Elliott Wave and the XAO

[rimtas]

Who follows Motley Fool-they just launched a million Dollar Portfolio project. The timing is just perfect(shows how extreme bullishness is here, despite a 20% plunge in prices). I read them with interest, I found their newsletters quite a good sentiment indicator for both short term and medium term timeframes. The message in most recent newsletters(last week) summarized sounds like this: "Do not sell anything".
I am not jumping to conclusions publicly, just pointing a finger to one more socionomic indicator. I think I will name it a Foolish indicator, for future references.

 

[shouldaindex]

Hi Rimtas,

MotleyFool are never bearish. It's their job to get as many people into trading shares and reading their advice, and the worst way to do that is to tell them they should stay away by lessening their investments. I agree it's a good contrary indicator, I read HotCopper sometimes just to see what other humans are up to.

 

[rimtas]

Yes, it is true that they are never bearish. But sometimes they are scared. When the wave (1) was approaching it's bottom, they wrote quite a few newsletters about the "upcoming crash". Back then they were exploring options of what situation will became if the crash would lie ahead. It was really bearish newsletter. Of course, they said that it would be even more better as yields would go up.
But the bottom line is that If you read them and try to grasp how the author feels at the moment, you can put this in perspective with market movement. Knowing that market makes people to react and feel one way or another, you can add this sentiment to your basket of other market observations and have a clearer picture.

Experienced traders/investors know that when situation becomes too crowded, market tends to turn. They are partially correct, that's why contrarian point of view works. But only if you put it alongside the Wave principle. Only knowledge about how people behave in one wave or another can give you an edge. Too bearish doesn't always points to the turning point, sometimes it is a kick-off of the larger degree wave down, or the state of Point of Recognition. So context of sentiment is the key.

Previously I deleted all Foolish newsletters after reading them, but know as I spoted some value, I started to archive them. All in all, they are too popular and this influences authors decisions how to write, how to stay with the crowd, how to be the part of it (unconsciously). Because other way no one will buy their services.

 

[rimtas]

I mentioned that I do not post short term forecasts anymore, thus weekly and Daily time frames should be enough. There are enough elioticians out here, let them do the hard intraday work.

I can't let go BHP scenario which even at weekly now looks like complete-last five waves of wave C ended at $22,40.So now I am looking at Wave (D) multimonth advance, unless the bottom of 19.98 falls out, which would be very bearish long term.


Also I am changing strategy of posting, from now I will do like most peple here does-remind about previous posts.
So the bottom line is that one year ago I made a call for wave C, which should be a five wave affair and drop Impulsively from $40 to $25. Original forecast can be found here:
https://www.aussiestockforums.com/forums/showthread.php?t=1335&p=840445&viewfull=1#post840445
And that is what exactly has happened. There were attempts to find a bottom of wave C along the way, but now subdivisions looks best so it is time to put real money on this count.
So basically it is a Call.
Entry point is at $24.09. Exit will be determined from future price action, depends what it brings on the table.

 

[rimtas]

Foolish indicator today turned bearish on banks, probably confirming that smaller degree wave C up is underway. They said:

"But times have changed. Companies like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) have been crunched over the last six months and, in my opinion, remain overpriced.

Making matters worse, some analysts have questioned the banks' ability to maintain their dividends should times get tougher. At their current prices, that's not a risk I'm willing to take"

 

[SuperGlue]

So basically it is a Call.
Entry point is at $24.09. Exit will be determined from future price action, depends what it brings on the table.

Please note:

Ex dividend day tomorrow - Dividend $0.8571 -100% franked.

 

[rimtas]

Please note:

Ex dividend day tomorrow - Dividend $0.8571 -100% franked.

Upss... Before entry I haven't checked dividend dates...Thanks.
This probably means that I will have an opportunity to add more. But short term structure indicates that correction below $24 is likely, so this will not be something that I haven't expected.
But at the end this doesn't matter, because this position has a time horizon of about 2 years or whatever it takes for Intermediate wave (D) to reach it's top. It is probably my first position which is orientated on the wave of such big degree.


I just noticed that BHP has highly reacted to the OIL price movement, and OIL just entered in the biggest correction UP since 2013, which should last many months and the most recent bottom should be rock solid.
Iron ore is clearly in wave (4) sideways correction (I covered this in previous posts about BHP), so the conditions for a BHP rise are positive if looking at the energy side.

 

[rimtas]

Just pointing out that market has been in the same mood just a few years ago, as those two fractals suggest. This doesn't mean that the outcome will be the same, as market dropped from one degree higher now, but if market starts to drift sideways in the moths to come(usually it is positive season till new year), consider correction, or it's first stage, is over.
All in all, there are only three waves from April top, but definitely not 1-2-3, most likely it is 1-2,1-2(still unfolding), or ABC.
Basically a lottery.

 

[gartley]

All in all, there are only three waves from April top, but definitely not 1-2-3, most likely it is 1-2,1-2(still unfolding), or ABC.

Basically a lottery.

This is the problem and my point exactly. You have gone from Bullish in April, to ultra bearishness as of last week pushing a continuation of a 3rd wave down. Now it's "a lottery"

At least we have 3 possible wave counts in question that you mention:

1: 1,2,3 done and 4 developing and 5 to come

2: 1-2, 1-2 and the point of recognition to come

3: ABC

Earlier when the last major low was posted cycles suggested that we get a rally into September. Nothing has changed yet and these cycles suggest another push to new recovery highs in the next 9-12 sessions approx..

So that most probably eliminates the 1,2,3,4,5 wavecount option and we should be focusing on the 1-2, 1-2 or ABC. ( assuming ofcourse we are in a bear market)

Now at this point in time doesn't really matter which one as our primary objective is to be positioned for the next leg down as the finish of this rally.

Interestingly I am forever receiving emails from EWI about total financial collapse etc.... Maybe later they will be correct but for the next few weeks if you are swing trader like me it's not the case.

 

[PennD]

Interestingly I am forever receiving emails from EWI about total financial collapse etc.... Maybe later they will be correct but for the next few weeks if you are swing trader like me it's not the case.

Fear sells... they need to make there money someway... if they traded their "wave counts" they would have blown their accounts up years ago

 

[gartley]

Fear sells... they need to make there money someway... if they traded their "wave counts" they would have blown their accounts up years ago

There's are reason why the likes of Prechter and other's write newsletters for a living........

 

[shouldaindex]

I always had this thought about trading.

If you are right even 6 / 10. That means the 4 right and 4 wrong cancel each other out assuming similar sized wins / losses. Let's say the average size of each gain / loss per trade is 5%. So the 2 that win are your returns.

If you make 10 trades per month, you make 10% (2 x 5%). Times that by 12 months...

But it never happens like that, if traders were right 60% of the time and made 2 trades per week, that's 120% a year (uncompounded).

So something in that formula is missing in reality.

 

[gartley]

I always had this thought about trading.

If you are right even 6 / 10. That means the 4 right and 4 wrong cancel each other out assuming similar sized wins / losses. Let's say the average size of each gain / loss per trade is 5%. So the 2 that win are your returns.

If you make 10 trades per month, you make 10% (2 x 5%). Times that by 12 months...

But it never happens like that, if traders were right 60% of the time and made 2 trades per week, that's 120% a year (uncompounded).

So something in that formula is missing in reality.

For me it's almost like this except losses are stopped as early as possible not at an arbitrary level like 5%. Losses are determined more by pattern of trend and a decision made very quickly . For about 10 trades a week taken on average 4 are small losses, another 4 a week are small gains exiting because either " shaken out" or not happy with the developing pattern of trend. The remaining 1 or 2 are the ones that come through.

 

[skyQuake]

I always had this thought about trading.

If you are right even 6 / 10. That means the 4 right and 4 wrong cancel each other out assuming similar sized wins / losses. Let's say the average size of each gain / loss per trade is 5%. So the 2 that win are your returns.

If you make 10 trades per month, you make 10% (2 x 5%). Times that by 12 months...

But it never happens like that, if traders were right 60% of the time and made 2 trades per week, that's 120% a year (uncompounded).

So something in that formula is missing in reality.

Say you have $1mil, you're not punting with the entire lot per trade.
To make things simple for the sake of argument you'd take $200k per trade. (1% risk to total account equity per trade)
200k @ 120% = 240k = 24% return

 

[rimtas]

There's are reason why the likes of Prechter and other's write newsletters for a living........

Did you know that the richest people who approach a market is not the ones who trading it, but who are analysing it and give other services related to market trading? Be it brokers, market advisors, forecasting firms like EWI, banking services etc.
I am not talking about those people who buy entire businesses, so please do not mention Buffet and the like, who made they fortunes in a great bull market, that is stalled rigt now..
This is about traders, those who want to be rich quick. Almost everyone here is a trader, making money to their brokers, banks, newsleter writers, forecasting firms.
I understood this long time ago and trying to reduce my trading frequency as much as possible and trade waves that could be as long as possible.

 

[gartley]

Did you know that the richest people who approach a market is not the ones who trading it, but who are analysing it and give other services related to market trading? Be it brokers, market advisors, forecasting firms like EWI, banking services etc.
I am not talking about those people who buy entire businesses, so please do not mention Buffet and the like, who made they fortunes in a great bull market, that is stalled rigt now..
This is about traders, those who want to be rich quick. Almost everyone here is a trader, making money to their brokers, banks, newsleter writers, forecasting firms.
I understood this long time ago and trying to reduce my trading frequency as much as possible and trade waves that could be as long as possible.

I won't argue with you there Rimtas. I agree , for newsletter writers, it can be easier to make a coin selling services than actually trading. And over trading is not a good thing, but holding onto longer term positions in a wildly volatile market can equally be as nerve wracking.

 

[rimtas]

There's are reason why the likes of Prechter and other's write newsletters for a living........

I quote once again, because it seems that you didn't understand my reply to your remark.
The only reason Precher and the others writtes newsletters is money. It's their job, and they are damn good at it, making millions of bucks-ordinary trader here can only dream about this outcome. Don't be jealous. If everyone can be as good as Precher in their fields, we all would be rich.

Also, those newsletters provide quite a good bunch of data, that otherwise is too expensive to buy separately. For 30-50 buck a months you get a lot of value for your decision making. Leave their opinions aside, focus on the data, do your own research, ultimately money is yours and you are responsible for this.

 

[gartley]

Don't be jealous. If everyone can be as good as Precher in their fields, we all would be rich.

I understood you the first time........

I was subscribed to EWI for 7 years even did a 5 day training course with them. Back then there where different analysts working with them. Thereafter I found the advantages but also the many weaknesses of EW. I took the blinkers from my eyes and found a whole new world of T/A out there a lot of it by trial error and a lot from real successfull traders, ones that don't need to write newsletters to earn a living.

Prechter got lucky and for a short while and made a few good calls in the 80's Since then his calls and forecasts have been 50/50 as I follow ratings for investment advisory. To his credit he called the crash of 87 and after that his calls for a bear market has been rubbish. The market has run up 12 fold since then. He maintained his bearish stance all the way to the 2000 top. He did the same during the bull market for gold from 2000 to 2010. That drummer has cost people so much money over the years it's not funny.

Stop misleading people rimtas, are you an agent for EWI or something???? Either that or your totally brainwashed

 

[Porper]

Stop misleading people rimtas, are you an agent for EWI or something???? Either that or your totally brainwashed

I think the latter gartley but the way he jumps to defend Prechter all the time maybe he has something to do with them. They have been advertising a lot recently; last week I got emails from them almost everyday. Same techniques used...fear...to sell newsletters. it works unfortunately.

I also did Prechters course a few years ago as well. Enjoyed it but soon realised that Elliott Wave didn't make you the money, at least not as a standalone method.

 

[rimtas]

That drummer has cost people so much money over the years it's not funny.

I am not defending him. I just pointed out that he is very good , basically the best in his field. I am not referring to his calls, EW or socionomics. I am referring to his business. Can you point me out how many such successful businesses (related to market forecasting/newsletters) you've seen that managed to stay in the market for decades, and grow substantially, today employing over hundred of people?
If EWI was listed on the exchange, their stock would be good as hell. Prechter alone earns 0,5 mil every month just sitting in his chair and writing his Theorist, and at the same time I am sure he enjoys his job a lot. Do you enjoy your job, and get 0,5mil bucks for it every month?

And yes, I am related to EWI. The one who is brainwashed is Porper. He is EW zombie, who thinks that CBA will buck the trend, when All Ords crash to new lows.