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« Inside the Numbers: ISM Reports and the Great Margin Squeeze | Main | This Market is a Typical Secular Bear »

Monday, February 14, 2011


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Hank Wernicki

da bear

I posted this on Friday after the close:

any word on the Paul Tudor Jones rumor that he called the top?
well, I just posted a Report on gold/silver and stocks. Then I checked out a DJIA chart and it looks like five full waves are in off the March 2009 low.
Jones uses Elliott wave sometimes so that may be what he is looking at.

here is a link to my Report:

da bear

Posted by: da bear | Friday, February 11, 2011 at 03:11 PM


da bear


I worked for PTJ back in 1986.
Back then, he used a little bit of EWT, but it was never a significant component to his trading . . . And for what it's worth, I highly doubt that he is calling a TOP right now. He's not a "Top Picker" like all of the other pundits in the Blogosphere. That's just not part of his trading methodology.

By the way, tThe S&P has risen 100% since the March 2009 low, and increased by $6.7 TRILLION dollars.


PS. Dougie Kass has been spreading several rumors lately ( like the one about PTJ calling a TOP in equities ) and now he says that a "gnome" is telling him that John Paulson has moved towards a neutral position in Gold and is tweeting this stuff across the internet.

With comments like this, Dougie Kass is steadily becoming a joke... and one really has to question whether he even manages money at all.

da bear

Five waves up in the DJIA since the March 2009 low.
The Flash Crash-Correction was the wave 4 with the actual "flash crash" comprising the wave 3 of C. It's a clear five wave count.

On the other hand, I think gold is in a giant B wave (similar to EWI's count on silver) and wave a of B went from gold $250 to gold $1,030ish by the Spring of 2008. The sell-off into November 2008 counts as a b wave decline in the B move up. The rally since has been wave c up of B. In my Report I posted a link to a good article on gold with a decent looking wave count. However, his wave count's 5 isn't fully formed. So gold can go higher.

here is another link to my Report:

I think EWI has their counts wrong. EWI should have a Financial Forecast or something due out soon.

... oh, I sent EWI a message about the five full waves with another comment to them on how this super-duper bear market appears to follow the mother-of-all-alternate counts (Figure 5-7) in At The Crest of the Tidal Wave.

The next decline will be the big 3 of 3 decline and will mimic the Spring 1930 to Summer 1932 decline. (that decline was also a WAVE 3). In bear markets the "all-out collapse" phase is the wave 3. The fast rebound is wave 4 (1932-1936/1937), followed by another down tick (1938 low).

My long-term dollar wave count has the orthodox top coming in 1987 or so, with the WAVE B high in 2000/2001. The drop into 2008 was wave 1,2, and 3 of C down. Since then we have been in 4 of C. With a rally soon, possibly 'c' of 4 of C. then a drop to around 50 for wave C down for completion (similar to the FDR devaluation in 1933).

da bear

da bear

If this is the top then I guess Paul Tudor Jones will take credit. lol

da bear

Prechter is a ninny

This is not the top. It is not even a top. Go short and you will be forced to cover. Buy puts and lose your shirt. Do either and you are merely fueling the rise, making bullish hands stronger. Which might well make you sad or angry or even more delusional and conspiratorial. This is a bull market. It eats bears.


If you look at the monthly pattern of tops, it is very likely some sort of top happens this month. The question is will it be just another smallish correction or what.

Can't help but think the psychology is becoming more and more like 1930, when DOW theorist Robert Rhea, I believe, said the rally was such that even he was fooled by its strength and covered his shorts even though he should have known better.


That is a very good observation upstart.



>"Can't help but think the psychology is becoming more and more like 1930"

Or it's more like the chop in the late 60s - early 70s. I know he's gotten some criticism for past bearish bias, but Binve's had some great analysis of five wave forms & impulse waves & secular bear markets. Required reading for Elliotticians.


If this count below is accurate [see chart], wave (iii) is shorter than (i) therefore the upside for (v) is limited by rule (cannot be longer than 30 points in length on the SPX)

Unfortunately, it isn't.

That being said, if you look at the time of the rally from the late August low to the early November high and then from the late November low to now, they are about equal, which could turn out to be a good point for us to reverse on a larger scale than just for a day or two, since I'm pretty sure that November decline was an x-wave, and often the time relationship between the two waves surrounding an x-wave is one of equality.


Yelnick I always enjoy reading your posts but am really at a loss as to why you quote EWI. They have been wrong for at least 15 months and have damaged many of their subscribers by encouraging people to go double leveraged short. Why would you even refer to what they have to say?


tk, on EWI, they got it right on the April top, well within your 'wrong for 15 months' period. Be careful not to fall into "recency bias", that because they aren't recently right they are always wrong

Michael W

Hey Yelnick,

Thanks for the update and read. Just wanted to ask you a quick question. Why do you bother continually posting the work of Elliott Wave analysts and bloggers that have continually called for a top and have been wrong for many many months? In all honesty, it makes Elliott Wave look absolutely useless and I am sure a good portion of your readers feel the same. On the other hand there are some really good analysts out there who have been extremely accurate and they definitely give Elliott Wave the credibility it deserves.

The main ones I follow are:

I'm sure there are others and perhaps some other readers might like to share them?



Chicken Little

Thanks for the post. I was beginning to worry about my longs since you hadn't written a bearish piece in weeks. I'll be doubling up - mostly fertilizer and base metals - at the open.



Thanks for the response but I don't understand how you can say EWI got it right in April. They called that the beginning of P3. So they got a short term top correct? ok, maybe but for all of their promises of P3 they have been wrong, wrong, wrong. Like I said, I enjoy reading your posts as they always seem well thought out and reasoned but why you would reference EWI considering how awful their predictions have been just does not make sense to me. Why do so many people want to defend EWI given how much pain they have caused those that paid for their advice? No need to answer.

you know i'm right

To those who would have Yelnick refrain from discussing EWI because of their poor track record:

Are you nuts? What betting record has been better since December 1987 than anti-Prechter? There are some awful prognosticators out there with terrible, terrible track records. But there is none as piss poor as Prechter's. This could well be due to randomness. It probably is. But if you are going to follow an "analyst" based on their historical value there is none better than anti-Prechter. Anti-Prechter has been a scarily profitable way to go for more than 23 years.


I am so excited for the email I received from EWI with subject title "2011 Could be an Exciting Year; Get 32 pages of Trading Lessons". How can it not be exciting when you can make whatever market calls you want, being mostly wrong and get paid for it. On top of that one can take 32 whole pages of trading lessons so that he(she) can make stupid calls as well. Very exciting stuff indeed. Can I have a sip of that drink too?


If it bugs you that this site advertises EWI garbage, don't visit this site anymore.


I doubt Yelnick would appreciate that Rudy. Something tells me that he wants people to read his comments and give some feedback and if possible to contribute to the dialogue with analysis. I have the impression that Yelnick is smarter than expecting people to agree with certain views or else they should walk. That said it strikes me Rudy that you start with the assumption that the site "advertises" EWI and that EWI is "garbage". I don't know if your assumptions are right but if they are doesn't it make sense someone to express that to Yelnick and other readers?


tk, they called the top, so a trader would have gotten out or shorted in advance. if you have read me for years, you know I am not a fan of P3 nor their uber-bearish long wave count. I see the pattern since 2000 as a sideways wave 4 not some sort of debacle that ends industrial civilization. EWI gets wrapped around the axle because their long count is off. they made the same mistake in 2002 and got their followers on the wrong side of the trade at the October bottom.

if the market is seen as sideways, once we got past the 62% retrace, the most likely outcome is a return to near the 1500 area, hitting the tops in 2000 and 2007 in the S&P. We are now heading towards 78% and that is really the last line of resistance against a triple top around 1500.

EWI persists in this being P2 with a P3 to follow, but it has gone far enough that the odds of P2 are much lower than it being a different wave. The two easiest to count are either an X wave or the start of a large B wave (the 2000-2009 being a large A wave that broke as a classic flat pattern). The third alternative, that this is a five-wave impulse (the start of a huge new bull market) seems less likely because the internal structure is not impulsive (no alternation in waves 2 and 4; no extended wave).

It is this lack of impulsive behavior that leads me to bet on the X wave. They are not well-explored in ewave, but tend to be simpler structures than impulses or corrections. Think of them this way: where corrections correct an impulse, X waves correct a correction.


Greg, readers calling EWI "mystic poop" in a variety of scatological language is fine with me; it may be no better than that. But I would prefer a discussion, particularly about pushing the state of the art forward. It seems time, doesn't it, for a new direction to emerge? Along the lines of fractal finance.

you know I'm right

Folks, if there were a magical sign that accurately predicted bull moves when it read "SHORT!" and bear moves when it read "LONG!" you would gladly pay forty bucks a month for it.

So slam Prechter for being "wrong" if you want. Just remember to fade him and to thank God for revealing to you a crystal ball that has been astoundingly accurate for 23+ years.

Mamma Boom Boom

>A new line-in-the-sand is SP1341. The current wave up started at the end of January at 1275, and based on its internal structure, should not break 1341 before a serious correction.<

Coulda, woulda, shoulda ???


Well here you go. Prechter has set his stop at 1359. All you anti-EWI prepared to go short when it hits it?


Wow, Prechter's stop is 1359 SPX???
Is that really true?

He's been 100% short since August of 2009 at an average of 1019 SPX.

Nothing like watching the market rally 30% against you and missing out on plenty of money-making opportunities from the LONG side.

But then again, what else would you expect from a guy that writes a newsletter, and who doesn't manage money. Given his stops, why he even has a Short-Term Update is absolutely beyond me.


Virgil, the EWi crew has now given three different signals:
Hochberg is out Friday, Kendall says 1341Hchberg back Monday, gives 1345 but only as a way-stationPrechter asks if we are about to explode UP then puts his stop at 1359

Hochberg promises to clarify Wed (tomorrow's STU). I think they are caught into three counts: Kendall has a convention five-wave C, Hochberg has an ED/wedge, and Prechter wonders if we are in wave 3 not wave 5. 


"I think they are caught into three counts: Kendall has a convention five-wave C, Hochberg has an ED/wedge, and Prechter wonders if we are in wave 3 not wave 5.Â"

It is the problem with EWI - why in gods name do they always seem to have three directions - some up and some down? A fine thing to do in theory - a terrible practice for trading advisory.



Yelnik -

When it did break resistance at 1310 (SP) it was clear to me it was going to make some kind of run up. Likely to the fib off July 10 - 1350 and also likely in time frames that make equal legs (as DG notes). But really,I am watching for a final blow-off before this moves down. Maybe I am wrong to be waiting for this to happen. Are you watching for a blow off rally 1800+ tick?



Joe, once we passed the 62% retrace I think the EWi count became simply wrong. This is not a P2 nor any sort of wave 2. It looks the most like an ABC where C should equal A, meaning it goes from 1011 up 1220 - 667 = 553 pts or to 1554 area. A correction is due but not a major one. Counting the C wave off 1011 as a five-wave has two issues: no extended wave, and the wave 2 down in August looks disproportionate to the purported wave 4 down, hence likely a minor wave 2 of a bigger wave 3 - Prechter's alt count.


Michael, you are being obtuse. Prechter closed out his August short a loooong time ago,

Mamma Boom Boom

>A correction is due but not a major one. <

Obviously, we disagree. BIG-TIME!

da bear

It looks better as a FIVE wave rally since the March 2009 lows.

Here is what I posted in my last Report:


Ok, wow. I just printed out a big charts chart of the DJIA. It appears that a full five waves are in if you count the Flash Crash correction as part of the wave 4. The bounce off 10,000 then was the start of wave 5. what you want to do then is count the high just before 11,000 as wave 3 high, then the initial dip as wave a of 4, a slightly higher wave b, and the flash crash as the wave 3 of 'c' down.
Originally, I counted the Flash Crash as the wave 3 (correctly). I also posited that the rest of the correction would be consist of wave 'd' and 'e' after that wave 'c'. On yelnick I posted, somewhat tongue in cheek that a wave 'g' was possible in which stocks rallied and where gold would hit new highs. guess that is another alternate count.


I also opine that if EWI would actually look at their old book, At The Crest of the Tidal Wave, that this bear market is tracing out like their Figure 5-7 in which this current bear market plays out like the Crash of 1987 only on a bigger scale.

here is a link to the online text and go to Figure 5-7 on page 79. In this scenario the wave (B) high occurred in Fall 2007. The Crash of 2008 was the major portion of wave I of C down and we have just finished II of C down.


maybe that link works. but if it doesn't I will give another link.

Again, the FLASH CRASH is the heart of the wave 4 -- it is a textbook of a corrective wave 4 in an advancing rally with the classic wave 5 since occurring on lighter volume.
The initial thrust of this WAVE II from 6,400 to 9,000 in short order. Then a wave ii decline retraced to DJIA 8,000.
The wave iii then took the DJIA from 8,000 to around 10,600 before the a-b-c wave iv decline.

In my opinion, this looks better from an Elliott Wave perspective.

da bear

Mamma Boom Boom

>Again, the FLASH CRASH is the heart of the wave 4 -- it is a textbook of a corrective wave 4 in an advancing rally with the classic wave 5 since occurring on lighter volume.<

Good observation, da bear.


Guess it depends on what you think big is, Yelnik.

As you correctly stated, "...the 1352 level, where the larger wave from July 2010 would equal 62% of the initial wave off the March 2009 bottom, a typical relationship..."

I just expect something like a 10% correction - very soon and I "hope" that there would be some kind of blow-off rally that precedes it.

But you know, da bear could very well be right. You really believe this market is going to triple top??



Joe, under fractal finance a market usually triple tops. Imagine a QE driven liquidity pump into June, a summer correction of over 10%, and a final rally on QE3 into Jan 2012. At this point QE is losing effectiveness, economy still sluggish, and we fall off sp1500.


America is bankrupt


This is from Memmingers 1/10/63 report to the Confederate congress. He calculated correctly, at the time, that the treasury would be bankrupted in six months.

"Like the moon’s attraction upon the ocean, the time of high water is postponed for a certain period beyond the moment at which the influence has been exerted, and the length of the interval is affected by exceptional causes. But although there may be delay, the event is certain."

The way they flooded the market with paper certainly reminds me that we are doing the same thing.

I certainly appreciate your posts and replies.



Joe - PragCap has an analysis of QE which shows the diminishing returns of QE2 vs QE1 and the Fed's initial response. They say this third time only lowered rates by 18bp, much less than theory. Fourth time with QE3 may do scratch.

We are not in any way close to the hyperinflationary abandonment of 1863 or of 1781

Fountain Pumps

This is not the top. It is not even a top. Go abbreviate and you will be affected to cover. Buy puts and lose your shirt. Do either and you are alone fueling the rise, authoritative bullish easily stronger. Which ability able-bodied accomplish you sad or affronted or even added delusional and conspiratorial. This is a balderdash market. It eats bears.

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