Elliott Wave and the XAO

[Porper]

Oops... I believe Elliott based his analysis in fundamentals and I'm having some trouble trying to marry up some fundamentals for the worst case EW scenerio.

Where did you read this Whiskers ?

As far as I know the whole idea of the wave principle is to not rely on fundamentals.This is more for the Elliotticians, most of us tend to be realists.

An example is Prechter suggesting the DOW will travel to 400. It can't happen i.m.o. That's not to say we can't breach the March lows by a substantial amount.

There are also various interpretations of the Wave theory.

Neely has his own band of followers, as does Prechter.

Some of us put emphasis on certain aspects despite the "purists" correcting our counts etc.

 

[Whiskers]

Where did you read this Whiskers ?

I was reading something about Elliotts history and where it mentioned Elliott winning a stock trading competition using EW but mentioned him using basic FA to help/guide his analysis.

I did have the link bookmarked, but my PC hard drive has crashed since and I hadn't saved my bookmarks... but I'll see if I can find it again.

 

[Porper]

I was reading something about Elliotts history and where it mentioned Elliott winning a stock trading competition using EW but mentioned him using basic FA to help/guide his analysis.

I did have the link bookmarked, but my PC hard drive has crashed since and I hadn't saved my bookmarks... but I'll see if I can find it again.

You are not getting mixed up with Prechter winning the trading champs are you ?

If anybody uses fundamentals to "guide" the count you are not using Elliott Wave at all i.m.o. The whole idea is not to let any emotion influence the count, whatever you expect.

Anyway maybe a topic for another thread as this doesn't have anything to do with the XAO.

 

[Boggo]

I haven't read all of this thread but is Robert Miner the guy being referred to ?

Of the hundreds of technical analysts and trading and investing advisors, Robert Miner was named Market Guru of the Year by the 1997 Supertraders Almanac for his incredible analysis and forecasting of the S&P in 1996. Early in 1996 when the S&P stood at 640 and most analysts and advisors were predicting the "overdue"top was at hand, Miner projected that the S&P would reach a minimum of 720 in 1996 and would not complete the bull trend prior to Oct. These were just the minimum price and time projections for 1996.

Miner recognized the May 23 - Aug. 216 decline as a correction in the bull trend and not the beginning of a bear market as was so loudly proclaimed by many analysts. In the July 20 Dynamic Trader Weekly Report, Miner identified Aug. 216 as a wave four low and projected an immediate continuation of the bull trend to new highs. This is exactly what unfolded.

His trading course is excellent as is his book "Dynamic Trading" (all 1.73 Kgs of it).
http://www.dynamictraders.com/about/company-info.html

 

[Porper]

I haven't read all of this thread but is Robert Miner the guy being referred to ?

Both Prechter & Miner won trading championships.I didn't know that Elliott himself did.

Agree his course & book (Miner) are very good. He keeps Elliott Wave very simple and doesn't entertain "complex" corrections for trading.

 

[Whiskers]

You are not getting mixed up with Prechter winning the trading champs are you ?

You're probably right there Porper.

Actually with Elliott it wasn't a trading comp per se... he challenged the financial community that he could accurately predict the market and nailed the 1935 low. http://www.elliottwave.com/info/

This isn't the article I was thinking of, but it goes pretty close to actually saying it with "The former expert organizer of businesses had uncovered, through meticulous study, the organizational principle behind the movement of markets" and

" ... human activities indicates that practically all developments which result from our social-economic processes follow a law that causes them to repeat themselves in similar and constantly recurring serials of waves or impulses of definite number and pattern... The stock market illustrates the wave impulse common to social-economic activity... It has its law, just as is true of other things throughout the universe." and

"One of these was a ground-breaking work that lifted the Wave Principle from a comprehensive catalog of the market's behavioral patterns to a broad theory of collective human behavior that was new to the fields of economics and sociology."

Although it isn't the article I had in mind, for me it and other articles still says Elliott had a great understanding of the fundamentals of social-economic behavior especially relating to the stock market that he used to frame and refine his wave types and counts... isn't that what is commonly referred to FA.

Conversely, it seems logical to me that an EW'ist should be able to relate a particular wave count/scenerio back to some social-economic (FA) rationale... a la my attempting to marry up the current and near future anticipated behaviour of the 'economic community' with alternate wave counts.

 

[OzWaveGuy]

Conversely, it seems logical to me that an EW'ist should be able to relate a particular wave count/scenerio back to some social-economic (FA) rationale... a la my attempting to marry up the current and near future anticipated behaviour of the 'economic community' with alternate wave counts.

Wave counts can be related to extremes in optimism and pessimism at the social level.

The stock market indexes are quite simply a way of measuring these extremes. Question: If there wasn't a stock market, could you still measure these extremes. Answer: Yes. They can be identified and measured - but almost in all cases are more difficult than indexes in the stock market itself.

Second Question: What were the 'fundamentals' at 4pm on 1st Nov 2007? Did you believe they would lead to a ~50% decline on the XAO over the next 352 trading days? Answer: Of course not. (Note: Check the forum to see if anyone did).

The 'Fundamentals' (whichever they may be) are a lagging indicator to human behavior and the corresponding extremes in pessimism and optimism.

One thing is for certain: It is again human behavior that will attempt to correlate fundamentals to the resultant extremes after the fact (there is also a multi-billion dollar industry of 'experts' that are good examples of this).

 

[Whiskers]

Wave counts can be related to extremes in optimism and pessimism at the social level.

The stock market indexes are quite simply a way of measuring these extremes. Question: If there wasn't a stock market, could you still measure these extremes. Answer: Yes. They can be identified and measured - but almost in all cases are more difficult than indexes in the stock market itself.

Agree here

Second Question: What were the 'fundamentals' at 4pm on 1st Nov 2007? Did you believe they would lead to a ~50% decline on the XAO over the next 352 trading days? Answer: Of course not. (Note: Check the forum to see if anyone did).

Well, I think there was a couple of tad excentric or perfectionist economist posters that came close. :

But no, the fundamentals at 4.00pm on the first of Nov 2007 only only related to investor psychology and decisions at the opening of the next business day and similarly the day after that and so on.

I'm aware that some analysis including EW was making such prediction... which no doubt added to the later pessimism becoming a self-fulfilling profecy, when Bush failed to deliver on his flagged remedies and caused the further sharp falls including the Aus bouse... which it is now evident didn't fall into such a recessionary hole as the rest of the world, was overdone, but for me is depressed because of among other things, arguably a degree of fundamental (discretionary) manipulation/mismanagement of the US economy and USD. A notable difference being the ousting of Bush for the Obama administration which I think people are just about ready to turn USD's back into the US from relative safe havens like Aus which would lower the AUDUSD and boost Aus export earnings and the XAO, giving the XAO a decent lift.

The 'Fundamentals' (whichever they may be) are a lagging indicator to human behavior and the corresponding extremes in pessimism and optimism.

I'm not sure what you mean here. Known 'fundamentals' are surely a lead indicator of human behaviour. If you mean not yet known, ie future released 'fundamentals' that relate to past and or present time periods, then it can't be an indicator of human behaviour, lagging or otherwise if it's not yet known to anyone. But, some people at least make an educated guess of what those figures, circumstances etc might be.

Bearing in mind that Elliott was also an accountant and sophisticated financial manager, that surely was an influential element in his forcasting, including the bottom of the Dow.

One thing is for certain: It is again human behavior that will attempt to correlate fundamentals to the resultant extremes after the fact (there is also a multi-billion dollar industry of 'experts' that are good examples of this).

Well, yes that's true too, some FA, TA and EW alike, after the fact tends to fuel excess optimism and pessimism and correlated exaggerated extremes in the markets. And conversely, there's a lot of 'industry' in forcasting... where such forcasting analysis tends to become self-fulfilling profecy.

Which brings me back to my original point about Elliott... he was a brilliant organiser and exponent of social-economic behaviour. It was his FA ability of the psychology (which includes logical, mathematical, and financial attributes) of people that was instrumental in correlating the link beween the behaviour of people and the market that defined his system.

For me it seems that some prominant EW 'experts' in their 'industry' best interests do not make enough of that connection, but tend to promote their 'wisdom' of EW like guru status in the furtherance of promoting their financial products... which I have to admit made it difficult for me to follow and make sense of EW as purely a stastical model.

Also, for me it's most important to remember that he formulated his system in an American culture, hence is it not reasonable to bear in mind that different cultures and individual people (especially since the advent of huge funds controlled by relatively few people) have different sensitivies, values and risk appetite thresholds etc and they often change over time.

Therefore to ignore the social context of the environment where Elliott developed his system and to presume that peoples knowledge, values etc don't change and fail to integrate that into ones EW analysis, for me is folley.

Other cycle analysis and Human Resource Management for that matter, make allowance for choices that people make at certain junctures to further define future possibilities.

That's basically my rationale for the Flat correction scenerio, based on current evidence... which btw factors in a degree of 'industry' self-fulfulling profecy as part of the psychology of the market.

 

[Sean K]

Second Question: What were the 'fundamentals' at 4pm on 1st Nov 2007? Did you believe they would lead to a ~50% decline on the XAO over the next 352 trading days? Answer: Of course not. (Note: Check the forum to see if anyone did).

I think you should check. And then check your own EW calls for a comparison.

 

[jancha]

I think you should check. And then check your own EW calls for a comparison.

Hey Kennas what happened to that break you were taking?

 

[OzWaveGuy]

A very brief update from the last XAO post here.

The 4700 level was reached under the corrective power of a three wave move, so now looking for validation that the XAO is readying for a push lower (primary view) or a continuance of further corrective action - sideways or possibly higher (secondary view).

 

[ASXNoob]

XAO is readying for a push lower (primary view) or a continuance of further corrective action - sideways or possibly higher (secondary view).

Ive been following this thread a bit and dont want to rude but thats basically saying the market could go down or sideways or up?

 

[Wysiwyg]

Ive been following this thread a bit and dont want to rude but thats basically saying the market could go down or sideways or up?

Noob, part of making market predictions is being wrong. Part of making market profits is being right.

 

[Timmy]

Ive been following this thread a bit and dont want to rude but thats basically saying the market could go down or sideways or up?

That's what I thought it said too.

 

[nunthewiser]

Ive been following this thread a bit and dont want to rude but thats basically saying the market could go down or sideways or up?

Welcome to the world of EW ............This way it can be shown to be a viable analysis.

 

[Porper]

Welcome to the world of EW ............This way it can be shown to be a viable analysis.

The trouble is, I can count on one hand the amount of people on this forum that actually understand it.

People shouldn't knock any method unless they have studied it and can prove that it doesn't work.

Beginners will chop and change between strategies for this very reason.

Clue: It is all about probabilities and not being correct in your analysis all of the time.

 

[Awesomandy]

Ive been following this thread a bit and dont want to rude but thats basically saying the market could go down or sideways or up?

I think the quote has been taken out of context, as it also states that we are "now looking for validation". We are currently at a level which has been identified as a potential turning point and waiting for further signals to validate the trend (and waves). Only after this is done, when further predictions can be made.

 

[Wysiwyg]

XAO - Expanding Triangle Scenario for Wave (4)

There is building evidence that the XAO could break down from the current levels by the fact that a series of 2nd waves could be considered complete. So far, the downwards moves have been unfolding in 5 waves - indicating further downside is required.

A break below the end of wave 'i' would suggestive of the next smaller legs down commencing. Alternatively further corrective moves slightly higher could still unfold before the downside resumes.

XAO - Expanding Triangle, Wave D

The update from today's action is fairly straightforward - from a short term standpoint, there is solid probability for further upside tomorrow to complete 5 small waves up - which would complete a Flat correction for wave (ii)

These two posts were consecutive days. That is the top post was followed by the second post. Now the analysis was "biased" to a further correction to the downside form the very beginning of the thread. It never happened and we all get it wrong. It just proves that technical analysis is a bias game.

The top post (here) is still biased toward that "D" and it just wouldn't play out. Then a semblance of what was actually happening in the next day post as the market turns up again.

 

[OzWaveGuy]

From previous discussions on the XAO wave counts here validation of the current count came with an expectation of a solid break downwards under 4600. Instead, the XAO broke out of a triangle (which I'll cover in a bit more detail in a future post) on Dec 22nd and headed to new medium term highs.

This triangle formation is an ending pattern and appears as wave 4's or as B and X-Waves in complex corrections - either way, it's an ominous sign. The break to new highs indicates another a-b-c correction is underway, and will ultimately form the third zig-zag in a triple zig-zag correction for wave 'B' circle.

There is a remote chance that this final corrective zig-zag has already completed, and is very small compared to the first two zig-zags. Strong evidence of a breakout of the channel would be needed to justify this position.

So far, this 'B' circle wave is operating within a tight upwards sloping channel. A potential false break out (shown) would not be a surprise for the finishing touches.

5235 is a point of interest due to a Fibonacci relationship with prior a wave and an area of solid resistance.

 

[Sean K]

So far, this 'B' circle wave is operating within a tight upwards sloping channel. A potential false break out (shown) would not be a surprise for the finishing touches.

5235 is a point of interest due to a Fibonacci relationship with prior a wave and an area of solid resistance.

OWG, If we ever get to the top of this B in a circle wave and head for the C in a circle where is that supposed to end according to EW? Cheers.