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« QE2 Explained - The Music Video | Main | With 3D a Bust, TV Gets Smart »

Thursday, December 30, 2010


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Mamma Boom Boom

>What may surprise long-time readers is that Prechter is not that bearish right now. ....... This suggests at a minimum C should go to Sp1350 no earlier than April 2011, and more likely goes back over 1560 by around Sep/Oct 2011.<

Now I don't care who you are, that's funny.


Once this downdraft gets started I'll try to pin-point a target, for you.



When in doubt, call it an "X" Wave.

Yelnick, you've been trying to call a TOP in the market for about as long as Prechter has . . . One of these days, you might actually be right.




I appreciate your analysis. Always seems well thought out but I can't figure out why you follow anything Prechter says. That guy has been soooo wrong and now he is becoming bullish? What happened to Hochberg and his nightly writings that the market decline was imminent? I don't subscribe to EWI any longer because they were/are so wrong. Why do you follow anything they say as I can't see that they have done anything well. I really do want to hear why you listen to them and site their work as I for one have lost a ton of $$ listening to EWI. Thanks.


JT, here I try to uncall a major top and you see it the other way. Who is blinded by belief?


"Note: The EWI view does not go that far in distance, at least not yet, in part because they view the Hope Rally as a wave 2, which normally does not go much beyond 62% of the prior drop, and this one is knocking on a 67% retracement. It could , however, go back as far as 78%, which is the range of 1350, without doing violence to EWI guidelines."

In 1937, Wave 2 retraced 82%.
In 1969, Wave 2 retraced 80%.

The reason that I know this is because I have Page #6 of the Elliot Wave Theorist, dated January 9th, 2004 in which the market was getting close to the so-called end of Wave 2 in early 2004 at Dow 10,773 which equalled 78.6% and was to begin the devastating P3.

Guess what?

The market never entered Wave 3 (P3)

The Googler

Back in 1872 George Tritch predicted a bear market for 2012

The Googler

AJ Frost predicted a major top sometime near 2010 based on the 8-9-10 cycle


TK, Prechter occasionally dives into analysis & even when I disagree I find it insightful and think readers would too.

STU thinks it could be the end but Prechter has several times commented that time & structure would allow for a run into 2012. Bashers tend to over-simplify his analysis.

I have never bought into the P2 count. It requires a much deeper drop in short order. Instead it looks like the 2009 bottom was a major bottom. When P2 is dropped the trajectory ahead looks sideways, and a larger retrace is to be expected.

Given that, EWI will remain off in their predictions except in two contexts: short term turns and bigger picture backdrop.

I have been exploring an alternative to the short term calls using Fractal Finance principles. Right now it is not calling for an interim top, so a good test with the STU is coming in January.

Account Deleted

S&P 500 Analysis after closing bell


Some of the Gartley patterns use .886 retracement. (sqrt .78)



That post by JT convinced me that JT and Michael are one in the same. They both never quite read what is written, and I've commented to M on this in the past.

Thanks for the excellent summary. Sy Harding figures the bull has about 18 months to run before the final top is in. He does expect a correction here and says 6 or 7% would be typical given the sentiment and over bought readings today. Might put the 401k to work if it pans out.



JT, I do not count either of those as waves 2. The first was leg c of a triangle and the second wave a down off the 1966 peak.

I will dig up that issue and see what EWI actually meant.


"TK, Prechter occasionally dives into analysis & even when I disagree I find it insightful and think readers would too." - Yelnick

Let's be honest here.

The fact of the matter is that Prechter loves to give all sorts of examples of sentiment, from the DSI numbers to AAI, as well as Investor's Intelligence. And yet, these "indicators" have shown to have very poor predictive value.

I, (as well as others here) are at a loss as to why you continue to give him a forum to present his views. Do you really want to make money??? Or do you merely want to blog about someone that has an esoteric theory that is virtually (and unrealistically) useless to trade off of?

Sorry Hock.

Michael and I are not the same, although we share the same office space and broadband network. In fact, there are four of us here. Close, but no cigar!

Happy New Year and Best Wishes to All.



Is alternation a rule or a guideline? The rally from '32 to '37 seems to fit well with that top channel line.


From Page #6 of the January 9th, 2004 Theorist:

"Wave Circle 2's distinction is not its RELATIVE depth but its ACTUAL extent and duration. At Grand Supercycle degree, the form is large and taking a long time. But it is still the same form. The consolation for us bears is that the downside resolution will be correspondingly large and persistent."


If Prech and Hoch actually traded based on their calls, they'd be broke several times over. Yeah, looks like we're headed towards another 78 percent retracement where they'll likely issue another "urgent" 200% short recommendation.

Let's be frank, the DSI, AAI, and who know's what other sentiment indicators the folks at EWI love to tout, have been showing overbought readings for the last 12-15 months in nearly every asset class. And according to them gold was expected to top at $400, then $660, $850, $1000, $1200. I still remember Hochberg in the mid-09 STU saying that gold's consolidation (which end up being a bullish flag pattern) was taking "it's own sweet time" but when it does break, it shall be dramatic.


I did some digging around. Some STU archives:

[Silver] remains in a similar near-term position to gold. The decline from Monday’s $13.94 high to this morning’s $12.95 low appears to be a “five,” which means that the next leg down has started.

[Silver] is fighting to get back above its wave (1) low at $12.41, but it failed to do so today. Sooner or later, wave (3) will draw prices toward, and eventually beneath, the October low ($8.39). The meager bounce from yesterday’s low may be the last of silver’s stay above $12.

[Silver] too appears about to bust loose on the downside. The next significant move should be a third wave down, which will be dramatic and draw silver prices toward the October low ($8.39).

[Silver] spiked to $13.30 (basis spot) and pulled back by session’s end, closing back under $13.00. The countertrend rise from April 17 should be over, or very nearly so. The implication is that wave 3 of (3) down is fast approaching...

In [Silver], we said Monday night that the “countertrend rise from April 17 should be over, or very nearly so.” Yesterday’s steep selloff is the type of behavior that supports this forecast. Silver should now be in the “next leg down,”

The trading sessions in [Gold] over the past two days have continued the downward bias initiated at the recent $919.40 high (Apr. 27). The process of completing each small-degree second wave rally, the latest being the April 27 high, has been slow, but the “payoff” for the bearish case should be fast approaching.

While the bearish case has frustrated us, certainly the gold and silver bulls cannot be celebrating either since both precious metals remain well beneath their respective March 2008 peaks.

Right now though, there is a serious 3-day inter-market divergence between gold and silver on top of a serious 3-month divergence, which means we are especially attentive for signs of an impending high.

[Silver]’s large outside-down day, a $1.05 reversal from intraday high to low (basis spot), indicates a top is in place.

Sherman "double long" McCoy

So, who exactly do they interview for these sentiment surveys? I've been in the business 30 years and never met, or heard of anybody who has participated. They are meaningless. Why take them at face value?

Prechter's primary appeal is to Alzheimers patients that keep forgetting how bad his market advice is. 3 years as a junior analyst at Merrill 30 years ago makes him an expert on nothing.

Never trust anybody who doesn't run money or publish audited returns. How desperate is somebody who depends on a $39.95 newsletter for their "edge"? PT Barnum's immortal wisdom comes to mind...


EWI's overemphasis on surveys is ridiculous. Surveys can't measure how bullish or bearish one is. Is one considered bullish in that they keep buying? Or is one bullish in that they are merely not selling? The DSI have continuously indicated 85+ percent bullish readings for much of the rally.

One thing that's worse in EWI's use of sentiment is their selective use - touting readings only when it makes the case favorable to their outcomes. Not a word about sentiment when the dollar was topping in spring of `09 or when gold & silver were bottoming back in the fall of `08.


well, I am not an expert trader and learned of EW about a year ago and it scared the hell out of me when you listen to their predictions. On the face their comments made sense but the more I read others along with the comments above I have come to realize they are peddling a product and are selective in the gauges they use to argue their opinion. My bad. I did ask them when I signed up for their service if they measured their accuracy and never got an answer. I tried to ask them how they managed a process they didn't measure but never got a clear answer. Now I know why. I still think EW sounds like it has merits but it seems that it is pretty open ended on how to "interpret" waves and therefore is not that great of a predictive tool. I have learned alot as a result of what I have lost in the past year but that's ok, the great thing about America is that you can always make more $$ if you are willing to work and put in the effort. I appreciate the comments of those that posted as it does help me learn. Happy new year.


Spot Silver found resistance this morning at .78 retracement from yesterdays drop. Fives up from end of July. 3rd wave becomes the shortest at 31.50. If it's an extended 3rd, than 3 equals 1 at about 35.50. Is this useless information?


Well that last was useless - 3 actually equals 1.6 x 1 at 35.50.


Regarding Russo's scenario - I can find only one pattern to have occurred during the three secular bear market's since 1929 which fits his count in even a general way and that is the '38 rally. Every other rally where the initial wave exceeded 40% was the first of 5 not 3 waves.

Also is this stuff really applicable on all time frames? I understand that you can find price action taking a similar form on different time frames but I am a little skeptical that wave theory can be applied in the same way on all time frames - particularly the really long term secular bull/bear one.

In a practical sense, even the laws of physics seem to change depending on the scale one is analyzing - I think there should be a little more skepticism about applying what works on one time frame to other time frames.


The subjective "pick and choose" analysis by Prechter of these rather dubious sentiment indicators (which no one has ever really defined as being all that specific, let alone having high predictive value) is a continued waste of time, as highlighted and pointed out by MANY of the posters on this board.

Prechter points to the AAI investor's sentiment at a 6-year high, but mutual funds have seen nearly 33 consecutive months of net OUTFLOWS!

Yeah, that makes a lot of sense.
Yet another highly "predictive" indicator, for sure.

The "conclusion" is that margin debt is fueling this stock market rally, and that this will end badly. Really?

Stop giving Technical Analysis such a bad name with all of this subjective analysis by Prechter and his like.

Anyone that has identified and confirmed the trend, bought weekly breakouts in various equity sectors have been able to reap the rewards of position trading and simply following the trend - - - keeping away from that absurdly dangerous game of playing "Pick The Top" cause P3 is IMMINENT.

Tell me, how'd P3 work out for all of the Prechter Bears when the OIH was down at 100 on Labor Day, and has rallied 40% in 4 months?

This could be a great forum for traders and market technicians... I just wish that it dumped it's obsession with Prechter and EWI and concentrated on REAL T/A.

I think that many others here (as noted by their posts above) feel the same way.

Hank Wernicki

Is EWT still short Silver ?

How are they handling the trade ?

Mamma Boom Boom

I don't know how the markets will open next year. Most short term indicators have gravitated to zero, from a lack of volume. But, I think the downdraft will assert itself fairly quickly.

I also think that, by the 2nd quarter, 'Benny and the Gents' will be forced to rethink monetary policy. Events are going to happen that will give them religion. Don't stand in front of the fan.

Happy New Year!



I was a sucker to have subscribed to EWI in the past. But one thing that impressed me was STU's call for the stock bottom back in March 09. It wasn't that Hochberg called the bottom exactly, but the fact that he quickly admitted to his mistake and changed sides immediately - something that can't be said for the rest of his calls.


here is Hochberg's comment from April 2009.
“…based on our projections, the bear market is more than halfway done in time. It is less than halfway done in price, however, as the steepest portions of the decline lie ahead.”

what a clown that guy is. I am the dumbass that followed their crap but I can't believe someone has such little shame that they keep charging for that stuff.

The Bernank

Did the ECRI just announce (today) that their Weekly Leading Economic Indicator is at the highest level since May of 2007?

Convert to Agnosticism

EWI doesn't sell predictions or advice to traders. They sell religion to True Believers. They will never be right. They will never be wrong. As an Estemmed Anointed Great Grand Guru might put it, "Just because it hasn't rained in months doesn't mean it won't rain."

They will just take your tithe and let you say you are a member of their church.

Jim Jones

For Prechter, it hasn't "rained" since he put his initial 50% short position on in the first week of August of 2009 when the SPX was trading right at 1000.

But don't tell that to all of his "followers" over at Daneric's Elliott Wave blog who continue to drink from the P3 "Kool-Aid" or those from that other perma-bear website ... Trading to (Lose) Win.

Happy New Year!

Roger D.

The implications of this chart are unimaginable for 99 pct of people. If your not short or hedged you should be!

KO weekly chart and printed a new high today. Coke is one of many with irregular supercycle tops. SPX long term target 350 with a supercycle "A" crash wave directly ahead.

Roger D.

Happy New Year


Jeez louise, did Daneric beat you up as a kid or something? You claim your methods are so superior to anything else here or on other wave blogs, yet continue to read those blogs with an almost religious fervor and report on their perma-bearishness.


With the exception of Yelnick, who mentions them from time-to-time, I don't think any of the other posters reads them on as regular a basis as you and certainly doesn't care enough to mention them here. Yet, you are the first one to say to others that they "aren't real traders" if they have time to read and post on blogs, but you seem to read and post on more than anyone else and under multiple usernames to boot!

Plus, it's good that there are people who are trading and who are clueless. Where do you think the profits which skilled traders extract from the market come from? The Tooth Fairy?

Man, you are a blithering idiot. Were your parents brother and sister?


Michael and I are not the same, although we share the same office space and broadband network. In fact, there are four of us here. Close, but no cigar!

Yeah, and you forgot to mention you share a preference for the same terminology, view on the markets (have you guys EVER disagreed? Are you Michael's little bitch who can't form an opinion different from his?) and idiosyncratic phraseology.

I'm sure if someone collected the posts you've made and ran them through some software it would come out that you are either the same person or twins who make a conscious effort to do everything the same. Either way, it's just odd.


JT, I went back to that Jan 2004 EWT. It is discussing wave2's that retrace 78% (+/- a bit) and how they are followed by a steep wave 3. The examples cited are all minor wave 2's within an already bearish decline. It is not discussing a major wave 2 like their current P2 count, which as you know I disagree with. 

In this EWT Prechter was still within a belief system that the Oct02 bottom was not a major bottom but a waystation on his deep decline which never happened. It was later he said mea culpa and changed his thinking. I have oft mentioned his bias, which I think hurts his technical assessment, that this is the End of Days not a large wave 4 correction that we are in. It comes from seeing 1932 as a major bottom, and not the start of a 20 year triangle, which better fits the circumstances as well as wave structure. That triangle is vivid in the inflation-adjusted Dow, and at the time Elliott himself thought we were in a large triangle. 

When I assess the EWI count I always fade the bias. It is the same as watching optimists see every green shoot as confirmation of a recovery. It was last December we had lots of chatter about green shoots and a V shaped recovery, which never happened. 

I suppose you could say the P2 count will persist among the EWI followers until we break 78% (think: Sp1350 area), after which it will more likely be seen as part of a B wave of a larger scale, or as my X wave. 

I gather you think an X wave is the last refuge of a scoundrel, but they pop up all the time in lingering corrections, and they tend to have a relatively simple structure that belies easy categorization - neither fish nor foul, or if you like, neither impulsive or corrective. The fact the Hope Rally is hard to count either as an impulse or as a corrective wave supports the X wave view. You could think of X's as badly-formed zigags - not as impulsive as a normal zigzag, nor as overlapping as a sideways move. This outcome should not surprise, since while corrective waves correct impulses, X waves correct corrections. 

The analysis of X's is very shallow as they seldom are seen at the scale of the Hope Rally. The rally off the 1974 bottom can be counted as an X wave connecting two zigzags - this is clearest on the inflation-adjusted Dow, and since we had a severe inflation, that is the better way to assess that period. Prechter counts that X in the nominal Dow as wave 1 up, and the subsequent zigzag as wave 2 down. Take a look at it (use At The Crest of you have that book - da bear's favorite volume): the wave up has a clear 3-wave structure punctuated by a long plateau at the top, which they count as 4 and a truncated 5. That plateau is better thought of as waves 1-2 down. 

In any event that X wave lends itself to two interpretations: as an impulse or an X - and they are back to back in the book. The Hope Rally also lends itself to an imperfect impulse (without clear alteration in waves 2 and 4 & without an extended wave inside) or a tortured zigzag - a good exemplar of an X. 


Paul, on EWI and silver/gold - couldn't agree more. Have called it wrong for years. You should read their current EWT for the latest.


OracleLurker, the fractal nature of markets means it should apply on differing time scales, with one big caveat: inflation. Over short time frames inflation can be ignored but over longer frames it can be determinative. The inflation-adjusted Dow looks quite different than the nominal Dow since 1933, with the divergence larger since 1965. Even the inflation measure matters; using gold gives a much lower current Dow than using CPI or the GDP deflator.


Hank, they were not short in Nov but went short in Dec and remain so. Lots of analysis in the EWT.


Paul, Prechter began calling the bottom in late Feb, and gets credit for the Mar 2009 bottom. Readers probably do not distinguish Hochberg's STU from Prechter's work enough. It was Prechter not Hochberg who went double short prematurely; and both of them correctly predicted the April top before it happened. Prechter is now more bullish than Hochberg, who remains convinced a major top is days away


The Bernank, ECRI is back to May 2010, not May 2007. It is in fact right where it was just before the April high. 

Listen to this interview:

He thinks the double-dip is not coming, but is worried over employment - GDP coming back with a fraction of the jobs being replaced. 


Virgil, alternation is a rule, and Neely adds a second: one wave of an impulse must extend (go more than 1.6x the next longest). Zigzags also stay on a channel, so a channelized wave which fails the two tests is likely a zigzag. Elliott himself counted the 1932-37 wave as a zigzag not an impulse. Prechter at one point devoted a lot of ink to this, explaining why it was a "5" not a "3". I think under his count (a) wave 2 was sharp and 4 was sideways, meaning they alternated; and (b) wave 5 extended.

The Hope Rally does not fit an impulse: waves 2 and 4 (in June and Jan) are both sharp, and no wave extended. It also has a lousy third wave, which has overlapping waves within it that characterize a corrective wave. I have never seen a clean count of that wave, from the July 2009 low to the January 2010 high. Possibly it is a simple ABC with the overlapping part in Sep/Oct a running triangle B wave. The A wave would have run quickly into August, when Prechter did his premature 200% short call; and the C wave would have been the thrust up from mid-Nov to Jan19.


Paul, on EWI and silver/gold - couldn't agree more. Have called it wrong for years. You should read their current EWT for the latest.

How about give me a heads up? I'm curious. Just don't want to pay for another subscription again.


Paul, I am not permitted to reveal too much. They have a construct to support their short call, and a lot of analysis behind it. If you follow the links in the blog post you might be able to snag a copy without a whole subscription. I do not play gold/silver so do not follow their views and have no independent opinion.

Roger D.

Hey hide and watch, the Dow completed this same top in January '10 and led to a swift powerful decline. Now the Dow transports have this classic pattern also. "Morta" the bull is dead.

Roger D.

Roger D.

here's your favorite chart,you know the one your tired of looking at AZO. My preposterous notion about the great irrgular bull market. Take a close look here and it really doesn't matter if I'm wrong in my count,because after a extension like this,the stock always crashes. The Dow transports and UAL did the same extension and crashed in 1990. Notice that the extension started in September with the QE2 anouncement. My point has always been that the irregular leg was entirely due to the reinflation efforts of the Federal Reserve. Now the greatest market crash in US history is about to begin.

Roger D.

Happy New Year


Yelnick, terrific year end analysis. Its a guideline in Prechter's book. I haven't read Neeley's but suppose I should. Although he seems to be as hated as Prechter lately.


Which chart are you referencing in his Crest book, 2-8 or 3-1? Russo's second chart is looking like da bear's alternate count in 5-7.


Virgil, Crest 2-4 shows 1932-37 well. Crest 2-6 shows 1974-78 well.


Peeping into the Bear Cave I see Prechter talk is still hot.
Some puppy bears just does not seem to get it that Big Perma Bear have had
it all wrong since March 2009. What a party they have been missing.
Now I read that Prechter is in fact not too bearish. That's scary.
Please, Yelnick, dig up some angst. Throw some fear into the cave.
True enough, too many "experts" are wildly optimistic. They're a bit late for
the real fun, but that's beside the main issue which is: More pessimism, more
doom and gloom, please!
Those of us who have made money since March 2009 really need you bears.
I mean it. Without you and there'd been much less money made.
So, in order to focus on more and more and more gains, please come up with
some nasty, ugly analysis. Something real scary. Something which scares
hords of people screaming out of the stock market.


Fortunately all the counts are flawed.

All the best to everyone for the New Year.

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