The Elliott Wave Analysis Thread

[motorway]

This question is easily answered. The five waves forward three waves back is the fewest number of waves possible for progress with fluctuation. That's the beauty of Elliott Wave and why I believe that it probably has some scientific basis and that someone will eventually win a Nobel prize one day for finally proving it.

Regarding someone else's question about waves on shorter timeframes. My opinion (based on common sense and some experience) is that Elliott Wave must work best at those timeframes where the price data (as represented on a chart) contains the purest representation of the sentiment behind the actions of the market participants, perhaps with some upper filter for volatility.

As you lengthen the timeframe of your analysis the risk for distortion of the relative meaning of price movements invariably goes up. What is a rise of 100% on the S&P500 when the USD depreciates 50% during the same time? Prechter had this problem when trying to breakdown the count of the 00-02 bear market and attempted to normalise the currency shifts and reduce the wave-count distortion by creating a "stable currency benchmark".

Similarly, while distortions caused by things such as currency fluctuations and inflation will (IMO) over a longer period of time slowly erode the viability of price data for wave counts, sudden increases in volatility (eg. 800-pound gorillas, black swan events etc.) must almost certainly destroy the effectiveness of wave counting until volatility subsides.

And at very small timeframes I expect that it takes events of lesser magnitude to ruin wave counts and start causing Elliott Wave rule breaking price activity. The lower you go the more likely you are to have your counts ruined, again IMO.

Prechter won the US Trading Championships using hourly charts. Many non-EW swing traders I know use this time-frame as their base (zooming out for market perspective and in to fine tune entries/exits). I've personally found the incidence of identifiable wave-counts at this time frame on liquid instruments makes it a kind of sweet spot for actually trading using EW.

My amateur opinion.

A really good post

Dow studied P&F for 15 years
Elliot studied Dow

does not seem to have realised that fact
ie there was already an objective Wave chart method

This 5-3 over a average cycle
is seen in a 3 box reversal chart
and the 45 degree angle


P&F is an objective wave chart
with time as dynamic not static

The EW people see on static time charts

are very hard I think to see on P&F charts

Yet if they were objective they would leap out

molecules break down in to atoms
that are no longer molecules

tides and waves break down in to ripples

EW is often used on indexes

But how can rigid rules be used over long time horizons
when the constituents change all the time to boost performance

esp the DOW such a narrow based index

Wyckoff too based his whole approach on the objective waves

on the small ripples He gives this as there cause

All stock market movements, however large or small, are made up of buying and selling waves. The market does not rise and fall like the water in a tank which is being filled or emptied. It moves to a higher or lower level by a series of surges - a good deal like an incoming or outgoing tide, with successive waves higher or lower than those preceding.

The small buying and selling waves which occur during every stock market session run so many minutes. They are caused largely by the restlessness of active professional traders, much like the ripples produced by the wind upon the ocean. Traders must have activity; they make their livelihood by trading on fluctuations. Therefore, they engage in a ceaseless tug of war, trying to put prices up whenever the condition of the market is favorable, or drive them down when they find that the bulls are weak or have over-extended themselves.

The degree of success or failure attending their efforts enables us to determine whether the market is growing stronger or weaker. These small waves are part of the larger waves

buildings are not just bricks
bricks are not just molecules
molecules are not just atoms

price and volume probably rules at the smallest
relative Strength probably at the largest

EW would have a sweet spot too


5-3 is an average over a cycle
Not all bricks are perfect
But buildings still stand
foundations hold up
etc


motorway

 

[Cartman]

This is where I lose/have lost-- interest in the discussion.

That surprises me Tech. The 1 second cycles are crystal clear. would have thought youd have em for breakfast
have attached a 1 sec chart of earlier today. the short setup shown is almost perfect you could quite easily find a 5 wave pattern in that down move

Regarding someone else's question about waves on shorter timeframes. My opinion (based on common sense and some experience) is that Elliott Wave must work best at those timeframes where the price data (as represented on a chart) contains the purest representation of the sentiment behind the actions of the market participants, perhaps with some upper filter for volatility.

As you lengthen the timeframe of your analysis the risk for distortion of the relative meaning of price movements invariably goes up.


And at very small timeframes I expect that it takes events of lesser magnitude to ruin wave counts and start causing Elliott Wave rule breaking price activity. The lower you go the more likely you are to have your counts ruined, again IMO.

Prechter won the US Trading Championships using hourly charts. Many non-EW swing traders I know use this time-frame as their base (zooming out for market perspective and in to fine tune entries/exits). I've personally found the incidence of identifiable wave-counts at this time frame on liquid instruments makes it a kind of sweet spot for actually trading using EW.

My amateur opinion.

that was no amateur opinion Gorilla very well put.


my first post somewhere above where i put forward the scenario that only 3 waves are required to trade successfully was not met with much seriousness -- thats why i kinda got a bit silly after that -- but i would actually appreciate some input on that

i know its technically not E/W (or is it ?? still dealing with the same waves just calling them 123 -- in hindsight i should have said 123 abc where the peak of wave 3 of each cycle becomes wave a -- peak of wave c then becomes the next wave 1 etc etc)
the average layman probably finds complex wave counts a bit crazy (that would be me lol) just trying to simplify it

anyway it works for me

 

[Rudy]

Hi Folks,

Sorry for coming in out of the blue but I have only just joined Aussie Stock Forums in the last few minutes. If I am breaching some rule of etiquette by just coming into the thread unannounced please forgive me and tell me what I need to do to do it properly.

I am extremely interested in Elliott Wave Principles and have been studying it in much detail for a period of 3 months now. Much of my time is spent analysing the XJO as I am an Aussie investor.

I have a question about an EW puzzle that I have which relates to the XJO from the start of the bull market in March 2003 and ended in the 3 significant waves down from the 1st November 2007 and culminated in the termination of the 3rd wave down on the 21st November 2008.

Effectively during that period we have had a total of 8 waves which falls in line with the basic Elliott Wave pattern. Now to my question. A number of EW analysts believe that the 3 waves of the bear market from the 1st November 2007 to the 21st November 2008 are an incomplete wave A of one degree higher. They believe that this wave A may be an impulse wave (ie, 5 wave pattern) with 2 waves yet to complete which is part of an ABC Zigzag pattern. Now I know that there are all sorts of views about those 3 waves but if these EW analysts are correct then the completed wave A will have a total of 5 waves down added to the 5 waves up from the previous bull market (2003~2007) giving us a total of 10 waves of the same degree.

I believe that this 10 wave pattern would be in breach of EW rules. Can you guys please provide some opinions on this please as I find it quite puzzling.

 

[OzWaveGuy]

Hi Folks,

Sorry for coming in out of the blue but I have only just joined Aussie Stock Forums in the last few minutes.

Welcome Rudy.

Perhaps you can label and post a chart so that people are clear on what you're describing.

Cheers OWG

 

[Porper]

Just taking a swipe at WP with that Porper my good man, who through one of his many aliases, admitted he had been holding USD for about 18 months or something, despite being on the wrong side.

Chops, I posted a couple of days ago suggesting that some E.Wavers weren't posting.

One of the reasons I don't post much now is exactly the reason you have pointed out above.

If we don't have clarity what do we have.

Over and out, again.

 

[OzWaveGuy]

I'll take this lull in thread activity to make a brief update on the market action over the last few days.

Yesterday, I posted some discussion on a possible text book double three correction on the XAO. So far, it looks as though the last leg of the double three is finalizing it's run. There was a chance yesterday that the double three had completed, but based on market action today, it looks as though the triangle is still unfolding.

I have not personally seen many double 3's unfold at a reasonable time scale like this (or perhaps I've missed them altogether ) so it's kinda interesting to watch.

My feeling (not backed up by any significant analysis at this stage) is that the breakout won't last that long before a reversal occurs. A possible target range after the breakout could be somewhere between 3785 (61.6% of the first leg) upto 3960 (100% of the first leg).

In addition there are other targets as well, including a target that is as low as 3680 (38.2% of the first leg up) which would just clear the Dec 1st High.

In any event, if the correction plays out as discussed the proceeding waves should provide guidance on the next leg's target areas.

I've overlaid the market action since 1st Dec onto the 'text book' Double Three.

 

[Rudy]

Welcome Rudy.

Perhaps you can label and post a chart so that people are clear on what you're describing.

Cheers OWG

Hi OzWaveGuy,

Thanks for the warm welcome, much appreciated.

The following chart shows one potential labeling of the XJO from March 2003 through to November 2008. It basically shows a completed Elliott Wave pattern of 8 waves of the same degree (level). The waves of the same level are shown in enclosed brackets, ie in "( )".

I have shown the label for the (A), (B), (C) corrective phase of one degree higher as [A]. I haven't shown the label for 1 degree higher at the termination point of (5) as it could be argued that it could be either [3] or [5].





There are some EW analysts who that it is premature to label the corrective phase of the first chart because they suggest that whilst there has been 3 waves down so far {(A), (B) and (C)}, there is a possibility that there may be another two waves as shown in the following chart.





Now I am fairly sure that labeling the down moves using numbers as I have does not meet EW conventions but I only do it to show that they are at the same degree as those 5 waves in the preceding up move.


Hence using that thought they may label the 5 down moves as (1), (2), (3), (4) and (5). The termination point then is a 5 wave pattern down again labeled [A]. Incidentally the 3 wave [A] would be the start of a Flat pattern and the 5 wave [A] pattern would be the start of a Zigzag pattern.

Any way back to my original question. It appears to me that the 5 wave down pattern does not meet EW rules as in conjuction with the 5 wave move up we have a total of 10 waves of the same degree in the completed pattern. I would have thought that you should only have a total of 8 waves in a completed pattern.

I guess that it could be argued that in fact I don't have a completed pattern because I am mixing two degrees (levels). Any opinions would be sincerely appreciated.

 

[OzWaveGuy]

A few days back I indicated I would walk people (who were interested) in using EW as part of the trading or investing plan.

Some suggested topics (and based on recent thread dicsussion) could include:

Wave identification and selecting the right time frames for analysis.
Specific Patterns to be aware of (ones that are good, and ones that will roast you)
Fibonannci
Entry/Exits
Use of indicators
Using Time in wave analysis

The above topics would probably be a good start - If you have any specific areas you would like covered then feel free to add them. Be prepared to buy and read (a lot) from books, this is the one area that will help you significantly.

This week has been hectic as all hell and won't lighten up until the end of the year, so expect topic coverage to be gradual.

First step, go to the education section of Elliott Wave international http://www.elliottwave.com/education/ and register (it's free) and start reading their EW material esp the basic stuff. They also have some free videos that are quite good. If your new to EW, you may not understand all the content, but don't worry - I'm still re-reading the books I have from time to time.

Cheers

OWG

 

[Rudy]

I'll take this lull in thread activity to make a brief update on the market action over the last few days.

Yesterday, I posted some discussion on a possible text book double three correction on the XAO. So far, it looks as though the last leg of the double three is finalizing it's run. There was a chance yesterday that the double three had completed, but based on market action today, it looks as though the triangle is still unfolding.

I have not personally seen many double 3's unfold at a reasonable time scale like this (or perhaps I've missed them altogether ) so it's kinda interesting to watch.

My feeling (not backed up by any significant analysis at this stage) is that the breakout won't last that long before a reversal occurs. A possible target range after the breakout could be somewhere between 3785 (61.6% of the first leg) upto 3960 (100% of the first leg).

In addition there are other targets as well, including a target that is as low as 3680 (38.2% of the first leg up) which would just clear the Dec 1st High.

In any event, if the correction plays out as discussed the proceeding waves should provide guidance on the next leg's target areas.

I've overlaid the market action since 1st Dec onto the 'text book' Double Three.

Hi OWG,

Thanks for sharing that chart with us. Your labeling looks good. Did the sharp dip down earlier today change your mind at all? I guess that the only thing that did was to change the shape of your 'd' wave from a zigzag into a flat. Would you say that 'd' has possibly completed and that on Monday we'll see the 'e' wave complete and the early part of the wave 'c' circle?

In order to get the top of wave 'c' circle what level are you taking as your start point? I thought that you had to take the termination point of your wave 'b' circle (ie, the termination of wave 'e') as the start point. Or do you take the lowest level attained by the wave 'b' circle?

Am I correct in assuming that your wave 'a' circle was the leg from the 21st November 2008 (3217.5) to the 28th November 2008 (3742) thus giving a range of 525 points?

Sorry about all the questions but I really want to learn this stuff.

 

[Rudy]

A few days back I indicated I would walk people (who were interested) in using EW as part of the trading or investing plan.

Some suggested topics (and based on recent thread dicsussion) could include:

Wave identification and selecting the right time frames for analysis.
Specific Patterns to be aware of (ones that are good, and ones that will roast you)
Fibonannci
Entry/Exits
Use of indicators
Using Time in wave analysis

The above topics would probably be a good start - If you have any specific areas you would like covered then feel free to add them. Be prepared to buy and read (a lot) from books, this is the one area that will help you significantly.

This week has been hectic as all hell and won't lighten up until the end of the year, so expect topic coverage to be gradual.

First step, go to the education section of Elliott Wave international http://www.elliottwave.com/education/ and register (it's free) and start reading their EW material esp the basic stuff. They also have some free videos that are quite good. If your new to EW, you may not understand all the content, but don't worry - I'm still re-reading the books I have from time to time.

Cheers

OWG

Hi OWG,

I am very interested in taking up your offer. I have already read through Prechter and Frost's Elliott Wave Principle book once completely and sections of it several times.

Cheers

Rudy

 

[fyusy]

OWG,

Hello, great charts, I'm interested in learning EW too. Count me in

 

[tech/a]

This maybe benificial to some.
This link is the the educational area in Esignal for Advanced Get users.
While it is specific to the software it also has some good answers to the use of Elliott in conjunction with other indicators---a question asked here often.
Some are Standard indicators and others are proprietory.

However it may well be of interest so I've posted it up.

If you down load the AGET Features PDF which is the last one you'll get a good overview.
For those curious the software is $3500 is for the EOD and $5000 for R/T.
Not selling it but sure the question will arise.

http://share.esignal.com/groupcontents.jsp?folder=AGET Features&groupid=20

 

[OzWaveGuy]

From https://www.aussiestockforums.com/forums/showpost.php?p=374527&postcount=266

Wave 'e' cooked @ 3:48pm today? Certainly a case for it.

For those 'excited' watching double three's unfold over many weeks, it looks like a much smaller double 3 unfolded as part of the b wave inside wave e today. You can see it on the 1min XAO chart from 11:27am to 3:14pm.

Let's see what happens tomorrow morning.

 

[It's Snake Pliskin]

Keep up the good work Oz wave guy and others.

 

[OzWaveGuy]

Thanks Snake

I'm not sure about others, but this is getting a little frustrating!

Wave (b) of c in the last leg of the Double Three - the Triangle, is a triangle itself. This means the d and e waves are yet to complete. Confused yet?

Even though there's good evidence that a double three was unfolding, it's still painfully difficult trying to get the edge on this correction. Nothing can be more confusing than a sub-wave within a triangle being a triangle as well. It creates misleading conclusions and subsequently incorrect entry positions for those who want to trade the thrust out of the Double Three.

I mentioned in a previous post that if you can grasp identifying patterns early in the process then the better off you are. It is also true that the patterns themselves repeat over and over - however, they are at different time scales and look slightly different every time, but the internal structures obey certain rules that make them identifiable.

In this double three, there is at least another double three, and several triangles (plus the standard zig-zags and flats). Triangles are especially important as they usually signify an end of a trend or a correction will shortly follow.

Triangles occur in wave 4 and B positions (and sometimes at the end of corrections like this double three).

Wave c of the triangle below is a zig-zag correction (5-3-5). Wave (b) of this zig-zag is a Triangle itself, with 5 waves before and after it. These substructures form a zig-zag correction - thus forming wave c of the major triangle below.

I've delved into some detail here - as it is so absolutely important to understand what is actually happening to the best of one's ability. It also highlights that there is a lot to learn - EW isn't a walk in the park and many people give up because it "doesn't work".

Even though you may not trade at this time scale. Each pattern rolls up to form a bigger pattern, and all the time giving clues as to what's about to happen. Therefore understanding the patterns is crucial.

I use a 1hour chart when I want a bigger picture view, but I'll usually use the 15min and 5min charts (sometimes even 1minute). Going higher in timescale can mean you miss waves or miss the meaning of the wave (eg triangle, or expanded flat).

Enough for tonight my brain is starting to hurt

 

[OzWaveGuy]

Hi OzWaveGuy,

....It appears to me that the 5 wave down pattern does not meet EW rules as in conjuction with the 5 wave move up we have a total of 10 waves of the same degree in the completed pattern. I would have thought that you should only have a total of 8 waves in a completed pattern.

I guess that it could be argued that in fact I don't have a completed pattern because I am mixing two degrees (levels). Any opinions would be sincerely appreciated.

No, I think you've got a reasonable chart there Rudy. A possible 5 waves down (I say possible because as you've pointed out 5 waves down hasn't occured as yet) means that there is a bigger correction unfolding at the next degree of trend (which I personally believe is the case).

I wrote about the implications of 5 waves down on the XAO some weeks back, located here --->https://www.aussiestockforums.com/forums/showpost.php?p=358838&postcount=5586

It received some attention from the non-EW folks as I was calling for 1500points on the XAO should 5 waves unfold in the near term. As you know, 5 waves down means a 3 wave correction followed by another 5 waves to complete a corrective 5-3-5 zig-zag structure.

Cheers

OWG

 

[MongrelSun]

I have only been following Elliot Wave for about 18 months to date so I am a bit reluctant to push my opinion at this time but I wanted to provide a second possibility to what is happening with the double three. My count places the double three as wave B of a higher degree B of wave 4 or wave 2 of wave 5 down (of C or 3 at the next higher degree).

The count is actually from my XJO chart but I believe it fits well on the XAO as well.

Also Bourse doesn't have much in the way of chart marking tools as far as I have been able to locate and I am still trying to organise all the different degrees in my own head so my appologies for the poor elliot wave labeling

 

[tech/a]

A simplified weekly count.

 

[Rudy]

I have only been following Elliot Wave for about 18 months to date so I am a bit reluctant to push my opinion at this time but I wanted to provide a second possibility to what is happening with the double three. My count places the double three as wave B of a higher degree B of wave 4 or wave 2 of wave 5 down (of C or 3 at the next higher degree).

The count is actually from my XJO chart but I believe it fits well on the XAO as well.

Also Bourse doesn't have much in the way of chart marking tools as far as I have been able to locate and I am still trying to organise all the different degrees in my own head so my appologies for the poor elliot wave labeling

Hi MongrelSun,

I have a fairly convoluted way of labeling my charts. I save my chart as a file from my charting software and then import it into "Paint". I use the Paint program to draw any lines I wish to put on the chart and then save it as a .jpg file. Once I have the .jpg file I import it into my photo editing software and put in whatever text I want on the chart.

It's a pity that it's a two step process but at least I can get the result that I want.

Cheers

Rudy

 

[Rudy]

Thanks Snake

I'm not sure about others, but this is getting a little frustrating!

Wave (b) of c in the last leg of the Double Three - the Triangle, is a triangle itself. This means the d and e waves are yet to complete. Confused yet?

Even though there's good evidence that a double three was unfolding, it's still painfully difficult trying to get the edge on this correction. Nothing can be more confusing than a sub-wave within a triangle being a triangle as well. It creates misleading conclusions and subsequently incorrect entry positions for those who want to trade the thrust out of the Double Three.

I mentioned in a previous post that if you can grasp identifying patterns early in the process then the better off you are. It is also true that the patterns themselves repeat over and over - however, they are at different time scales and look slightly different every time, but the internal structures obey certain rules that make them identifiable.

In this double three, there is at least another double three, and several triangles (plus the standard zig-zags and flats). Triangles are especially important as they usually signify an end of a trend or a correction will shortly follow.

Triangles occur in wave 4 and B positions (and sometimes at the end of corrections like this double three).

Wave c of the triangle below is a zig-zag correction (5-3-5). Wave (b) of this zig-zag is a Triangle itself, with 5 waves before and after it. These substructures form a zig-zag correction - thus forming wave c of the major triangle below.

I've delved into some detail here - as it is so absolutely important to understand what is actually happening to the best of one's ability. It also highlights that there is a lot to learn - EW isn't a walk in the park and many people give up because it "doesn't work".

Even though you may not trade at this time scale. Each pattern rolls up to form a bigger pattern, and all the time giving clues as to what's about to happen. Therefore understanding the patterns is crucial.

I use a 1hour chart when I want a bigger picture view, but I'll usually use the 15min and 5min charts (sometimes even 1minute). Going higher in timescale can mean you miss waves or miss the meaning of the wave (eg triangle, or expanded flat).

Enough for tonight my brain is starting to hurt

Hi OWG,

I appreciate that you have taken the time to label the complex corrective wave 4 that's currently underway as it is a real brain teaser. Any time I get impatient with the time it is taking to complete I remind myself that it took around two months for wave 2 to complete and wave 4 has only been underway for a little over a month.

Cheers

Rudy