pattern as a bearish expanded or irregular flat which ended on Aug9. Neely saw the pattern as a bullish B wave  triangle where the Flash Crash was leg A down; he also can count it as a double flat. The expanded flat has not yet been busted, but runs into the objection that the bifurcation down from Aug10 to Aug27 counts best as a "3" not a "5". 

If it is a "3" the options for a bearish vies is that it is continuing either as a triangle (five waves) or a complex correction such as a double flat (seven waves). Both say this Plateau goes out longer than bears are imagining, perhaps all the way into the mid-term election. 

Earlier this past week I parenthetically noted that we could be breaking in a triangle. I am beginning to see the first tickles of that view in the ewave sites from Market Thoughts, as described in the big chart below, although it had been sent to me privately by a reader a week earlier. 

The form in most of the indices is a Barrier Triangle with a barrier along the top and an upslope from below. The waves count as leg A to the June high, leg B to the July low, leg C to the early Aug high, and leg D to the end-of-August low. We would now be in the final leg E. The implications are interesting:

Timing: Neely finds that most triangles resolve about 25% before the apex. If you trend the upslope from the July1 low through the Aug 27 low, the apex (if at 1130) is about 8 months away (we are going 30 points in 50-60 days depending where you count the leg D low. This seems too far out, and would make leg E whacky in time. Normally a leg E goes no more than D, or less than three weeks. Target: around the equinox on Sep23. (Note to astronomy buffs - the Earth's orbit is not a circle but an ellipse, so while the other three solstice/equinox points happen on the 20th or 21st of the month, the autumnal equinox happens later, on the 22nd or 23rd.)

Distance: A barrier triangle leg E should get back near the barrier, around 1125-1130, but in some indices such as the Naz won't get that far.

Aftermath: the drop after should be at least as far as the widest point, which is leg C in the S&P or 120 pts, targeting a retest of the July lows. If the next wave down goes as far as the Flash Crash, a normal relationship for a zigzag, it should go 175 points, or down around 950. If it extends (a normal relationship for a wave 3 vs wave 1), it would target 850.

Longer Term: A triangle does not occur in a wave 2, but in a B wave or wave 4. This means we would NOT be in the dreaded P3, and after the aftermath should reverse UP. History might count this as a wave B in the Hope Rally, with a wave C to follow to new highs (above 1220). 

Comments

[Biased]

C, but not new highs. Neely is nailing this.

[Sherman "double long" McCoy]

looks like a massive inverted head and shoulders with a 1200 objective to me. But then again, what do I know, I'm long? What to do with my profits, now that's a tough decision...

[Bill C]

FWIW, here is my wave count.

http://bdroppings.blogspot.com/2010/09/rally-imminent.html

I did not put all the labels on but I figure the experienced Elliott waver can see this count easily.

Wave A down from the May high to July low at 1010. We are in wave c of B which should take us above 1129. Then wave C down just in time for the election. After that I don't know, I don't like to get too far ahead of the waves with my predictions.

[DG]

Man, some of you guys post as if you were long-only mutual fund managers or something. Anyone who's taken advantage of the fact that the market's been in a fairly wide trading range for almost a year, with no NET movement in the SPY since late November 2009, has been reaping more profits than anyone who's only trading the long side.

I've had a 55% long/45% short trade ratio since the beginning of the year and both trade types have been net profitable. Could that all change starting Tuesday? Sure. In which case, I will adapt my trading strategy.

Beating the market is more difficult if you voluntarily forgo half of the opportunities the market is giving you, whether the half you forgo is on the long or the short side.

[vipul garg]

yelnick,
the charts from binve have not even an iota of bearish wedge in them.if they have to be triangles, they will be bullish only.

and the chart from EWTtrends is amazing.a person trying to mock wave theory couldnot have made a better one.wave 1 of a larger impulse ,whether in grey or red is a terminal which is downright ridiculus.one doesnot need to see more that this count cannot be right.
it is almost a disservice to wave theory to post such charts

[DG]

it is almost a disservice to wave theory to post such charts

I agree. It would be much better if people would just say "I don't know what the wave count is" rather than post these extremely illogical counts. As I said earlier this week, wave theory is deceptively simple when you first become acquainted with it.

I know you made a nice call to go long earlier this week, so hopefully you have profited from that.

I still think wave counts at this stage of the market are inherently unstable, but that "triple bottom" was clearly a Triangle ending a Combination and the massive rally since is the "thrust" out of that Triangle. As I was watching the market fail to make new lows on Tuesday and then begin rallying into the closing bell, that was the first thought that came to mind. In fact, my method triggered a long signal at 105.4 SPY that afternoon, so this week's rally was great.

[Bird]

DG, what is your % wins to losses and size of average win to average loss so far since your quasi-public test began? thx

[vipul garg]

DG,
yes, that was a low risk entry.its been a good trade.

for the wave counts, it really cant get worse than wave 1 of an impulse is a terminal.

[Mike]

every week that followed by three days holidays weekend is a false signal because most of fund manager is away for holidays.this upside in stockmarket and in the euro is false signal. next week will come to normal trend....means down :-)

[Michael]

Binve, Daneric, EWTrends, Evil Speculator, Trading to Win (Lose), and all of those other elliott wave blogs are a total joke... All of these guys are like the David Rosenberg of market strategists, who continually (wrongly) assume that there must be a high correlation between the Economy, and stock prices.

What's even more of a joke are the idiots that post on those blogs, acting as if their $5,000 Ameritrade accounts are still intact, even though they claim that they've been short 95% of the time heading into every single 50 handle rally in the S&P for the last year - - - yet claim that they are STILL MAKING MONEY. LOL!

"Fitting" the most recent 3-wave decline from the 1129 high into an impulsive "5" down is just the latest of the convoluted E-Wave "artwork" that I've witnessed in the last year.

You'd be far better off ignoring what the S&P is doing and where it is going, and simply concentrating on one single stock sector to trade, and becoming very good at it using basic technical analysis.

All of these E-Wave blogs that continue to drink from the same "Kool-Aid" and have no clue that the Hindenberg Omen is completely useless given the amount of non-operating companies listed in the NYSE all deserve the dismissive hate that they are receiving now.

The FACT is that you didn't have to be an E-Waver to figure out that a successful re-test of SPX 1040 would lead to a significant rally given all of the negative "Double-Dip" sentiment out there that has lead to "Cardinal Climaxes" and "Death Cross" pronouncements which have done nothing other than put the final nails in the coffin for all of the Perma-Bears.

These people couldn't trade their way out of a "paper-bag" if they had to because they refuse to trade what they "see" - - - rather than HOPE for a nested 1-2, or HOPE for a Wave 4 that leads to a Wave 5.

Instead, their ignorance and addiction to "Kool-Aid" spanked their little red behinds one more time, and deservedly so. Perhaps they just don't have much "skin" in the game to actually respect the market in the first place... Instead, they'd rather blog, cause that way it doesn't cost them any real MONEY when they are wrong!

:)

[DG]

Hey Bird,

So far since January 2010 when I started using this method, it's 54.32% winners (162 trades, 88 winners 74 losers) and a 2.18 winner to loser ratio on a percentage basis (average winner is 0.96% and average loser is 0.44%). Total return of 36.8% with an average of 1.06% capital at-risk per trade. Maximum drawdown at that risk level is 5.24%, so you can sleep at night, too.

That said, the market MAY be morphing into a new phase here, at least temporarily, if we actually are in an Impulse wave up to end a Flat (Neely's count), in which case my method might decrease in effectiveness and Neely's method increase. As always, I will monitor the performance statistics and choose whichever method is best suited for the market environment. My "addition" to wave theory is to introduce an element of algorithmic trading into it, but I've never envisioned it as a full-on substitute for wave counts. As time goes on, it may become so, but I'm just not sure. Need more data and comparisons.

for the wave counts, it really cant get worse than wave 1 of an impulse is a terminal.

Wave-E of a Triangle as a 5-waver?

The thing is that none of these wave counts do what Neely forces you to do, which is think about the psychological logic behind the wave count and whether or not the sequential patterns fit together from that perspective. So, putting a Terminal at the beginning of a pattern seems reasonable because the person doing it isn't thinking about the underlying psychology of a Terminal, which is one of "exhaustion", not one of "new beginnings" or "trend reversal".

[Account Deleted]

Dow Jones weekend update

[george]

http://blogs.forbes.com/lizmoyer/2010/08/23/hindenburg-omen-prompts-exit-from-stocks/
jim miekka the blind math expert the inventor of the hindenburg omen closes out all of his stock positions. he had been 100 percent long
the market.
he was interviewed on cnbc friday september 3rd afternoon but i could not find the video link in their video archieves on their site. here is an article about jim from forbes.

[upstart]

I think we simply get a larger bullish triangle lasting the rest of the year at least, where the drop to July was A and the rally from the low the other day is the beginnings of c of B. So we retest the April high to complete B. Bullish, but we don't make new highs until next year unless B ekes out a marginal new one for a running triangle. Thrust out ends well into next year or early 2012, when the bearishness is worked off. Bear returns in 2012 with uncertainty of election weighing.

[Chabazite]

Yelnick - I am asking for your help here. The somewhat surprising figures released by the ISM have highlighted a problem which has been nagging at me for some time. I think there is a fair bit of evidence that the timings of certain news releases, statements by the FED and so on suggests that the US authorities are absoultely hell bent on keeping stock prices high. I would say almost to the exclusion of all other initiatives - no matter about jobs, housing prices, debt etc; absolutely ANYTHING to get the markets back to where they were a couple of years ago. This view was echoed with recent comments by Greenspan that high stock prices do wonders for the economy. Now, maybe I am being naive here, and if I am I apologise. But I am confused. I can see why high equity prices should be important for Pension funds, and also for the 'feelgood' factor that the rich minority who own shares. And maybe protecting the interests of Pension funds is enough in its own right. But otherwise I simply cannot see the logic behind this obsession, for obsession is what it seems to have become and over many years and to the cost of virtually everything else. I suspect it has much to do with the prices of bonds etc, and maybe that is the real driver and equities simply follow. but I can't put my finger on it at the moment. Perhaps with your insight you could shed some light on this matter? Best. Chab. PS! I hope you are enjoying a pleasant extended weekend in the US; here in the UK we are finally getting some decent sunny weather late in the season.

[trendlines]

S&P500: Trendline Watch

S&P500 has reached the downtrendline as suggested, and may now take a breather, before breaking above it. Very Short Term, support is at 1100 & 1085. My primary view in the medium-term: a move up towards 1130-1150 is possible to finish this complex B wave. Still expecting a C-wave tumble towards 950 after that, to possibly end the correction. Watch the blue channel on a break above the maroon channel.

http://trendlines618.blogspot.com/2010/09/s-trendline-watch.html

[DG]

All you guys who post chart after chart, are you ever going to post some trading results, even if they are just simulated (on this issue I am not as adamant as some others, because in my mind something is better than nothing)?

I see the same people posting links to their blogs and even just glancing at their counts, I know they are wrong, but maybe you are at least getting some success trading them, even if it's just by the fact that you are using good risk management practices and cutting losses short.

You kind of owe it to anyone who clicks on your links to let them know if they are clicking over to a site of someone who has a clue or not, don't you?

[yelnick]

Chab, I saw the UK got into the high 10s but London still shows showers. Over here in the Left Coast we have had a cool summer in the SF area, and in SoCal the coldest since the 1870s or something like that. Global warming is happening somewhere else I suppose.

Your question is whether the Feds are manipulating the stock market, and I presume you wonder if it is working.

Greenspan clearly focuses on stocks - he did after 1987 and talked about it in 1996 ("irrational exuberance"). There may be a PPT. But if he was trying to manipulate, he has had problem after 2000. Didn't work out so well. A flat decade so far.

The Fed is supposed to be independent but it usually acts to support the in-power government. Perhaps Volcker is the very model of a modern central banker, but Greenspan pumped and pumped. Bernanke seems to have done some things better, including rapid Fed-ization of interbank loans in Sep 2008. Right now it is not that clear that the Fed is really helping Obama. They eased off QE and pulled the rug out of Recovery Summer.

The stock market is included in most leading indicators, including ECRI. Your concern may be as simple as some powers-that-be trying to move stocks in order to move leading indicators to "regain confidence," as if the loss of confidence is causing the "recoveryless recovery." I suspect a lot of the Obama economic team thinks this way, but I have not seen it from Bernanke, and I do not give any of them (under Obama or under Bush) that much credit for being that clever.

I think instead your concern comes from another explanation, the Law of Unintended Consequences: ZIRP is not leading to an increase in bank lending, and so we are not seeing a restoration of the private economy; but it has led to a surge of speculation that is showing up in commodities, bonds and stocks. This fits the odd stock market of buoyant prices amidst declining volume and mutual fund outflows: what are left in the market are the 'bots trading each other and funds who have to place cash.

We have seen JPM and GS both drop their proprietary desks. Watch to see if this leads to a lessening of speculative interests in markets. This would show up in the mix of buyers changing while overall volume remaining about the same.

[Michael]

"You kind of owe it to anyone who clicks on your links to let them know if they are clicking over to a site of someone who has a clue or not, don't you?" - DG

You just singled-out my biggest problem with the Blogosphere of Technical Analysis...

Anyone can put up some nice charts on a website and call attention to themselves, yet very few actually pull the "trigger" and trade. In my opinon, actually having "skin" in the game is the biggest single teacher of all and after reading many of these blogs over the last year or two it's obvious that there is no way that any of these guys have much (if any) real skin in the game. I mean, there is just NO WAY that these people could be as BEARISH as they have been, and yet not watch their trading accounts get BLOWN TO PIECES!

Furthermore, it appears as though the E-Wave blogs are some of the worst culprits when it comes to people who are "dabbling" (and I am using that word kindly) in Elliott Wave Theory, and yet don't trade.

People like Daneric come to mind, and so do the likes of Binve and others who (in my opinion) are merely portals for Prechter and EWI. Their counts have virtually been the same with one primary count after another falling way to some sort of an "alternate" as the market action fails to confirm their most BEARISH of all counts. This has been going on for nearly 18 months now, and certainly since Prechter's initial short position in the first week of August of 2009 which he's never seen the light of day on.

The reason why I find this so interesting is because there is a huge contingent of people that are so enamoured with EWT that they will go to great lengths to stick with it with the goal of capitalizing off of a "P3" to no end... Some of these blogs have literally become CULTS.

For example, Kenny has become so fed up with Elliott Wave (and Prechter/Hochberg) that he no longer embraces it like he used to, and actually now makes fun of it. Yet, what's even more interesting is the fact that Kenny's "followers/posters" have left in droves and moved on to Daneric's blog, as well as that of "Trading to Win", which continue to embrace Wave Theory. At one point during Kenny's fullon analysis of Elliott Wave, Kenny had several hundred people posting on his blog, and following his every move. Yet, since he's abandoned EWT he's lucky if he sees more than 40-50 posts per day, and one-third of those posts are from he, himself. Where did all of these PERMA-BEAR P3 KOOL-AID DRINKERS GO???

They simply went to other blogs that cater to more conspiracy theories and ridiculous wave counts in which every downmove is counted as an IMPULSE. LOL!

As the market has stayed afloat and not fallen prey to the most Bearish of predictions, these posters have become so addicted to the "P3-Prechter Kool-Aid" that they have lost all grasp on reality. In fact, they'd rather blame NY Fed POMO, Goldman Sachs, JPM, the PPT, HFT, Bernanke, Obama, and anyone else that they can spin a "conspiracy" theory on for their blown up short positions and puts that have expired worthless, time and time again.

I actually received an e-mail from Daneric once last year implying how he was never going to play the LONG SIDE of the market for fear of THAT winding-up being the TOP! These people have such huge Ego's that they actually believe that Mr. Market gives a rat's ass about what they do or think. It's really quite funny. How old are these people, anyway?

In another e-mail, Daneric admitted that he didn't trade the markets and had a "day" job, but that he lived for calling the TOP in the market. The fantasy continues . . . just as it has for the last 12 months. We can always DREAM, can't we???

And now more than ever, he's got even more people posting on his blog... The "kool-aid" drinking continues even though we are now a year removed from Prechter's initial short position. It's a most amazing phenomena and example of EGO amd ADDICTION.

Too bad those two concepts have absolutely nothing to do with making money on a consistent basis.

It would be nice to see some sort of VERIFICATION regarding people who put up technical analysis blogs in the Blogosphere - - - especially these EWavers. But I'm not holding my breadth for that to happen cause it's pretty obvious that they have very little (if any) skin in the game.

[OracleLurker]

Well let's say, hypothetically or not, you are one of the 10% that consistently wins at trading - are you just going to give away your secrets on a public blog? Unlikely. There are a couple of people out there that have developed some interesting frameworks for understanding the market and are very open about their approach - they tend to be the personality types that care more about accumulating knowledge then they do wealth. I believe that 99% of the most successful traders are not interested in sharing their knowledge with the general public so it should be little surprise that blog-o-sphere analysis is usually garbage.

[Dean]

If you guys don't like blogs that post charts, why visit them?

[Zendo]

OracleLurker,

In other words those who post here specifically touting their approach and methods are usually garbage... or they are not as good as they claimed... or they can't accumulate wealth... yet they need to justify themselves? Good comment.

[Chabazite]

Many thanks for the comprehensive response, Yelnick. The consequences of GS and JPM dropping their proprietary desks is something I need to digest further. Regards. Chab.

[KRG]

Y : Seriously.. you cann't post a chart showing 1st wave as a terminal? Or is this again some leading diagonal?

Incidentally I checked up on the Neely's 88' cycles article and few stuff he posted earlier in NeoWave site. The advance 1974 to 87, he was calling it a corrective x wave, part of wave 2. This article is there in MEW as an appendix

[Mike]

prepare for euro crash and also the stockmarket when fund managers will come from holidays at tuesday :-)
this upside was false because no one was sit at the trading desk :-)

[Bird]

NSPOLAR-- I looked back at our conversation back in August where you asked if I saw anything about mid-to-latter Feb '11. I've seen something new that interests me about that timeframe. Say again why you were focussed on Feb '11? Thx.

[DG]

If you guys don't like blogs that post charts, why visit them?

Posted by: Dean | Sunday, September 05, 2010 at 08:50 PM

It's not that I don't like looking at other people's charts, if only to find the flaws in them. I would just like to see how they are trading the views embedded in those charts and get the added context that information would provide. I know for a fact that it is possible to have the wrong wave count and still have good trading results.

[OracleLurker]

Mike they can still read charts on and bark orders into their phones from the Hamptons. I don't think Weds to Friday's action was entirely driven by interns.

[DG]

Well let's say, hypothetically or not, you are one of the 10% that consistently wins at trading - are you just going to give away your secrets on a public blog? Unlikely.

I'm actually not sure it would matter if you did. Why? Because my experience is that people think in terms of "secrets" as absolutes, as in, "If I get this secret, I will never have a losing trade", whereas, in reality, the "secrets" are probabilistic, meaning that even after you implement them, you'll still have many losing trades and, depending on the timeframe you trade, even entire losing months (although probably not years). As I've posted before, risking 1% of capital per trade, Neely's up 30% with his Weekly trade recommendations over the past 4 years, while the market he trades (S&P 500) is down a little more than 10%. Does that qualify NeoWave as a "secret"? Well, if you're not up 30% over the past 4 years, yes, it does. That's only logical, right? But, if you're idea of a "secret" is that you should be up 10,000% or more over a 4-year time period, NeoWave obviously won't meet your standards and so, even if you know about it, you'll keep looking for that next "secret".

But, let's say you took your position-sizing more scientifically than Neely does and used the Kelly Criterion for those Weekly trades, rather than a fixed 1-2%. Then, you'd be up 271% over those 4 years (at your peak, you'd have been up over 7500-10000% after the trade of March 10-18, 2010, depending on the size of your initial portfolio stake, so Neely's Weekly traders have had a huge drawdown over the past 18 months, but would still be up that 271% after the drawdown).

Is that worthy of being called a "secret"? Yet, the two pieces of information you'd have needed to achieve those returns would have cost you a grand total of ~$2000 for Neely's service over a ~4-year period and to Google "Kelly Criterion" to figure out the formula and apply it to Neely's trade recommendations.

I believe that 99% of the most successful traders are not interested in sharing their knowledge with the general public so it should be little surprise that blog-o-sphere analysis is usually garbage.

True enough. Maybe I'm asking the impossible when I say that those who are posting garbage should voluntarily refrain from doing so or at least post their trading (real, simulated, implied, whatever) record. They know who they are. Especially if you've got a lot of followers who may not realize you're just doing it for whatever reasons other than making money.

Anyway, Bird asked me for some stats and I provided them, so at the very least, I can't be called a hypocrite on this point. I've explained my methodology in full detail to anyone who was interested in joining my blog, so more people know about it than did when I discovered it back in January of this year, yet August was my best month yet. So, in my experience, simply telling people about your method doesn't alter its performance in any practical way. Why? Because for every 100 people you tell, maybe 1 will pick it up and run with it and the other 99 will keep on doing what they were doing before, EVEN IF it's a worse method over the long run.

Anyway, that's my observations on the psychology of how people select their trading methods and why those selections will almost always be sub-optimal.

[vipul garg]

trading is a larger set incorporating subsets like analysis whether based on EWT or others.so this blog appears to me to be a blog on EWT and hence trading is not the most significant here.a site with a title like trade for living/trade to win and so on will be more appropriate for trade insights.

[DG]

vipul,

Sure, I am not saying Yelnick should provide his track record, but if someone links to a site where they are posting their own views (Yelnick obviously is posting mostly the views of others when it comes to EWT, although if he persists with the Fractal Finance concept, I think he should also post a track record for it), they should also post some kind of trading record derivable from those views.

It doesn't even necessarily have to be quantitative to the second decimal point, even something like what CXO Advisory does would be sufficient:

http://www.cxoadvisory.com/individual-gurus/

[Mike]

OracleLurker= when fundmanagers are on holidays...... they are make something better than reading charts ;)
like swimming or with ladies or....... :-) prepare when they will be back and sit on the trading desk :-)

[vipul garg]

DG,
i understand where YOU are coming from.
but besides the few like molecool who come here to advertise their own site, the rest of us come here to read and share.
so the continued insistence of some on trading only when the discussion is about analysis using wave theory is more like the miss universe effect: wanting beauty contest participants to be good at extempore speeches and so on, so that you could undermine most of the beautiful women.

i am sure a section on trading will be very useful where trading strategies be discussed and dissected but so far here i dont see one.

oraclelurker,
we all are selfish genes as dawkins will say.
however some of the best entrepreneurs share most of their skill set since after experiencing success , they definitely realise that sharing doesnot lead to replicability.
feedback mechanisms are some of the best tutors.

[OracleLurker]

Well I do think that's a pretty valid request to make of anyone that has a paid subscription service - it's amazing that many of them get away with not doing this.

[DG]

vipul,

I realize that a person can do wave analysis without making a trade based on it, either due to lack of capital or because their wave analysis implies that the timing for the type of trade they want to do isn't right, e.g. if I am a position trader and my analysis shows I'm in the middle of a pattern, but my trading style dictates I only trade at the end of a pattern. But, aside from those specific situations, it seems to me that any wave count implicitly dictates a certain trade be taken. In fact, the CXO Advisory analysis of "individual gurus" often takes that form, such that if an "individual guru" makes a statement that he is bearish, CXO then measures the implied return of a short trade over the subsequent time periods until the guru then turns bullish. So, the guru himself may not say "Go short" when he says he is bearish, but it is implied.

To continue with your analogy, in that sense, wave analysis and trading are not so separate as beauty and speech. It is more like being judged on beauty in an evening dress and beauty in a swimsuit. One would expect Miss Universe to look good in both.

A perfect example is this whole P3 nonsense. Imagine two scenarios, one where a wave analyst in March 2009 determined that the market was going to turn up in a wave-2 and that the turn should last about a year and retrace about 61.8% of the initial decline, and then P3 would begin. Now, in the second scenario, imagine someone who also thought March 2009 was a bottom and the market was going to go up in a wave-2, but at every little reversal proclaimed that P3 was beginning. Two wave analysts with the same flawed big-picture wave count, but as a trader, I'd much rather be reading the first blogger than the second, even if neither of them runs a "trading blog" per se.

[Michael]

"If you guys don't like blogs that post charts, why visit them?"-Oracle

If anything, they provide a tremendous ability to be a CONTRARY indicator.

Some of these blogs like "Trading to Win" and "Daneric's Elliott Wave" are huge havens for PERMA-BEARS. If you actually know how to play the long side of the market, you are simply not welcome.

The state of DENIAL that these people are in is truly phenomenal. If the market surges 30 S&P handles in one day, they chalk it up to the prop desks of JPM or GS buying equities ( even though their prop operations contribute only 1% of total revenues), or the NY Fed conducting a POMO operation, yet even if you believed in such a "conspiracy" theory putting fresh cash in the accounts of Govt. Bond dealers, the trades have yet to settle.

When all of these "P3 Fantasy" bloggers start "growling" hard and the sentiment is filled with references to "Cardinal Climaxes, "Death Crosses" and "Hindenberg Omens, it's time to get long . . . and has actually worked extremely well over the last 12-14 months at various oversold junctures. Last Wednesday was just another prime example.

It's an amazing phenomenon and I'm sure that the Harvard Business School could develop a chapter or two on this type of "crowd" psychology and obsession with EWT and P3.

:)

[vipul garg]

DG,
i am not saying wave analysis and trading are separate, but when discussing about analysis, a poster choses to deride another by 'including' trading only to imply that inspite of your analysis, i am better trader/or you dont trade and stuff is more like the analogy i was trying to draw.
technical analysis is a skill and which may or may not lead to profitable trades since trading has many more elements to it.

so in a way i am trying to say that i would respect a person only for his technical analytical skills and which would be irrespective of his trading prowess.

[yelnick]

KRG, I posted the EWTrends chart to show the channel down and the minor details in the recent move. I do not buy the LD down nor their wave count for the wave from April to July bottom. I had spent some time back when dissecting the LD count and dismissing it. Sorry for not commenting in the post about this.

On Neely, I find that his appendix and long count make little sense.

[DG]

but when discussing about analysis, a poster choses to deride another by 'including' trading only to imply that inspite of your analysis, i am better trader/or you dont trade and stuff is more like the analogy i was trying to draw.

Maybe I'm the only one seeing it as a "problem", but my problem is that I can't say if someone is a good trader or not without them providing some information. I agree that two people can take the same information over time and end up with very different trading results from the same wave analysis. It could also turn out that the one deriding someone else could prove out to be the worse trader of the two. Without information, it's impossible to determine.

And, I'm not even saying that someone needs to post real trades, I'd be happy to even see paper trades, since it's almost a virtual certainty that paper trading will be more profitable (given the same strategy) than real trading, since at least on paper you don't do things like prematurely exit winning trades because you are nervous or not take losses because you think they will come back. Paper trading would be the "ideal" returns for your analysis' implied trades. And if someone has a good method, today's paper-trader is tomorrow's trading success. If someone is making 50-60% annual returns with a decent risk profile, that is a person whose analysis I'd value, even if I then had to take that analysis and form my own trading plan from it.

Time is limited, so if I'm going to read someone's analysis, I want to know I'm not wasting time.

[molecool]

"Binve, Daneric, EWTrends, Evil Speculator, Trading to Win (Lose), and all of those other elliott wave blogs are a total joke..."

I don't know about those other guys but I for one warned everyone about the strong possibility of a snap back. Also - EWT is only a small part of the work I present. But you wouldn't know any of that since you're probably not even reading my work.

BTW, it's all there for everyone to see - go and check it out.

[molecool]

"besides the few like molecool who come here to advertise their own site, the rest of us come here to read and share."

I have posted my URL here maybe two or three times in the past two years. Jeeezzzz - tough crowd....

[yelnick]

Mole et al. - oh boy. You at Evil Speculator are pushing the state of the art on technical tools, and are now seeing if your primary computer tool can create tradable calls. I commend that and recommend my readers follow you. 

Neely pushed the state of the art in the '80s when he created NEoWave. Tony Caldaro did it in the '90s with his Objective Elliott Wave. Zoran Gayer was doing this in the '00s by extending NEoWave into fractals. I have followed some others such as Dent and Fibonacciman who also have their original approaches to share. Hank Wernicki is doing it today with fractals. DG has developed his own methods and shares the results online within a select circle. I have been quietly checking out machine learning approaches and have begin sharing some preliminary results under the rubric of Fractal Finance.  

All of this is very different than an EW tout site that tries to out-Prechter Prechter (or out-Hochberg Hochberg). 

Molecool should be exasperated by commentators who cannot tell the difference. And I believe he is prepared to suffer the slings and arrows of outrageous faultfinding that predictions are heir to. 

[DG]

BTW, as a reason why I think the topic of a "track record" is important, even though many believe that "past performance is no indication of future results", I present this paper as evidence that there is in fact skill involved in market timing and it's not just all luck. I'm not sure why the authors are listed as being affiliated with Harvard Dept. of Health Care Policy, since I think the original research was undertaken on behalf of Legg Mason (at least that's what I saw earlier this summer).

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1664031

[Edwin]

so many of the of traders (like AllAboutTrends) would not hesitate to sell the market immediately after a rally...Could it be that they are so anchored to lower prices...aka what William Eckhardt called.."a call to counter-trend"?

Well, I like to think that an emerging trend has developed and I did the "uncomfortable" thing by going and staying long since last Tuesday..I don't dare to lose my line...(Hmmmm.didn't Mr. Partridge say something like this?)

We will see very soon how the July to August's higher high and higher low is going to play out.

[vipul garg]

molecool,
read buddha.life is tough.

may be those are the only two three times you ve posted then.kindly see your above comment for corroboration. "check it out."

in any case, i have seen your work and i am one of the 'crowd' who thinks that you really need to work on technical skills .good that you admit EWT is a small part of your work, coz you dont have a hang of it at all.

[G Glory]

This guy's post before the open on August 31st got me long last Tuesday:

http://gi61et.blogspot.com/2010/08/1407-bst-spx-update-60-min-chart.html

He's got bullish and bearish counts and makes the point that the market can be doing many things, bullish or bearish, at any one time. I finally got it, I think after a few weeks of following his blog, having previously followed the biased approaches of EWI and then people like kenny.

Before he started his own blog, gi6 used to post his bullish and bearish counts on kenny's blog - it was like a breath of fresh air since I had been so accustomed to one view - ie kenny's, which was always put forward as the only possible view of what the market was doing. Tracking gi6's posts against what kenny was saying, I realised that kenny actually had no clue really. Its very interesting that kenny has recently started posting alternative bullish and bearish counts - something he never used to do. Daneric too. It seems they've started to adopt gi6's approach (however, kenny's counts seem to be no more than a copy of counts I've already seen on gi6's blog)

Its the first blog I've made money from. I suspect that this guy does trade his own analysis, but even if he doesn't, I couldn't care less since he's made me profitable for the first time in a long while just from recognising that there are lots of different possible counts playing out, digesting his analysis of the different possible counts and watching the levels he gives. He used to make the point on kenny's blog and has said it several times on his own blog that you can make money even if the count is wrong - and I've found this to be true, contrary to my previous beliefs.

Of course, not everyone will agree with his counts or with my opinion of his blog, but again, I don't care! I'm profitable now and learning from his analysis so that I can do it for myself in the future.

[Account Deleted]

Dow Jones futures before opening bell

[Molecool]

Vipul: I asked the Buddha and he told me that you are nothing - thus what you say or think means nothing to me.

Before you crawl back under your rock: What's the sound of one hand slapping you?

[Michael]

"Before he started his own blog, gi6 used to post his bullish and bearish counts on kenny's blog - it was like a breath of fresh air since I had been so accustomed to one view - ie kenny's, which was always put forward as the only possible view of what the market was doing. Tracking gi6's posts against what kenny was saying, I realised that kenny actually had no clue really." - G Glory

You are being rather naive to think that you have found the "Holy Grail" with "gi6" and his charts/blog.
He's not that definitive. And he can become just as "lost" as Kenny and Daneric.

While these guys have recently posted some bullish alternate counts, it is only done so to cut down on the "flaming" that they receive . . . in other words, it is a hedge against the Perma-Bear PRIMARY counts that they obsess over on their blogs.

You have to understand that people like Daneric aren't concerned about making money TRADING because they have a "day" job and don't trade. (He's only interested in claiming the notoriety of being able to say that he caught P3 and warned everyone about it). In fact, I have noticed that the majority of the mega-bearish posters that frequent Kenny and Daneric's blogs, not too mention "Trading to Win (Lose)" are young people that don't have a lot of market experience under their belts and have full-time jobs that have nothing to do with the markets. It's clear to anyone that has witnessed their "posts" over time that they don't have much (if any) skin in the game at all. Moreover, they drink the same perma-bear EWI "Kool-Aid" and wouldn't be caught DEAD going LONG a stock if their livelihood depended on it. They'd much rather be short in a rally like last week, to then cry about NY Fed manipulation and GS and JPM prop desk conspiracies...

The other day, I saw a comment made by a poster who thanked Daneric for his OBJECTIVE view of the markets and technical analysis. Are you freaking kidding me?

That guy is about as objective as our very own Roger.

Elliott Wave is Daneric's porn and he frequently masturbates to the next "Flash Crash" and "P3 Unicorn". Why would anyone want to "follow" someone that has NEVER played the long side of the US equity market in the last 12 months?

These guys are merely a portal for EWI and Prechter.
They've been flat-out WRONG for not just days or weeks, but months, and years.

The "Trading to Win (Lose)" blog might even be worse, since it contains a lot of Kenny's followers on it that dropped Kenny like a hot potato as soon as Kenny began taking pot-shots at Prechter and Hochberg and calling them out on one failed count after another. I think that Kenny has tried to go back to pure classical technical analysis, but underneath, he's just as big of a PERMA-BEAR as any of the other EWT bloggers out there.

Again, it's a most interesting addiction and phenomenon. It has nothing to do with taking an honest appraisal of the markets using technical analysis, let alone trying to impliment and execute a trading strategy that will make money.

These fools that post on these blogs frequently "average down losing" short positions as the market goes higher and break every risk management rule in the book. That tells me that they are either a bunch of college kids that are just full of BS and don't really trade, or they are young, inexperienced, and highly naive people that make the single worst mistake in having a strong BIAS and believing that equity prices are highly correlated with the fundamental Economic backdrop.

The EWT blogosphere is littered with these kind of "followers". Buyer beware.

[Hank Wernicki]

IF today's lows hold a rally is ahead for the SPX / ES

Look at 9/1 that's the Child

Breaking the lows brings a decline into 9/27