The Elliott Wave Analysis Thread

CanOz · 6 March 2009

Porper said:
all live in tents and grow potatoes to survive.

One question i have, if we give less weight to patterns on indexes over several years, do we also give less weight to EW counts over many many years as well?

I can supply the potatoes.

Cheers,

CanOz

tech/a · 7 March 2009

CanOz said:
One question i have, if we give less weight to patterns on indexes over several years, do we also give less weight to EW counts over many many years as well?

I can supply the potatoes.

Cheers,

CanOz

Waves do alter in all degrees overtime.
Again the beauty of the methodology.

Porper · 7 March 2009

CanOz said:
One question i have, if we give less weight to patterns on indexes over several years, do we also give less weight to EW counts over many many years as well?

I can supply the potatoes.

Cheers,

CanOz

Do we give less weight to long term patterns or indexes ? I know some Elliot analysts suggest this and say the best patterns are in futures, forex etc, and maybe they are correct.

If a long term chart conflicts with the short term, then yes, emphasis should be on the short, but say we have 3 time frames as in the S&P 500 at the moment and they all concur, surely this makes the short term pattern a higher probability, as does it the long term.

As a side note we are in the price and time range now for the termination of wave 5 of 3 so we should get a bounce into wave A of 4 which should last a few months.Very tradeable.

I'll let you know about the potatoes when armageddon starts

OzWaveGuy · 7 March 2009

Porper said:
Ozwave, looking at your chart once all the lower degree waves sort themselves out surely you are looking at more like 2000 as a target ? Not that I am saying that is unrealistic, we are in uncertain times and anything is possible.be had in the bounce.

I'm looking only at the Fib relationships at the moment, and using 61.8% of wave (1) that started in late 2007. 61.8% tends to appear a fair bit in the XAO as far as wave relationships go. This brings 2700 as primary target area. Now, there's nothing to say that this final wave down could relate to wave (1) or (3) by other fib ratios. 100%, 138% and even 161% could see the XAO get a lot messier and bring 2000 into sight.

At the moment, there's a lack of evidence to support deeper downside targets, until the wave counts unfold a little more. If we start to see some wave 4's that correct these smaller wave 3's, then an estimation can be drawn up use fib ratios.

As far as the S&P500 goes, the expanded flat correction you've shown certianly is a valid outcome - assuming it is a expanded flat correction. I have another interpretation that sees a lot more downside yet to go. Additionally, if the XAO is nearing a completed 5 waves down, then another 5 down needs to occur. This would lead me to believe that the DJI and SPX will also need to fall further (depending on count interpretations of course - mine is: we need to correct back down to the 1987 or even 1975 levels which are both previous wave 4s).

Nonetheless, there are massive changes that are occurring in the financial markets today and huge changes coming to your door in the near future. Potatoes can always be a backup strategy if need be

OzWaveGuy · 7 March 2009

CanOz said:
One question i have, if we give less weight to patterns on indexes over several years, do we also give less weight to EW counts over many many years as well?

I can supply the potatoes.

Cheers,

CanOz

It's a fair question. Under EW - it won't matter if your looking for patterns on a 5min chart or an yearly chart, waves will occur at all time scales. Consider this: If you saw a clear 5 waves up (eg a perfect EW impulse wave) on a yearly chart that spanned 35 years and wave 4 was a triangle - what would you do or believe was going to happen?

Now consider the same 5 wave pattern on an hourly chart, again a triangle for wave 4 - the perfect EW impulse pattern. You could trade the correction down to wave 4 (as a rough guide). No different to the yearly example. All tradable base on your trading timeframe, the counts all hold true.

EW has other uses when we start talking about much longer term timeframes. The difficulty with the longer term (eg 40+ years) is that the data isn't always available much past 100 years ago, so this may make wave counts on the 100 year chart a little speculative. Although some folks like prechter have done some analysis on this front.

OzWaveGuy · 7 March 2009

This is the chart I've been using for the longer term view (and I've posted a similar version before). The longer term wave counts are speculation, and I'm mainly looking for wave alternation to locate corrective waves of the same degree.

Assuming the wave counts are accurate prior to 1975, the extreme bearish case becomes very realistic and would see the XAO drive though the 100 year trend line to end up near a previous wave 4 (super-cycle degree) in 1975. The house of cards would truly need to collapse to wipe out that last 40 years of progress on the indexes.

However, the bull leg since 1975 is very telling, 5 waves up, triangle for wave 4 - hence the 1987 target area is realistic now, considering the XAO today, is about to finish 5 waves down. The question now becomes: Will the XAO stop at 1500?

No amount of intervention (the Bailout rally) will stop the slide to lower levels, in the best case it may prolong the upcoming bounce.

beamstas · 7 March 2009

Cartman said:
gidday Beamer boy --- we have a live one here --- time to go fishing !!

my point --- 'how the hell do u know what its gona do from your E/W analysis?

your answer ---

---- I trade 1 second/1 minute chart formations ---- reading 1 hour/1 day momentum is like trading in slow motion
----- if you cant pick the bottom of momentum in a 1 hour chart --- stop trading !!! --- Roll yr eyes again Beamer --- that was a very clever response ---- yr obviously very intelligent! ----- and im the foolish one around here apparently --- (my turn)

Come on now cartman, you can't say "what if the market is at a low and then rises up putting you behind" and then the next statement you say to someone "how do you know what the market is going to do??"

Im guessing you trade with 100% accuracy?

If you are going to oppose EW on an EW thread, at least make sure what you are saying doesn't contradict itself!

Porper · 7 March 2009

OzWaveGuy said:
Assuming the wave counts are accurate prior to 1975, the extreme bearish case becomes very realistic and would see the XAO drive though the 100 year trend line to end up near a previous wave 4 (super-cycle degree) in 1975. The house of cards would truly need to collapse to wipe out that last 40 years of progress on the indexes.

1500 is bearish enough, the world will be a desperate place for a lot of people if we get to those numbers.

The next stop at 300 just wont happen, nowhere near.There would be no financial stability worldwide and certainly no stock market if we got anywhere near that.Money would have no value, soup kitchens, crime out of control, you get the picture.

In my opinion this is where Elliot Wave definitely doesn't work.The theory is fine but when you get to super cycle it is virtually impossible to retrace the required amount realistically.And how much has the world changed in the past 150 odd years ?

OzWaveGuy · 7 March 2009

Porper said:
1500 is bearish enough, the world will be a desperate place for a lot of people if we get to those numbers.

The next stop at 300 just wont happen, nowhere near.There would be no financial stability worldwide and certainly no stock market if we got anywhere near that.Money would have no value, soup kitchens, crime out of control, you get the picture.

In my opinion this is where Elliot Wave definitely doesn't work.The theory is fine but when you get to super cycle it is virtually impossible to retrace the required amount realistically.And how much has the world changed in the past 150 odd years ?

I doubt the folks who lived thru the 1929 crisis would agree some of the above statements considering various indexes at the time lost around 90% and took 25 years to recover back to the highs, soup kitchens and bread lines were the norm and plenty of instability in all areas of the world economies. In Australia, the unemployment rate was 32%.

If EW doesn't work at longer time scales, where do you draw the line? For wave counts and human psychology to suddenly become invalid is a little difficult to comprehend. Human progress (and contraction) is what EW is measuring, it simply doesn't stop because a different time frame above a certain threshold (whatever that may be) is used.

Looking at evidence at hand, nothing is off the table. As I indicated, returning back to the 75' levels is an extreme case - but it's still on the table, whether folks like it or not.

Porper · 7 March 2009

OzWaveGuy said:
If EW doesn't work at longer time scales, where do you draw the line? For wave counts and human psychology to suddenly become invalid is a little difficult to comprehend. Human progress (and contraction) is what EW is measuring, it simply doesn't stop because a different time frame above a certain threshold (whatever that may be) is used.

I posted a monthly chart so I certainly think it works on longer time frames.All I am saying is that if you put fib retracements on a grand supercycle chart it becomes unrealistic to get down to those numbers again.As to where you draw the line, good question, I suppose that is subjective.

Also, if we are talking Grand supercycle retracements it certainly wouldn't end in our lifetime.

Yes a 90% drop in the depression, but to get to 300 the Aussie market would need to drop more than 95%, I am saying it wouldn't happen because of the dynamics of the world financial structure.It would be Armageddon before that happened.The soup kitchens would be needed way before 300.

OzWaveGuy · 7 March 2009

Porper said:
I am saying it wouldn't happen because of the dynamics of the world financial structure.

Dynamics? What would that be exactly $8.5 trillion of dynamic 'stimulus' to date in the US has failed to halt the slide, short selling bans, closing the stock markets will do nothing. The last time I looked at the 'financial structure' (whatever that is) the 'experts' were:

taking the financial watchdogs/sheriffs out of the home loan industry in the US so it became the 'wild west'
making bad loans and bypassing risk management processes
pushing toxic debt around to anyone who would buy it
....take your pick....

By squeezing the last drops from the credit syringe into the patient, at some point the overdoses are going to kill the patient. Injecting more credit via the bailouts will simply make the fall harder by increasing negative social mood (esp when the people find out about the misuse of this significant funding, Pacific Brands, AIG etc)

Negative Social mood is determining how deep this 'crisis' goes - and EW logical suggests the retracement needs to hit a previous wave 4 (as a guide). So I re-submit to you - It will hit a previous wave 4, either 1987, or 1975 and there's nothing anyone can do about it (as we've clearly seen so far).

CNN did a poll a few months back, and asked what will resolve the financial crisis. The majority selected 'time' and did not believe lower interest rates or anything else would address the situation. I 100% agree with the majority - it will take 'time' to turn social mood from negative to positive.

We can continue this conversation when the market is around 1500. At that point in time, there should be evidence to indicate where the market will go from there - hopefully the news will be at it's worst and everyone is massively bearish, this will be a signal that the bottom is at hand - the patient will be in recovery and opportunities will present themselves to those that see thru the gloominess.

drsmith · 7 March 2009

OzWaveGuy said:
This is the chart I've been using for the longer term view (and I've posted a similar version before). The longer term wave counts are speculation, and I'm mainly looking for wave alternation to locate corrective waves of the same degree.

Assuming the wave counts are accurate prior to 1975, the extreme bearish case becomes very realistic and would see the XAO drive though the 100 year trend line to end up near a previous wave 4 (super-cycle degree) in 1975. The house of cards would truly need to collapse to wipe out that last 40 years of progress on the indexes.

However, the bull leg since 1975 is very telling, 5 waves up, triangle for wave 4 - hence the 1987 target area is realistic now, considering the XAO today, is about to finish 5 waves down. The question now becomes: Will the XAO stop at 1500?

No amount of intervention (the Bailout rally) will stop the slide to lower levels, in the best case it may prolong the upcoming bounce.

What I find most interesting about that graph is the 100 year trend line.

In a broad sence could this be said to be proportional to the growth in human productivity and if so is it valid to assume the growth rate to be constant ?

Since civilisation began it's overall advancement there have been periods of accelerated growth and setbacks over periods of hundreds of years. As an example take the technological advancements of the Greeks and Romans followed by the stagnation of the dark ages.

A more recent example could be increased technological advancement as a result of competition between the USA and the former USSR during the cold war and also advancements in computer technology. This obviously does not eliminate the credit bubble but it may have increased the underlying growth rate of human productivity in recent decades when compared to earlier decades of the 20'th century.

Porper · 7 March 2009

OzWaveGuy said:
We can continue this conversation when the market is around 1500.

Well being an Elliot Analyst Oz it is probably not a good idea to talk fundamentals, I freely admit to knowing almost Zilch about the topic.As you know the fundamentals have nothing to do with Elliot wave. As you rightly stated, it measures crowd behaviour or as you put it social mood.

I am not as sure as you that we will reach 1500, infact at this point in time I disagree, of course as price and waves progress this can change.All this talk of the long term view has absolutely nothing to do with trading or investment decisions unless you hold a very long term view.

We'll agree to disagree and see what patterns transpire.

OzWaveGuy · 7 March 2009

Speaking of human progress, I find this graph interesting from ---> http://en.wikipedia.org/wiki/File:ParadigmShiftsFrr15Events.svg

Showing smooth acceleration of major paradigm shifts throughout history. Not sure I can find any EW wave within this but it gives thought to some of the recent discussion on progression of the human race and what it may look like from different points of view.

OzWaveGuy · 7 March 2009

Porper said:
Well being an Elliot Analyst Oz it is probably not a good idea to talk fundamentals

I'd like to explore this comment a little further as you've hit some key points here that others may benfit from.

Yes, you're right - fundamentals don't play a part in the EW analysis. However, let's reverse the equation a little. Has anyone thought about what fundamentals will appear as the markets plays out to the downside? Let's assume for arguments sake the market gets down to 1500 - what will the fundamentals look like? eg: Will it be safe for my family? Will I have a reliable income?, will I still be able to day trade or will there be severe trading restrictions? What derivatives will be available for me? Will CFDs still exist?

The point of the above is to highlight that whilst very few will trade very long term on EW, the value of EW over much longer time frames is to gain an understanding of what the fundamentals will look like in the future. Robert Prechter has published a book that covers this - conquer the crash. I haven't read it, but it covers mass bank failures (surprise surprise), personal safety, a shake up of the Financial industry, much more regulation etc.

Let me end this very long Saturday (for me) by saying: Whilst EW can be used as part of a trading plan, longer term it has it's uses too by helping the analyst to understand what lies ahead on fundamental and social level.

Good discussion Porper. Cheers OWG, over and out.

drsmith · 7 March 2009

Interesting that it shows a linear trend over the very long term but is there available a similar logarithmic plot of global share market/human productivity growth on a scale of hundreds of years as that may provide a better insight on any future bottom on a global scale than the Australian market graphic over the past 100 years or so.

A fall from over 6000 to 300 (over 95%) if replicated on a global scale could possibly represent the greatest setback in human civilisation since the fall of the Roman Empire.

Cartman · 8 March 2009

beamstas said:
Come on now cartman, you can't say "what if the market is at a low and then rises up putting you behind" and then the next statement you say to someone "how do you know what the market is going to do??"

Im guessing you trade with 100% accuracy?

If you are going to oppose EW on an EW thread, at least make sure what you are saying doesn't contradict itself!

Beamer --- lets not get into a squabble over undefinable linguistic anomalies --- AND ---- i didnt contradict myself at all ---- u just didnt understand what i said ----- as many dont around here ---- geez, at least i dont do a Nick Radge and tell u to READ what ive written ---- no offence Nick, but that was pretty egotistical --

u originally stated --- what if i knew xyz was gona go up after it dropped X% --- would i take the trade ------ if i knew it was gona go up id put the goddamn house on it obviously !! ------ (but not till after it dropped those few %

my point ---- how do u know if its gona go up (with yr E/W anaylisis) was in reference to my other point ------ WHY take the trade IF the indication is that the stock (or whatever) is near the bottom of a short term cycle !! -------------

ie. why put yourself at a disadvantage in any trade based purely on a long range price point ---- (ie Nicks short on WOR at $14.59 from memory ), -- if the trade can be opened at a better price point, why take it just because the E/W analysis says its 'close' to the mark ----- my whole point was, trading the Momentum cycle will give u a much better entry/exit point

ie to maximise yr E/W analysis u need to shorten the entry/exit time criteria down to obtain the maximal advantage on the trade ! ---

funnily enuff, i dont disagree with E/W --- i trade on waves/patterns myself (just short ones) ---- i do find it interesting that E/W's would reject the idea of optimizing their entries and exits based on short term Momentum cycles ---- but hey -- who really cares ---- as Tech says --- Im probably just a fool ---- funny man that Tech

ps i trade at between 70 and 75% accuracy ------- still working on improving that though

beamstas · 8 March 2009

Cartman said:
Beamer --- lets not get into a squabble over undefinable linguistic anomalies --- AND ---- i didnt contradict myself at all ---- u just didnt understand what i said ----- as many dont around here ---- geez, at least i dont do a Nick Radge and tell u to READ what ive written ---- no offence Nick, but that was pretty egotistical --

u originally stated --- what if i knew xyz was gona go up after it dropped X% --- would i take the trade ------ if i knew it was gona go up id put the goddamn house on it obviously !! ------ (but not till after it dropped those few %

my point ---- how do u know if its gona go up (with yr E/W anaylisis) was in reference to my other point ------ WHY take the trade IF the indication is that the stock (or whatever) is near the bottom of a short term cycle !! -------------

ie. why put yourself at a disadvantage in any trade based purely on a long range price point ---- (ie Nicks short on WOR at $14.59 from memory ), -- if the trade can be opened at a better price point, why take it just because the E/W analysis says its 'close' to the mark ----- my whole point was, trading the Momentum cycle will give u a much better entry/exit point

ie to maximise yr E/W analysis u need to shorten the entry/exit time criteria down to obtain the maximal advantage on the trade ! ---

funnily enuff, i dont disagree with E/W --- i trade on waves/patterns myself (just short ones) ---- i do find it interesting that E/W's would reject the idea of optimizing their entries and exits based on short term Momentum cycles ---- but hey -- who really cares ---- as Tech says --- Im probably just a fool ---- funny man that Tech

ps i trade at between 70 and 75% accuracy ------- still working on improving that though

Come on mate, no squabble from me here!

There is no such thing as taking a trade because it is "close to the mark"
Using technical analysis to trade on EW, it has either hit the mark or it hasn't.

Almost any trade can be opened at your "better point". Not everyone can buy at the all time low and sell at the all time high

What im saying is, it isn't about picking the bottom, no matter if it's the all time bottom or the daily bottom. The idea is to follow the trend! I can see what you mean about trying to jig your entry to gain maximal advantage, but when you say that all im hearing is the bloke down the steet who is buying RIO because they "have" to be at the bottom now and they'll definitly go up!

Obviously nick has chosen $14.59 for his entry point for a reason.

Best of luck with your trading cartman.

Brad

motorway · 8 March 2009

OzWaveGuy said:
Speaking of human progress, I find this graph interesting from ---> http://en.wikipedia.org/wiki/File:ParadigmShiftsFrr15Events.svg

Showing smooth acceleration of major paradigm shifts throughout history. Not sure I can find any EW wave within this but it gives thought to some of the recent discussion on progression of the human race and what it may look like from different points of view.

I Note The Name Theordore Modis on that chart..

There is some connection to EW
and cartman's momentum Cycles

eg a pure S curve occurs when the population is unreflexive

The curves of things like stock markets are distorted both by overshoot and anticipation

note the bold type

A bear mkt is a negative growth cycle..
Instead of a ceiling The population reaches a floor

An S curve could be broken up into 5 wave pattern

motorway

Fundamental scientific concepts can shed new light in predicting the economic turnaround. Biological models that describe growth in competition invariably involve S-shaped patterns, the so-called S-curves.
The population of rabbits multiplying in a fenced-off grass field grows exponentially in the beginning but later on slows down as the ecological niche is being filled to capacity. By the time the rabbits population reaches a ceiling (i.e. the maximum number of rabbits that can be sustained in the field) it will have traced out an S-shaped curve over time.
Besides rabbits and other species, S-curves also dictate the growth patterns in inanimate populations such as products and markets.

Natural growth in competition follows S-shaped patterns (S curves). The simplest mathematical function that produces an S curve is called a logistic and the natural law behind it states that at any given time the rate of growth is proportional to both the amount of growth already accomplished and the amount of growth remaining to be accomplished.

If either one of these quantities is small, the rate of growth will be small. This is the case at the beginning and at the end of the process. The rate is greatest in the middle, where both the growth accomplished and the growth remaining are sizable.

What is hidden under the graceful shape of the S curve is the fact that natural growth obeys a strict law which is seeded with knowledge of the final ceiling, the amount of growth remaining to be accomplished.

Therefore, accurate measurements of the growth process can be used to determine the law quantitatively, thus revealing the final size (the value of the ceiling) ahead of time. This is why the S curve approach possesses predictive power.

Cartman · 9 March 2009

beamstas said:
Come on mate, no squabble from me here!

Best of luck with your trading cartman.

Brad

ok truce its is with u Brad ---- u seem like a reasonable fella

i confess to turning into an angry bast@rd when people accuse me of talking total rubbish ------ AND i get called a fool --- all in the one day :taz:

geez ---- i only talk 50% rubbish and im just a little foolish ---
but at least my ego is under control ---

good luck to u too.

The Elliott Wave Analysis Thread

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