2005年上证大盘波浪预测图 [原创 2005-01-31 21:09:28]
http://photo.hexun.com/photo/0/165/165454/176671.GIF
http://photo.hexun.com/photo/0/165/165454/176673.GIF
(字节数: 144)
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股票成仙记 [原创 2004-11-25 10:40:18]
股票成仙记
买只股票二十八，
盘算年底小发发,
半年不到“二”丢啦；
料想八元是底部，
快掏钞票来补窟；
五月不满过来看，
吓得两腿直打颤，
八元股价剩一半；
四元股价还能跌？
倾尽所有往里贴；
四月不到过来瞧，
股价三元没人要；
三月刚过满屏找，
发现该股不见了。
券商说它上三板，
一天到晚直心烦；
面对妻儿无脸面，
想想抛了救点钱，
再查股价已成仙！
注:低于1元的股为仙股.
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沁园春.沪深股指 [原创 2004-11-25 10:30:30]
沁园春.沪深股指
2004年
无能为力 大盘跌去 交易所里 看电脑绿遍 个股尽染
大盘绿透 百股呼救 ST浅底 千股落体竞自由
涨跌急 问苍茫大盘 谁主沉浮
携来股友漫游 忆往昔峥嵘岁月稠 恰股市初创 日进百斗
初生牛犊 挥金如土 指点大盘 激扬庄股 散户当年操盘手
曾记否 到股市炒股 多空俊秀
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上证自1259点以来的波浪分析与预测 [原创 2004-11-24 22:46:42]
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上证从2245点以来的波浪分析与预测 [原创 2004-11-24 22:40:17]
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上证大盘周K线全景图波浪分析与预测 [原创 2004-11-24 18:38:26]
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SPTD-2009 TradingDESK © ELLIOTT today, 2009
04/22/09 S&P 500, 10min., ,2009, April 21, 2009
(posted April 22, 2009)http://www.elliott-today.com/images/sptd-287.gif Prices are rallying off the 828 and trading near a 50% retracement of the preceeding decline. A move to 857 cannot ruled out and this level marks
the 61.8% Fibonacci retracement. Weekly Update>>>
S&P 500, 10min., ,2009, April 20, 2009
(posted April 21, 2009)http://www.elliott-today.com/images/sptd-286.gif"Caution is advised as the latest run to recovery highs occurred under diverged conditions." (ELLtoday, April 18, 2009) Yesterday's steep decline retraced 33% of the advance since the low of 666 in the S&P. ELLtoday's "We Are Here" arrow shown Saturday came just in time as the market plunged Monday right at the opening bell. The current decline is part of an unfolding upward corrective pattern that constitutes as wave 2 or b.There is nothing wrong with this pattern and readers of this website were informed (warned) before the fact !
Market Dispatches 4/20/2009
Dow falls 290 as credit fears hit financial stocks
Stocks tumble after Bank of America's profit beats estimates, but its sharp boost in loan-loss reserves worries investors and slams the market. IBM results disappoint.
Wall Street kommt der Mut abhanden Wochenlang zogen die Kurse an - doch nun hieß die vorherrschende Richtung: wieder nach
unten. FTD de., April 21,2009
S&P 500, 10min., ,2009, April 17, 2009
(posted April 18, 2009)
http://www.elliott-today.com/images/sptd-285_small.gif Market moved away from the steep rising 2x1 Fibo fanline, although traveled
in a parallel channel. Rising 1x1 provides support and 860 counts for natural
support as that marks the fourth wave of one lesser degree. Caution is advised as the latest run to recovery highs occurred under diverged conditions.
Recovery Hopes Lift Stocks
Hopeful signs emerged in stock and bond markets, including robust junk-bond sales, IPOs such as the one on Thursday for Rosetta Stone, and the Dow retaking 8000, at 8029.62, up 109.44 points. WSJ, April 16,2009 S&P 500, 10min., ,2009, April 16, 2009
(posted April 17, 2009)
http://www.elliott-today.com/images/sptd-282_small.gif
Wednesday, the market run into natural resistance at 856 and stalled. The ensuing
correction traced out a clear A-B-C corrective pattern signaling higher prices ahead.
Support found at the rising 1x1 Fibo fanline. Currently the market is trading near the rising 2x1.
Market Dispatches 4/15/2009
Dow up 109 as recession fears ease
Stocks rally in the last hour of trading, despite weakness in Intel and other tech stocks, on suggestions the economy is nearing a bottom. American Express and Procter & Gamble lead the blue chips higher. Oil moves lower. Mutual funds are attracting new cash. Typically wave two psychology. (Please see discussion April 10,2009)
S&P 500, 10min., ,2009, April 15, 2009
(posted April 16, 2009)
http://www.elliott-today.com/images/sptd-281_small.gif
836, 837 and 838 level marked three supporting points for the entire decline.
Finally higher into natural resistance, 0.618, again. The wave structure looks
not complete and the correction is still in force. A move above the falling 1x2
would eliminate that count.
S&P 500, 10min., ,2009, April 14, 2009
(posted April 15, 2009)
http://www.elliott-today.com/images/sptd-280_small.gif
"A much bigger decline will enfold". ELLtoday, April 13,2009Yes, it did.Thanks to The Wave Principle. And yes, thanks to Fibonacci. It's not kind of mystic, it is real, because the market did it, right here yesterday as can be seen on the chart.
S&P 500, 10min., ,2009, April 13, 2009
(posted April 14, 2009)
http://www.elliott-today.com/images/sptd-279_small.gif
Umsatz deutscher Autobauer sinkt um 40 Prozent
Die deutsche Industrie verzeichnet den stärksten Umsatz einbruch seit der Wiedervereinigung: Im Februar 2009 nahm das verarbeitende Gewerbe fast ein Viertel weniger ein als ein Jahr zuvor. Besonders hart trifft es die Hersteller von Fahrzeugen. Auch der Umsatz deutscher Firmen im Ausland sackte ab. Die Welt, April 14, 2009
I'm watching the rising 1x1 Fibo fanline for temporary support. The expanding DT on the chart is just a possibility - if correct, a much bigger decline will enfold.
S&P 500, 10min., ,2009, April 9, 2009
(posted April 10, 2009)http://www.elliott-today.com/images/sptd-274.gif(on mouse over see YTD chart)Caution is advised as the nearly vertical blast off reached the 2x1 Fibo fanline, exceded it and fell back. A potential five-wave advance can be counted as complete or nearly so, I expect a setback at least back to 1x1.
S&P 500, 10min., ,2009, April 8, 2009
(posted April 9, 2009)http://www.elliott-today.com/images/sptd-273_small.gif I am watching the market trading within the ML-2 channel. 814-815 should hold support if a key pivot low has already been struck.
Gier nach Gold
Der Goldpreis kennt derzeit nur eine Richtung: nach oben. Weil die Wirtschaftskrise die Anleger verunsichert, investieren sie in das solide Edelmetall. Experten sind überzeugt, dass der Preis noch weiter steigt - obwohl es weder Zinsen noch Dividenden gibt.Spiegel de., April 6,2009
Dämpfer für von der Leyen
Deutsche verweigern Babyboom
Die Familienministerin hat sich weit aus dem Fenster gelehnt:
Dank ihrer Politik bekämen die Deutschen wieder mehr Kinder. Leider spielten die potenziellen Eltern nicht mit: Die Geburtenrate ist im vergangenen Jahr wieder gesunken. FTD de., April 7, 2009 Socionomics>>> S&P 500, 10min., ,2009, April 7, 2009
(posted April 8, 2009)http://www.elliott-today.com/images/sptd-272_small.gif
The market gapped down below the lower ML-2 channel,
pulled back and headed lower. Focus on ML-1 channel.
S&P 500, 10min., ,2009, April 6, 2009
(posted April 7, 2009)http://www.elliott-today.com/images/sptd-271_small.gif Market in correction mode. While impulse waves have a total of 5, 9, 13 or 17 waves and so on, corrective waves have a count of 3,7 or 11 waves, and so on. The market traced out 6 waves so far and need to put on another. The latest upswing yesterday reached the ML-2, too. S&P 500, 10min., ,2009, April 3, 2009
(posted April 6, 2009)http://www.elliott-today.com/images/sptd-270_small.gif The Weekly Update of March 3, 2009 explained, that the market has just reached a Midline (ML-1) and either may pause there for awhile or will shot through to the upside.
S&P 500, 10min., ,2009, April 2, 2009 Another Highhttp://www.elliott-today.com/images/sptd-267_small.gif Anleger im Rausch der Konjunkturhoffnung
Die Zuversicht ist an die Aktienmärkte zurückgekehrt: Sie trieb den Dax weit über die Marke von 4300 Punkten hinaus. Viele Anleger erkannten in den aktuellen Konjunkturdaten eine Trendwende. Vor allem die konjunktursensiblen Auto- und Stahlwerte fanden begeisterten Zuspruch. FTD de., April 3, 2009
Yesterday, I said, "A strong move above the latest high and the falling 1x2 Fibo fanline suggests the rally is on pace."
Indeed, the market shot up and made it to 845 Index points, gaining 26.8% from the bottom at 666.
Today's operative word is hope, one of only two "four letter words" in the world of investing. The professionals who own stock today on the assumption that the economy "will be fixed" of contained inflation and steady growth are going to be shocked to realize in retrospect that the decline has just began. Second waves typically recreate the emotions present at the preceeding major turn, so psychology in the wave 2 rally should be extremely exuberant, reflecting certainity that the bull market has resumed. Be prepared to resist the relentless drumbeat of hopeful optimism that will accompany most of the first and second waves of
the bear market. (At the Crest of the Tidal Wave, 1995 Robert R.Prechter)THE RALLY OF FALSE HOPES
by Ghassan Abdallah, Ph.D.
March 24, 2009 www.financialsense.com/
by Ghassan Abdallah, Ph.D.,March 24, 2009 www.financialsense.com/
U.S. Economy Raises Tentative Hopes Some economic signs are tentatively encouraging, suggesting the U.S. recession, now entering its 17th month, is near its trough. WSJ, March 29,2009
encouraging, suggesting the U.S. recession, now entering its 17th month, is near its trough. WSJ, March 29,2009
The Latest Bailout Moves: Finally Some Hope
offers investors chance for juicy gains by using -- of all things -- leverage as a
lure. WSJ, March 29,2009
Börsenausblick
Zuversicht für die US-Aktienmärkte
Am amerikanischen Aktienmarkt gibt es Anzeichen für Zuversicht.
Wichtig wird seine Entwicklung in der kommenden Woche sein. FTD, March 28,2009
Market Dispatches 4/1/2009
Dow up 153 as hope trumps bad news
Weak news on home and auto sales and manufacturing is nonetheless better than expected and gives bulls a reason to buy.
January 2009
February 2009
March 2009
April 2009
More from ELLIOTT today:
S&P 500 - Special Reports, © ELLIOTT today Fibonacci Ratio - As They Occurred Live In The Markets..!DAXGold
January 2009 S&P 500, 10min.,chart, January 30,2009
(postedJanuary 31,2009)
© ELLIOTT today, January 31,2009
http://www.elliott-today.com/images/sptd-211.gifThe 10minute chart of the SPX displays a rather rare phenomenon.
A first wave extension within Minute wave (iii) to the downside.
(EWP, Frost & Prechter, 1990, p.24-25) The decline travels well within an Elliott parallel trendchannel (not shown) as it should and has room to fall. The count reveals the short-term market is in Minuette wave iv of
Minute wave (iii) of Minor wave 5 to the downside. Since fourth waves are often producing more complex price patterns it is quite possible that actually this fourth wave is in progress and not even finished.Also upside gains are limited and should by no means exceed the previous fourth wave (see Fibo fanline 1x1).
S&P 500, daily chart,May 2008-January 2009 January 30,2009
(postedJanuary 30,2009) © ELLIOTT today, January 30,2009 http://www.elliott-today.com/images/sptd-210.gif
Elliott's publisher, renowned investment advisor Charles Collins, first realized that The Wave Principle is connected to the Fibonacci sequence, and communicated that fact to Elliott. After researching the subject to the small extent possible at the time, Elliott presented the final unifying conclusion of his theory in 1940, explaining that the progress of waves has the same mathematical base as so many phenomena of life. It is imperative to understand that certainty about the probabilities is not the same as certainty about one specific outcome. Since analysis is based upon price patterns, a pattern identified as having completed is either over, or it isn't. If the market changes direction, the analyst has caught the turn. If the market moves beyond what the appearantly completed pattern would have allowed, the position is wrong, and any funds at risk can be reclaimed immediately. Most other approaches, whether fundamental, technical or cyclical, do not allow other than arbitrarily chosen stop points, thus keeping risk and frustration high. There are also times when an Elliott Wave analysis allows for a number of outcomes, or when there is no clearly preferred probably outcome. Needless to say, I was way to optimistic regarding the ensuing upward correction. And, that's the
case with the pros, too. A recent survey reports an astounding "positive bias" toward the market.
Elliott Wave Analysis The prefered wave count shown last week stood the test and must not be altered. Minute wave (ii) retraced 52.51% of the preceeding decline of Minute wave (i),
a common retracement level. Minute wave (iii) down should be more spectacular and should again surprise the media. One reason is the breaking of the former
lows of November 2008. The chart displays the downmove of the S&P 500 Index and shows the details on daily bars. As you can see, not only do the waves subdivide (1,2,3,4,5) but it also travels within a parallel trend channel. Minor Waves 2 and 4 sport alternation by taking different forms, (zigzag and double three), thus satisfying the most common guideline of impulse wave formation. Here is the point of discussion: The herding impulse rather than the rational neocortex , drives the decisions of most financial market participants. Both the herding impulse and its attendant emotions are hard-wired nearly identically into people's unconscious minds. Whatever certain individuals may decide rationally, such decisions are diverse, and the herding impulse is ubiquitous. Thus, in the aggregate, individual rational decisions tend to cancel out, leaving herding impulses to determine the market's overall trend. TheWave Principle describes the order and pattern of human herding. As emotions attending the herding impulse become more heightened, people's neocortexes become less effectual and so produce less independence. Ironically, then, emotional markets are more orderly than non-emotional markets because they more purely reflect the aggregate impulse to herd.People feel and therefore almost universally believe that emotional markets are disorderly, but that is only because their limbic systems at such times give off emotions that create stress, which is what makes people respond to the impulses in the first place. Minute wave (ii) may not be complete and could morph into a more complex pattern, as is typically for second waves. If it happens , this would not alter the implications for Minute wave (iii) down.
Fibonacci From the high of August 11, 2008 at 1313,15 - 741,02 = 572,13 or 43,57%
Low of November 21,2008 of 741,02 - 943,85 = 202,83 or 27,37%
And the ratio is43,57% / 27,37% = 1.5918 or inverted 0.62818 which is phi = 0.618.
Minor Wave 2 lasted 26 days, Minor wave 3 lasted 100 days and Minor wave 4 lasted 45 days. Minor wave 1 declined from August 11 to September 18 which is 37 days. Intermediate wave (2) took a timespan of 56 days (Fibonacci 55 !!)
Fifth waves often run equality in time and price especially when the third waves extends, as it is in this case. The just started fifth wave down should fall below 741 and with respect to time may bottom between February 13, 2009 and March March 2, 2009. This is NOT a forecast, it is just a possibility compared with historic data.January 2009 S&P 500, 10min.,chart, January 29,2009
(postedJanuary 30,2009)
© ELLIOTT today, January 30,2009
http://www.elliott-today.com/images/sptd-180.gif
Yesterday I posted the chart of the S&P 500 Index, 10minutes showing the trading on January 28, 2009. The EW labeling displayed a completed 5-wave advance from the January 16 low. Five waves completed the advance and the market turned down on a dime. This action is classic Elliott. Technically speaking, the market trades clearly well below the falling 1x1 Fibo-Fanline and
is itself in a weak position. Don't miss this evenings Elliott labeling on the big picture.
S&P 500, 10min.,chart, January 28,2009
(postedJanuary 29,2009)
© ELLIOTT today, January 29,2009
http://www.elliott-today.com/images/sptd-179.gif
This is classic Elliott: The gap shown on the chart occurred right where it supposed to in the "third of a third" wave, which under the Elliott Wave Principle is "strong and broad" and the trend at this point is unmistakable. (EWP, Frost & Prechter, p. 68. Elliott Wave Principle 1990) Note how clearly market action moved along the rising Fibo-Fanline 1x1. Again, the media had it backward:Banks, Fed Rally Stocks
The Dow industrials jumped 2.5% as the Fed hinted it would keep rates low and another bank rescue appeared to take shape. WSJ, Jan 29,2009 On January 23, 2009 I presented a chart (below on this site) with a forecast calling for higher prices ahead.
S&P 500, 10min.,chart, January 26,2009
(postedJanuary 27,2009)
© ELLIOTT today, January 27,2009
http://www.elliott-today.com/images/sptd-209.gif
Prices edged up as forecasted and are trading along the rising 1x1 Fibo-Fanline.Support abround the 830 level that's where the rising 2x1 Fibo-Fanline comes in.
S&P 500, 10min.,chart, January 26,2009
(postedJanuary 27,2009) © ELLIOTT today, January 27,2009
http://www.elliott-today.com/images/sptd-208.gif
Friday's update called "Recovery Ahead" came to pass. The market surpassed the 0.618 Fibonacci mark (see chart of Jan.22,2009) and climbed higher. The ensuing correction traced out what looks like a three-wave structure, labeled a-b-c, which
is corrective in character. Late Monday the market again started to advance.
Liquidity Chart
http://www.elliott-today.com/images/free3_small.png
How your "Checking Account Balance" and the Stock Market are similar
It's no mystery to you. If your checking account balance expands week after week, then one thing is clear ... and it is that you are spending less than you are taking in ... so you have an increasing surplus of dollars to do something with every month.
Its called "discretionary income" ... the money left over after all expenses are paid.
It is probably the most important part of the money you make ... because, unless you have "leftover discretionary income" you don't have money to buy anything else. With it, you can continue to buy more and more and expand the value of you home or personal assets. (Sure ... you could borrow money or use your charge card, but that creates an offsetting debt obligation to your purchase, so you have no increase in your 'net asset valuation".
The stock market is similar in a way. There is something known as "Liquidity levels", and that is similar to your checkbook. Look at Liquidity as discretionary income or lack thereof.
The more Liquidity moving into the market, the more money there is available for trading up the value of stocks on new purchases. If Liquidity moves to a level called Expansion, then the amount of Liquidity inflows exceed all the outflow amounts. In such cases, excessive "discretionary" money can be used to enhance a process of buying more and more ... and that drives up the stock market.
The downside is that the opposite happens when Liquidity is outflowing, and when Liquidity goes into Contraction. This is like your checkbook running out of money before you can finish paying your bills every month. This leaves you in a net deficit and over time could require you to start selling some of your other assets in order to keep up with the bills.
That's it ... it's the how and why Liquidity levels and the direction of the stock market go "hand-in-hand".
Today, we will share our daily Inflowing/Outflowing Liquidity chart with you. This chart
goes back to last March and shows the following "Liquidity Events":
Now look at the Event Label numbers to see where they transpired and what was happening to the New York Stock Exchange Index.
The correlation is marvelously clear. Down trending Liquidity levels meant the market would pull back. Liquidity levels in Contraction meant the money outflows would keep the market down and moving lower.
So, the market's Liquidity has been in Contraction since last year, and it still remains there. Until Liquidity starts an up trend, and moves above the trading range in the boxed in area, then the net outflows will leave no excessive money for buying and driving the market higher. December and January showed an elevation of Liquidity off a bottom, and that translated into an up move in the market. At least until 11 days ago when Liquidity levels started dropping again and moving lower into Contraction territory.
Things will change ... after Liquidity starts to trend up, and after it moves high enough to reach Expansion Territory. Watch the money ... like the balance in your checkbook, it dictates whether you can buy anything or not.
Elliott Wave Analysis S&P 500, daily chart,January 2000 - January 2009 January 23,2009
(postedJanuary 24,2009) © ELLIOTT today, January 24,2009
http://www.elliott-today.com/images/sptd-206.gif
Chart 1
What's Going On? The wave structure shown here unfolded its pattern quite clearly regardless of wars, energy
crisis, speeches, assassinations, jawboning or the weather. To a phenomenal extent, the
S&P 500 Index (also, the DJIA has an identical pattern) appeared to know exactly where
it was, exactly where it had been, and exactly where it was going. But why is an average
of 500 or 30 stocks so reliable in exhibiting over and over again these phenomena of
construction? For a hundred years, investors have noticed that events external to the
market often seem to have no effect on the market's progress. With the knowledge that
the market continuously unfolds in waves that are related to each other through form and
ratio, we can see why there is little connection. The market has a life of its own. Now what
ultimately causes that particular pattern of the market's life is open to debate. It can be
surmissed, though, that it is mass human psychology that is registering its changes in the
barometer known as the S&P 500, the Dow or the Nasdaq. This idea helps to explain the
cause of future events: changes in the mass emotional outlook. That's what comes first.
The market is a mirror of the forces, whatever they may be, which are affecting humanity
both in and out of the market arena. The market doesn't "see in the future" as the
discounting idea suggests; it reflects the causes of the future. Increasingly optimistic people
expand business; increasingly depressed people contract their businesses. The results
show up later as a "discounted" future. It's not the politicians who gallantly "save" a bear
market by returning to policies of economic sanity, it's the mass emotional environment,
as reflected by the market, which forces them at some critical point to do it. Events do not
shape the forces of the market; it is the forces behind the market that shape events.
Time Zone Amazingly, the time distance measured from the top of January 14, 2000 to the top
of October 10,2007 is 2786 days or 92.86 months. The time distance from the start
of the "Great Bull Market" in 1980 measured to October 1987 resp. December 4, 1987,
the time of the "Crash of 1987" is 2767 days or 92.23 months.
S&P 500, daily chart,May 2008-January 2009 January 23,2009
(postedJanuary 24,2009) © ELLIOTT today, January 24,2009
http://www.elliott-today.com/images/sptd-207.gif
Chart 2
The chart of the S&P 500 Index (SPX) shows a clear-cut textbook Elliott Wave structure.
From the high of Intermediate wave (2) the market fell in five-waves of Minor degree to
complete the first wave of Intermediate wave (3). Minor wave 3 tanked sharply lower
and so far was the strongest and longest wave, typically for third-waves. Minor wave 3
also shows very clearly five waves of the next lower degree, Minute waves (i), (ii), (iii), (iv)
and (v). Minor wave 3 cut through the 1x1 Fibo-Fanline like butter and bottomed at 741,
right in the area of the 2002-2003 lows. Minor wave 3 fell relentlessly in 182 days or
six months. An important Gann-number. The leap out of the low of Minor wave 3 counts
as Minute wave (a) and the ensuing correction including the higher wave b counts as
wave (b). Under this interpretation the market finished Minute wave (b) yesterday and
should rally in Minute wave (c) of Minor wave 4. If correct, the rally could last into March
2009 and an estimated target around 1000-1050 is possible. Alternately, an expanding
triangle could be in force for wave 4, a common wave position for such a formation.
A breakdown of the recent low however, would eliminate that scenario. Since wave (c)
of 4 must be of five-waves up to leave this count correct, only a three-wave structure up
would force me to count an upward correction in wave (ii). Nevertheless, the overall trend
is clearly down.
S&P 500, 10min. chart, January 22,2009
(postedJanuary 23,2009)
http://www.elliott-today.com/images/sptd-205.gif
The first wave up from the lows of Jan 20 and 21 traced out what looks like a clear three-wave structure indicating a bear market leg in the making. Now look at the chart and see how both of the latest recoveries stopped right in the area of a Fibonacci 0.618 retracement level and the market turned down just like on a dime.
S&P 500, daily chart, January 22,2009
(postedJanuary 23,2009))
http://www.elliott-today.com/images/sptd-204_small.gif
The most striking word this time around is "change". The idea that is a new year and a new presidential term seem to be the main sources of a new, striking optimism. "Hope" and "Optimism" that accompanied Obama's victory. Moving the economy in a new and upward direction and so the markets. "The NEW new deal" covers Time Magazine but the Wave Principle suggests otherwise: The real big downturn has just began, namely Primary wave . Supporting my analysis of more to come to downside is my point of view as a contrarian: Not one of the 12 analysts is bearish for upcoming year. USA Today finds essentially the same result in a survey of the "top five" market strategists and notes, "predicting a rebound may be based on more than hope. Stocks have snapped back sharply after past historic declines. That's correct, but does it rely to 2009? The daily chart of the S&P 500 (SPX) shows my EW labeling very clear: 5th wave underway and at what level this wave will end a recovery eventually spectacular will seem to prove the bulls correct. The key word is "seem". From an Elliott point of view a wave two rebound will follow once Primary wave is complete. But that's NOT the whole story for the entire 2009.
S&P 500, 10min, January 22,2009
(postedJanuary 22,2009))
http://www.elliott-today.com/images/sptd-203_small.gif "It's NOT over", wrote ELLtoday on November 5, 2008. I labeled the daily chart presented on this page according to classic Elliott Wave Principle (R.N.Elliott) and so far the direction of the market so far proved correct. In short, a fall below 1000 was clearly in the cards and it happened. Please go back to the
October 30, 2008 chart below and see my pointed forecast . On October 18,2008 I posted a long term chart of the S&P 500 intitled "Meltdown" which displays the Elliott Wave Count I prefered for a long time. The most important message the Elliott Wave Principle sounded out loud to the one's who KNOW was this: A FIVE WAVE DECLINE is in the makingindicating a NEW DIRECTION of the market for a long time come. At that time, Minor wave 4 was in the making and Minor wave 5 yet to come. That's what happened quite exactly.
January 2009
February 2009
March 2009
S&P 500 TradingDESK - Daily Updatehttp://www.elliott-today.com/images/sptd277_small.gif © ELLIOTT today, 2009
04/21/09 February 2009 Socionomics: Market Psychology Those are familiar with Socionomics will have an idea what the main arguments against any further decline not to speak of an end of the "great rally" from March 2003 will be. Speculative environments come along at most only once in a generation, as a horde of new, inexperienced players is then available to descend upon the stock market scene. Members of the general public are always latecomers to the market's party, and because of skepticism and rationality
at the door. Socionomics>>>On January 30, 2009, ELLtoday had the following to say: Minor Wave 2 lasted 26 days, Minor wave 3 lasted 100 days and Minor wave 4 lasted 45 days. Minor wave 1 declined from August 11 to September 18 which is 37 days. Intermediate wave (2) took a timespan of 56 days (Fibonacci 55 !!) Fifth waves often run equality in time and price especially when the third waves extends, as it is in this case. The just started fifth wave down should fall below 741 and with respect to time may bottom between February 13, 2009 and March March 2, 2009. This is NOT a forecast, it is just a possibility compared with historic data.
S&P 500, daily chart,May 2007 - February 2009 © ELLIOTT today, February 28,2009 http://www.elliott-today.com/images/sptd-232_small.gif The basis of the Wave Principle is that prices unfold in "five waves" of crowd psychological development when moving in the direction of the one larger trend, and "three waves" when moving against. The size of trend per se and whether the trend of one larger size is up or down per se, are not determinants of the subdivisions. Thus, in a Primary uptrend, an Intermediate advance occurs in five waves, moving up-down-up-down-up according to certain rules, and an Intermediate reaction occurs in three waves (down-up-down). Conversely, in a Primary downtrend, an Intermediate decline occurs in five waves, moving down-up-down according to the same rules, and an intermediate rally occurs
in three waves (up-down-up). The labeling on the chart of the daily S&P 500 Index shows an alternate
count of the entire decline from the high of October 2007. Yes, the bear
market now at the end of February 2009 is already 16.5 months underway.
For example, the bear market of 1973-1974 lasted 99 weeks with a
percentage fall of 46.6%. The recent market decline measured from the
high price of October 11, 2007 at 1576 is already 53.3% exceeding even the
first slump of the famous 1929 crash which was 49.4%. The market is going
to write history! The Dow took out the November 2008 lows and the October
2002 lows signalling even further losses ahead. The good news from a technical
point of view is that the ROC (momentum measure) displays a bullish divergence.
The question is however, how long will it take for a lift off? The answer according
to The Wave Principle: a turning point is at hand, when the market completes
a structure. "A structure" in this case means in probably terms, a diagonal triangle
fifth wave (EWP, p. 31, Frost & Prechter, 1990) which is shown on the chart above. Example: NASDAQ Composite Index, March 2000-May 2000
http://www.elliott-today.com/images/sptd-233_small.gifWhat about Investor's sentiment? My contrary stance helped
readers of this website get completely out of the market's top in the
years 2000 and 2007. The Daily Sentiment Index just recorded two
straight days of 3% S&P bulls, for Feb 20 and 23. These are the
lowest consecutive bullish percentage readings in history. So
sentiment is at a level that supports my outlook of the daily S&P
picture. The Dow's 22.3% rise from the November low to the
January 6 high was enough to convince many pundits that the
bottom was in place. Experts are clearly itching to catch the
"impressive" rallies that almost always follow a "waterfall decline." Elliott Wave Analysis S&P 500, daily chart,January 2000 - January 2009 January 23,2009
(postedJanuary 24,2009) © ELLIOTT today, January 24,2009 (on mouse over please see chart of February 14, 2009)http://www.elliott-today.com/images/sptd-206.gif As Robert Prechter writes in his book Elliott Wave Principle:
"The primary value of the Wave Principle is that it provides
a context for market analysis." The January analysis of the S&P 500 Index expectations were for a countertrend move in Minor wave 4 to a level around the 1000 level which also counts as a 38.2% Fibonacci retracement of the preceding decline, typically for fourth waves. The highest price so far in this recovery was 941 points. The current low of Feb 12, 2009 was identified as wave b of an expanded flat and these three-wave moves are significant within the context of the Wave Principle, because they represent corrections within the larger trend which is still down. Just as there are idealized Fibonacci retracements for corrective waves within the context of the Wave Principle, there are also idealized Fibonacci projections for impulse waves. For example, wave three typically travels 1.618 times the length of wave one. Also, when wave three extends, waves five and one tend toward equality, often in price and time. So let's start the math. The top occurred on October 11, 2007 at intraday high 1576. Five waves down of Minor degree were completed at 1256 on March 17,2008, a loss of -320 points or -20.30%. Intermediate wave (2) run from 1256 points in the S&P to a high of 1440 points on May 19,2008, a gain of +184 points or retraced 57.5% of the preceding decline. Wave (3) then declined (1440-741) -699 points or 48.5% and wave (4) if its already over, gained back 200 points or 28.6% of wave (3), which in percentage terms is half the amount of wave (2). Now if the length of wave (5) equals the length of wave (1), a reasonable target for Primary wave to end is at 621 in the S&P 500. This level is interesting, since it represents a 60.60% substraction from the entire high of October 2007. On the other hand, a wave length for wave (5) of only 0.618 of the length of wave (1) counts for 743 in the S&P just in the area of the preceding low. A drop to 621 means a percentage length of wave (5) of 34% . Intermediate wave (1) then is 0.5970 percentage of wave (5) just shy of the classic 0.618 Fibonacci proportion.
S&P 500, 10min., Feb 26,2009 http://www.elliott-today.com/images/sptd-231.gifFirst, the New Lows peaked in October. The New Lows were then followed by a lesser rise in November while the market made a new low on the S&P. That was a positive divergence, where the market rose from there ... only to fall back down to retest the S&P low again. But notice how, once again, the New Lows have a Positive divergence and this time, the divergence is more positive than the last time. So, we have a "positive force" acting on the market. Nearby, the 10minute chart of the SPX shows the length of wave v now equals wave i, each 16 points. But most important, in term of Elliott waves, the market now trades in the latter stages of wave 5 signaling completion of the pattern. S&P 500, 10min., Feb 26,2009 http://www.elliott-today.com/images/sptd-230.gifThe "Run into Resistance" was well demonstrated yesterday. Yesterday's intraday high did not reach the ML at the fourth attempt and prices declined again penetrating the lower ML channel line. S&P 500, 10min., Feb 25,2009 http://www.elliott-today.com/images/sptd-229_small.gif At the opening bell the market fell sharply almost 70% measured from the low of Feb 23 but recovered and even exceeded the previous high. Day's high met natural resistance at the previous 4th wave. This behavior is classic Elliott.The decline from January 6, 2009 is by all means a three-wave structure meaning the entire structure dating back to the November low probably is only part of a more complex formation. But nevertheless, it is a correction (temporarly) in a much bigger
downtrend. S&P 500, 10min., Feb 24,2009 http://www.elliott-today.com/images/sptd-227_small.gif Market Dispatches 2/24/2009
Dow up 236 as Bernanke reassures Street
The S&P 500 and Nasdaq break 6-day losing streaks
as the Fed chief says 2010 could be a 'year of recovery.' So, They Think, Bernanke Can Turn The Market? S&P 500, daily chart,August 2007 - February 2009 © ELLIOTT today, February 24,2009 http://www.elliott-today.com/images/sptd-228.gifFrom the January 24, 2009 update: (please see chart below) The top occurred on October 11, 2007 at intraday high 1576. Five waves down of Minor degree were completed at 1256 on March 17,2008, a loss of -320 points or -20.30%. Intermediate wave (2) run from 1256 points in the S&P to a high of 1440 points on May 19,2008, a gain of +184 points or retraced 57.5% of the preceding decline. Wave (3) then declined (1440-741) -699 points or 48.5% and wave (4) if its already over, gained back 200 points or 28.6% of wave (3), which in percentage terms is half the amount of wave (2). Now if the length of wave (5) equals the length of wave (1), a reasonable target for Primary wave to end is
at 621 in the S&P 500. This level is interesting, since it represents a 60.60% substraction from the entire high of October 2007. On the other hand, a wave length for wave (5) of only 0.618 of the length of wave (1) counts for 743 in the S&P just in the area of the preceding low. A drop to 621 means a percentage length of wave (5) of 34% . Intermediate wave (1) then is 0.5970 percentage of wave (5) just shy of the classic 0.618 Fibonacci proportion. Actually, thereis nothing to add to this former analysis. The market's natural path has to form out and complete its structure. S&P 500, 10min., Feb 23,2009 http://www.elliott-today.com/images/sptd-226_small.gif Here I draw a new ML channel which displays the market's action
quite closely. After completion of an expanded flat (a-b-c) the market traced out what looks like a clear-cut 5-wave-structure which traveled within an Elliott parallel trend channel. AIG vor 100 Milliarden Jahresverlust
Beispielloses Finanzdebakel: Der Versicherungskonzern AIG hat laut Medienberichten allein im vierten Quartal 60 Mrd. $ versenkt. Für das Jahr 2008 würde das Minus so auf knapp 100 Mrd. $ anschwellen. FTD, Feb 24,2009
Germany's Business
Morale Hits a Low
Business confidence in Europe's largest economy plunged to a record low in February, indicating a deepening recession. WSJ, Feb 24,2009 Market Dispatches2/23/2009
Dow, S&P 500 tumble to 1997 levels but...
According to Standard and Poor's, Financial stocks in the S&P 500 account for 13.29% of the index (Dec. 31st. 2008). The DJI index has Citigroup in it ... the same bank that the government is slowly taking over.
What that points out, is that the melt down in financials is a big holdback on market's ability to move higher. So, that means that you should keep a very close eye on the Banking Index
(Symbol: $BKX).
As long as it keeps tanking, it will offer no support for the market's upside. To appreciate the size of the melt down on Banking securities, take a look at the chart below. Last week was another down week for the index, and Friday saw it go down below a 1992 support level. Yes, it recovered some during the day on Friday and closed above that resistance ... but that is nothing to write home about.
S&P 500, 10min., Feb 20,2009 http://www.elliott-today.com/images/sptd-225_small.gif Short term, the S&P 500 Index (SPX) dropped toward
the ML channel line but did not touch it. After hitting a new
low on the 10minute chart, the market reversed to the upside
and broke out of the upper boundary line. Please keep in mind,
that the chart shown above is of a very short time period and
these smaller waves do not change the overall major trend.
S&P 500, 10min., Feb 19,2009 http://www.elliott-today.com/images/sptd-224_small.gif A early rise above the upper ML channel line stalled
and the market fell back again. At the closing
bell the SPX closed within the ML channel. Flirting
with the lows established in November 2008 I am
watching the market to hold at or above the ML channel
line. The bullish divergence is still in place. Thus, as new
price action unfolds, it puts past price action into context.
S&P 500, 10min., Feb 18,2009 http://www.elliott-today.com/images/sptd-223_small.gif Bad news all over again - the market is testing the November lows. The January 6, 2009 high stalled at the upper ML channel line and declined in five waves. On January 26,2009 however, the market climbed above that line and traded there since then. There is a good chance the SPX will start a rally here at least back to the early February highs.
"The Worst of the Crisis in Wall Street is Over."
May 3, 2008, Bloomberg Television
"...the Worst is Over."
May 12, 2008, head of Treasuries trading at New York securities firm.
"The Acute Phase of the Credit Crisis is Over."
May 20, 2008, Global hedge fund manager on Bloomberg.
The "worst-is-over" bullish sentiment that restores the bullish resolve of a long rise is the most dangerous kind of bullishness there is. It's a perfect example of wave-two optimism that comes right before the bottom drops out. (EWI)
Trump Unit Considers Chapter 11 Trump Entertainment, Donald Trump's casino group, is expected to file for Chapter 11 protection Tuesday, after its board authorized the filing in a pre-emptive move.WSJ, Feb 17,2009
Luxury-Car Makers Face Steep Declines The world's top makers of luxury cars, including Daimler's Mercedes-Benz, BMW and Volkswagen, are facing a sea change triggered by imploding demand amid a broader trend toward smaller vehicles. WSJ, Feb 17, 2009
Japan Economy Shrinks 12.7%, Steepest Drop Since 1974 Oil Shock By Jason Clenfield
Feb. 16 (Bloomberg) -- Japan’s economy shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, as recessions in the U.S. and Europe triggered a record drop in exports. Bloomberg.com, Feb , 16, 2009
Pimco Says World Economic Crisis Faces ‘Second Wave’
By Wes Goodman. Feb. 11 (Bloomberg) -- Pacific Investment Management Co., which runs the world’s biggest bond fund, said the global economy faces a “second wave” of turmoil unless governments adopt larger spending plans.
S&P 500, 10min., Feb 17,2009 http://www.elliott-today.com/images/sptd-222_small.gif The market gapped down from the opening bell and dropped
sharply to the lower boundary line of the falling ML channel.
A recovery back to the ML stalled and prices declined again. S&P 500, 10min., Feb 11,2009 http://www.elliott-today.com/images/sptd-218.gifAfter Tuesday's slump only a slight recovery took place. The S&P is now trading below the
ML channel. DJIA, 10min., Feb 10,2009http://www.elliott-today.com/images/sptd-216.gif
Blame it on GeithnerAccording to Robert Folsom, (EWI):
Geithner began his remarks at 11:11am Eastern and finished 19 minutes later, at 11:30.
At the moment he began talking the Dow Industrials were already down 207 points. As
for the 19 minutes in question, prices fluctuated up and down within about a 50-point range.
When he finished, the Dow was down some 215 points. When the session closed at 4:00pm
he Dow ended 382 points lower. Which is to say: the market fell further BEFORE Geithner
spoke than it did AFTER.
S&P 500, 10min., Feb 12,2009 http://www.elliott-today.com/images/sptd-219_small.gif The market opened sharply down on the opening
bell, recovered half of the losses and bottomed
below wave v. Wave v on the chart counts as the
real bottom while the lower low counts as part of
an expanded flat correction (wave b) and the late
upswing is wave c. Wave c may not be complete yet,
Natural resistance comes in at the previous fourth wave,
which formed a contracting triangle.
S&P 500, 10min., Feb 10,2009
http://www.elliott-today.com/images/sptd-217.gifDue to server problems I wasn't able to post the 10minute chart of the S&P over the weekend.
Market Dispatches2/10/2009
Dow falls 382 as Wall Street boos bailout plan
Due to server problems I wasn't able to post the 10minute chart of the S&P over the weekend.
I still argued all along markets down waves are NOT complete, as so many specialist are hoping. What an EW analyst here is missing is a fifth wave which completes the entire structure from the high of October 2007. The high of October 2007? You name it, polls about what the entire market will do next time, almost as much optimism as they have had on exactly that top! Think about it! After 47% DJIA, daily chart, February 7, 2009 (Update) © ELLIOTT today, February 7,2009http://www.elliott-today.com/images/sptd-215.gifElliott Wave Analysis Intermediate Wave (4) Still in Progress The chart of the DJIA shows a clear-cut textbook Elliott Wave structure. From the high of Intermediate wave (2) the market fell in five-waves of Minor degree to complete Intermediate wave (3). Minor wave 3 tanked sharply lower and so far was the strongest and longest wave, typically for third-waves. Minor wave 3 also shows very clearly five waves of the next lower degree, Minute waves (i), (ii), (iii), (iv) and (v). Minor wave 3 cut through the 1x1 Fibo-Fanline like butter and bottomed October 10, 2008, exactly 360 days (circle) from the top of October 2007 right in the area of the 2002-2003 lows. Minor wave 3 fell relentlessly in 182 days or six months. An important Gann-number. The leap out of the low of Minor wave 3 counts as Minor wave a and the ensuing correction including the higher wave (b) counts as wave b. Under this interpretation the market finished Minor wave b yesterday and should rally in Minor wave c of Intermediate wave (4). If correct, the rally could last into March 2009 and an estimated target around 10,000-10,500 is possible. Nevertheless, the overall trend is clearly down. The chart of January 23, 2009 shows the "Big Picture" S&P 500, daily chart, February 5,2009
(postedFebruary 6,2009) © ELLIOTT today, February 6,2009http://www.elliott-today.com/images/sptd-214.gif Market Dispatches 1/2/2009Stocks rise despite weak dato
The first economic report of 2009 shows the worst manufacturing reading in 28 years.
‘Grimmest’ Davos Ever Brings Anger, Finger-Pointing at Bankers. Feb. 2 (Bloomberg)
The Media as a Reflector of Social Mood
A Classic Example
Danger ahead? Stocks' early warning signal
A choppy start to 2007 could mean tough times ahead, according to some historic trends,
but don't start worrying just yet. CNNMoney.com ,January 10 2007
Socionomics shows why the media must always be wrong in the aggregate
when reporting prediction about major social trends. Reporters usually are
nonprofessional in the fields they cover, so the feelings of reporters in general
mirror those of the people. Reporters often contact financial analysts who
express their own feelings about markets, thus reflecting society's consensus
feelings. A bullish analyst rarely gets a forum at a major market bottom, and a
bear rarely gets one at a major top. The media's choice of times to quote certain
professionals typically shows those professionals retrospectively in their worst
light.
James Stack of Investech undertook the tedious job of culling marketrelated
articles going all the way back to the 1920s. The resulting chronicle is a
tragicomedy of never-ending wrongness. As John Rothschild sums up Stack's
conclusions, "When they are predicting anything that involves money, economists
prominent investors and the reporters who quote them haven't been wrong on
occasion; they've been unerringly errant. Paul Montgomery of Universal Economics
and Ned Davis of Ned Davis Research have studied the timing of covers of major
news magazines, finding that whenever one of them takes a stand on the stock
market, it is invariably an important turn in the other direction that typically lasts
years. (The Wave Principle of Human Social Behavior, R.Prechter 1999).
Elliott Wave Analysis
The daily chart of the S&P 500 Index dislplays the path of the index since its top of 1565 in October 2007. As can be clearly seen, each downwave divides into five smaller waves (degrees) and each upward wave divides into three smaller waves indicating the bear market is in full rage down. Despite the turmoil in the markets, the wave structure couldn't be better reflecting classic Elliott waves. In fact, emotional markets produce the clearest pattern but also travels within a parallel trend channel. Waves 2 and 4 sport alternation by taking different forms,(zigzag, flat),
thus satisfying the most common guideline of impulse wave formations. As you can see, the construction of intermediate wave (1) displays five waves of one smaller degree, namely Minor waves 1, 2, 3, 4 and 5. The same structure can be seen in Intermediate wave (3). The same structure again should be developing in Intermediate wave (5). Minor wave 1 of Intermediate
wave (5) bottomed in January and Minor wave 2 now in progress should be completed soon.
The next wave down is Minor wave 3 which should be stronger than Minor wave 1. Once Intermediate wave (5) is complete, Primary wave will be a classic model of Elliott wave
pattern. The good news, at least for the time being, a multi-month recovery in Primary wave
will emerge, probably through most of 2009
These two charts display the most probably counts for the near future. While it cannot ruled out, that the market slumps dead ahead down in Intermediate wave (5) as shown by the labeling of the S&P 500, I prefer the picture labeled in the DJIA.
S&P 500, 10min.,chart, February 4,2009
(postedFebruary 5,2009)
© ELLIOTT today, February 4,2009http://www.elliott-today.com/images/sptd-213.gifThe market first climbed higher and reached the falling 1x2 Fibo-fanline (see chart below). At 850 the SPX completed wave c of an expanded flat the formation discovered yesterday. The following impulse down traced out what looks like a clear 5-wave decline,
with wave iv in the making. The market is now trading below the rising 1x1 Fibo-fanline, which indicates a weak market. S&P 500, 10min.,chart, February 3,2009
(postedFebruary 4,2009)
© ELLIOTT today, February 4,2009http://www.elliott-today.com/images/sptd-212.gifHere You can see the completed Elliott structure down from the high
of Minute wave (ii). Intervaning wave (iv) now in progress is likely to
tracing out an expanded flat. The market climbed above the falling
1x1 Fibo-fanline, rested there for awhile and late in the trading made
it up to the 1x2 Fibo-fanline. Natural resistance is in the area of the
previous fourth wave and there we are ! S&P 500, 10min.,chart, February 2,2009
(postedFebruary 3,2009)
© ELLIOTT today, February 3,2009
http://www.elliott-today.com/images/Feb2001.gifThe markets fell sharply at the opening bell but recovered some losses later in the trading. As the 10minute chart reveals, after completing small five waves down prices rebounded of some sort but didn't even reach the Fibo-fanline 1x1. January 2009 S&P 500, 10min.,chart, January 30,2009
(postedJanuary 31,2009)
© ELLIOTT today, January 31,2009
http://www.elliott-today.com/images/sptd-211.gifThe 10minute chart of the SPX displays a rather rare phenomenon.
A first wave extension within Minute wave (iii) to the downside.
(EWP, Frost & Prechter, 1990, p.24-25) The decline travels well within an Elliott parallel trendchannel (not shown) as it should and has room to fall. The count reveals the short-term market is in Minuette wave iv of
Minute wave (iii) of Minor wave 5 to the downside. Since fourth waves are often producing more complex price patterns it is quite possible that actually this fourth wave is in progress and not even finished.Also upside gains are limited and should by no means exceed the previous fourth wave (see Fibo fanline 1x1).
January 2009
February 2009
March 2009
April 2009
MARCH 26, 2009,
WTO Details Rising Protectionism, Pushes Countries to Reverse Course
BRUSSELS -- A steady buildup of protectionist measures could "slowly strangle" international trade and undercut the effectiveness of national stimulus plans, according to a report the World Trade Organization sent its 153 members on Thursday. WSJ, March 27,2009
Social Implications
While the Wave Principle is the single best method for anticipating the behavior of markets, its value at times goes way beyond even that great benefit. The effects that a change in market trend will have on society are not in evidence at the start of the trend. They become intensely manifest by the time of its termination. Is it too early to begin projecting events that will result from approaching bear market in social trend? To be sure, this book contains dozens of very specific financial forecasts, which are root social phenomena. The average conflict during the bear market will be far greater than it was during the bull market and will lead to periods of turmoil, not just in financial markets, but in society. Indeed, the trends now implied by long term market patterns have always produced dramatic social upheaval. The coming trend of negative social psychology will be characterized primarily by polarization, between and among various perceived groups, whether political, ideological, religious, geographical, intolerance, disagreement and exclusion, as opposed to the bull market years, whose net trend has been toward benevolence, confidence, tolerance, agreement and inclusion. Such a sentiment change typically brings conflict in many forms, and evidence of it will be include protectionism in trade matters, a polarized and vocal electorate, separatist movements, xenophobia, citizen-government clashes, the dissolution of old alliances and parties, and the emergence of radical new ones. (At The Crest of The Tidal Wave, p.432, (c) 1995 and 2001, Robert R.Prechter)S&P 500 Index (SPX)
© ELLIOTT today, March 21,2009
http://www.elliott-today.com/images/sptd-255.gif Chart 3
Elliott Wave Analysis Elliott used parallel channels to assist in determining normal wave targets and to provide clues to possible development of trends. In The Wave Principle he asserted that as a wave progresses, "it is necessary that the movement be channeled between two parallel lines." He regarded trend channeling as an important tool in establishing wave completion targets
and in the segregation of individual waves. (EWP, p.61) Sometimes a sub-wave within one of the main five waves will briefly exceed its associated channel line. When that happens, these outlying waves often stay within another, wider trend channel whose parallel lines contain all prices but do not necessarily touch the ends of waves two and four, or three. (The Elliott Wave Theorist, Robert R.Prechter, 09/03) According to the text, the dotted line on chart shows the outlining
channeling, containing all wave extremes. Interesting, the lower
channel line touches the end of wave (5) quite exactly, supporting
the case, that Primary wave has bottomed. The sideways action from November 2008 to February 2009 can be labeled as a contracting triangle and the ensuing "thrust out of a triangle" completed Intermediate wave (5) of Primary wave .
Possible targets for Primary wave : Elliotter know about the famous retracement levels provided by Fibonacci mathematics:
A 38.2 % Fibonacci retracement would bring the S&P 500 to about the 1,013 level.A 50 % Fibonacci retracement would bring the S&P 500 to about the 1,121 level. A 61.8 % Fibonacci retracement would bring the S&P 500 to about the 1,228 level. There is a high probability that the market will run into resistance provided by the falling 1x2 Fibonacci fanline, which, when drawn from the top of October 2007 runs about into the mid 1,100s.
S&P 500, 10min., March 26,2009 Five Waves-Up http://www.elliott-today.com/images/sptd-259_small.gif The action of the last two days provided an excellent example of the usefulness to take Fibonacci fanline to your trading tool. After touching the rising 2x1 Wednesday, the market started a 40+ point-rally. S&P 500 Index, daily http://www.elliott-today.com/images/sptd-262_small.gif Elliott Wave Analysis: On the basis of our experience with triangles, we propose that often the time at which the boundary lines of a previously triangle converge at its apex coincides exactly with a turning point in the market. (EWP, p.42-43, Frost & Prechter). Once you identify a valid channel, you can use it to help identify some minor trend changes along the way as well as the major trend reversal at the end of wave five (or wave C in zigzag). The two-four line of a channel provides no impediment to the progress of the next emerging wave, but sometimes after going past this line, prices will return to "test" i t, or touch it briefly, before continuing in the new direction. As the labeling on the chart reveals, a classic five-wave decline of Primary degree completed the first (!) wave down. As of Friday, March 27,2009, the S&P 500 Index has not only reached the apex of the triangle (Chart : alternately - double zigzag) but also trades near the Major Midline (red-dotted line). This could be a strong signal that the first wave of Minor wave 1 of Intermediate wave (a) is complete. (Alternately of course: all of Intermediate wave (a). Weekly Update © ELLIOTT today, March 28,2009 Welthandel stürzt ins Bodenlose
Der Welthandel ist in den vergangenen Monaten zusammengebrochen. Im Zeitraum von August 2008 bis Januar sank der globale Warenaustausch um fast 20 Prozent. Das berechneten Ökonomen des niederländischen Forschungsinstituts CPB. FTD de, March 26,2009
Die Wut erreicht die Straße
Manager werden als Geiseln genommen, Banker bedroht, Villen attackiert. Der Unmut über die Verantwortlichen der Wirtschaftskrise erreicht eine neue Dimension: Die allgemeine Wut richtet sich zunehmend gegen Einzelpersonen. FTD, March 26,2009
(See Social Implications below>>>)
S&P 500, 10min., March 26,2009 Leading Diagonal...http://www.elliott-today.com/images/sptd-263_small.gif "Five waves up", that's what I said on March 26,2009 and indeed, the market traced out an a-b-c which ended right at the "previous fourth wave" and a last run to slightly new highs completed the entire structure. The market "gapped down" below the lower short term channel line, tried to recover, but failed. The structure as of Friday's trading seems to form a leading diagonal (Type 2, EWP p.47-48, Frost & Prechter). This pattern appears as wave 1 or A. You may have noticed that the S&P 500 Index trades near above the rising Fibo fanline (not shown) when drawn from the low of 791. S&P 500, 10min., March 30,2009 Midline Channel & FiboFanLineshttp://www.elliott-today.com/images/sptd-264_small.gif The low 791 functioned like magnetic center, since first the prices
broke down at that level, recovered along the ML and at the end
of the trading day closed above the ML. I hope you are not confused
with so many lines on the chart, but as you can see the dramatic opening
gap and the trading thereafter occurred right between the falling 1x2 Fibo fanline
and the ML (red-dotted line).
Geheimes Gutachten
HRE-Risiken größer als gedacht
Der Immobilienfianzierer Hypo Real Estate wird immer mehr zu einem Fass ohne Boden. Dem Finanzministerium liegt nach stern-Recherchen ein geheimes Gutachten vor, wonach die Ausfallrisiken auf bis zu 60 Prozent der Bilanzsumme der HRE ansteigen könnten. Das wären 235 Milliarden Euro. stern.de, March 25,2009 S&P 500, 10min., March 25,2009 Test of the 2x1http://www.elliott-today.com/images/sptd-258_small.gif
The S&P 500 edged higher at the opening but declined to 791 just right to the rising 2x1 Fibo fanline.
Let us look at Banking Index today
(symbol: $BKX).
(This daily chart goes back to 1993, 17 years ago.)
For today, take a look at the close-up insert in the upper left hand corner. That is a picture of the Index's movement since January of this year.
First, note the fan lines. We have had rising fan lines which is a sign that the Banking Index is trying to stabilize.
Second, note what happened last week. Based on 8:30 pre-market data we are seeing, Geithner's announcement could have the Banking Index test 31 today if it has enough "meat" in it. Last week, the index made its first higher high of the year. Now ... if it can make a higher/low, then it will start a short term up trend ... and that would be good for the markets.
S&P 500, 10min., March 24,2009 A-B-C http://www.elliott-today.com/images/sptd-257_small.gif
S&P 500 trades above the rising 1x1 Fibo fanline and should support. The structure shown on the chart is an a-b-c expanded
flat correction. Milieu in der Krise
Im Puff herrscht tote Hose
Die Krise macht sich auch in Bordellen bemerkbar: Im Puff herrscht tote Hose.
Doch das Milieu gibt nicht auf. Discount-Bordelle, Wellness-Tempel und Sexpartys
für jedermann sollen in die Zukunft führen.
Stern.de, March 22,2009US-Verbraucherpreise
Deflationsängste werden kleiner
Boerse-online.de, March 21,2009 S&P 500, 10min., March 23,2009 "Obama’s 22% Stock Rally Recovery
From Bear Market"
Bloomberg.com, March 24,2009
http://www.elliott-today.com/images/sptd-256_small.gif
Market Dispatches 3/10/2009
Dow surges 379 in year's biggest rally
Financial stocks set off a huge snap-back rally after Citigroup says it has
been profitable so far this year. The text above (Market Dispatches, 3/10/2009) related "the Dow's biggest rally in year's" to Citigroup's
announcement at that time. Yesterday's 'blast off ' occurred because of the "Toxic-Asset Plan" released from the government. Socionomics explains: "The standard presumption is that the state of the economy is a key determinant of the stock market’s trends. All day long on financial elevision and year after year in financial print media, investors debate the state of the economy for clues to the future course of the stock market. If this presumed causal relationship actually existed, then there would be some evidence that the economy leads the stock market. On the contrary, for decades, the Commerce Department of the federal government has identified the stock market as a leading indicator of the economy, which
is indeed the case." (Socionomics: Economy>>>) Wave iv of Minute wave (c) ended a hairsbreath beneath Minuette wave iii and completed an a-b-c zigzag. The market opened strongly to the upside and is either in wave (iii) or wave (v). Statt Investitionen
Unternehmen horten Bargeld
Firmen nehmen Milliarden mit Anleihen auf - und legen ihr Kapital auf die hohe Kante.
Volkswirte sehen das skeptisch. FTD de. , March 21,2009
Firmen nehmen Milliarden mit Anleihen auf - und legen ihr Kapital auf die hohe Kante.
Volkswirte sehen das skeptisch. FTD de. , March 21,2009
ThyssenKrupp will über 3000 Jobs streichen
Die neue Führungsstruktur folgt alten Krupp-Traditionen:
Das Controlling gewinnt an Einfluss. FTD de. , March 21, 2009
Die neue Führungsstruktur folgt alten Krupp-Traditionen:
Das Controlling gewinnt an Einfluss. FTD de. , March 21, 2009
U.S. Mortgage Rates May Fall to Lowest Since
World War II on Fed Purchases
San Francisco Area Home Prices Dip Below
$300,000 for First Time Since '99
Lost Bonuses Signal Biggest Drop in Manhattan
Apartment Prices Since 1980 The socionomic hypothesis explains the data. Changes in the stock market
immediately reflect the changes in endogenous social mood. As social mood becomes increasingly positive, productive activity increases; as social mood becomes increasingly negative, productive activity decreases. These results show up in lagging economic statistics as expansions and recessions. The standard presumption has no explanation for the relative timing of these two phenomena.
(The Wave Principle of Human Social Behavior, 1999 by Robert R. Prechter) Read moreWeekly Update (data through March 20,2009) NASDAQ Composite Index
© ELLIOTT today, March 20,2009 http://www.elliott-today.com/images/sptd-252_small.gif
Chart 1 ...and here is a reprint from the Special Report of October 13, 2007,
seventeen(!!) days before the top ! Special Report NASDAQ Composite Index
October 13,2007
The chart of the NASDAQ Composite Index displays the advance from October 2002 to October 2007. In time,
this is the same distance nearly to the day as the advance in the Dow Jones Industrial Average from August 1982
to August 1987. We all know what happended in October of that year! Crash they called it at the time, but it was
the deepest fourth wave correction in the history of the market.
Starting October 7,2002 at 1113,36 Minor wave 1 traveled +408 points. 1.618 times 408 gives 660.14 and when
added to tue top of wave 1 at 1521.44 the result is 2181.58, only 5.98 points from the high of December 30,2004,
which was 2187.57. Fibonacci at its best ! The clear five-wave advance from the low of 1113 produced a classic Elliott
impulse, i.e., Intermediate wave (a) of Primary wave . (It is possible, that an even higher degree of Cycle degree is
about to end then the five-wave impulse becomes Primary wave ).
Primary wave traced out a rare "running flat", a 3-3-5 construction, where wave C fails to travel its full distance,
falling short of the level at which wave A ended. Apparently in this case, the forces in the direction of the larger trend
are so powerful that the pattern becomes skewed in this way. At such times, the fundamental or emotional factors seem
to overriding normal wave development.
Many times before I said, the market always provides clues when it is about to change direction, and a thorough
knowledge of those clues is the goal of every successful market timer. If a turn is recognized, great. If a turn is
missed, then the next task is to determine whether the market's action in the new direction suggests a change in
the larger trend. Within the current list of clues in the wave structure, momentum indicators and sentiment measures
the NASDAQ Composite is about to top out NOW or has already. It's screaming SELL ! Although some may react
as if "wolf" has been cried once too often, multiple "sell" signals from reliable indicators are not an objective defensible
reason to ignore them. In fact, the opposite is true. Any market which has continued to rally while producing numerous
signs of topping behavior is most likely setting up for a big decline.
Why? The pattern in the NASDAQ Composite index recently traced out what looks like an expanding diagonal triangle for
wave 5 of (c) of . According to the textbook description the next move will be a big one, say -800 points at minimum !!
In percentage terms, that is a decline of -28%. Call it a CRASH ?! Please notice the nice Elliott parallel channel containing
waves (a)-(b) and (c). Please see the chart
Special Report NASDAQ Composite Index, © ELLIOTT today, October13 2007
Elliott Wave Analysis: Thanks to the Wave Principle, the most important message the chart of the NASDAQ Composite Index
is that the structure of the decline is missing a fifth wave. This decline, wave (5), is needed in order to
conclude five Intermediate-degree waves from October 2007, which, when complete, will comprise
Primary wave of Cycle wave c. Actually, the NASDAQ trades in wave c of an expanded flat
(see Elliott Wave Principle) or alternately, in wave c of a contracting triangle, which has to trace out
waves c, d and e to complete Intermediate wave (4). A final thrust out of thetriangle then will complete
the entire structure from October 2007. In contrast, the S&P andthe Dow may have already bottomed, but
we will be patient and act accordingly. Aside from EWP, the chart shows that the falling 1x1 Fibonacci fanline has not been penetrated to theupside , yet, signaling the market is in a weak position.
Too much optimism? Anleger erwarten Fortsetzung der Rally
Die Kurse klettern weiter - das glauben zumindest die Marktbeobachter,
die an den Aktien- und Rentenmärkten einen leichten Optimismus wahrnehmen.
FTD.de, March 21,2009 S&P 500, 10min., March 20,2009
http://www.elliott-today.com/images/sptd-253_small.gif
Chart 2 The slight drop below 780 at the opening (actually 779,28) gave a warning of what could happen: a clear three-wave advance in wave ii, a countertrend move in an ongoing declineand the following wave iii clearly violeted the 1x2 Fibo fanline producing a strong fall-down in prices. Wave iv retraced back to that line but prices entered wave v down. S&P 500, 10min., March 19,2009 In Wave Four?http://www.elliott-today.com/images/sptd-251_small.gif The market must stay above 780 to confirm the wave iv count for the
recent 'sideways' action. The recnet consolidation could be an internal fourth-wave correction suggesting one leg higher to follow in wave (v).
S&P 500 Posts Steepest Advance Since 1939: Technical Analysis
March 19 (Bloomberg) -- The Standard & Poor’s 500 Index’s 17 percent ascent from March 9 through yesterday exceeded any advance by the main benchmark for American equities over a seven-day period since 1939, an indication to technical analysts that the rally may stall. Bloomberg.com, March 19,2009
S&P 500, 10min., March 18,2009 Near Completionhttp://www.elliott-today.com/images/sptd-250_small.gif With the recent high the S&P 500 gained 20.5% off the low of 666, marked on March 6, 2009. Trading is above the rising 1x1 Fibo fanline so far and the Elliott wave count until late is right on track. The Elliott structure needs a final fifth wave for completion.
S&P 500, 10min., March 17,2009 On Trackhttp://www.elliott-today.com/images/sptd-249_small.gif The correction of Minute wave (iv) ended right in the area of the previous fourth wave of one lesser degree and the market turned up on a dime. A five-wave advance can be seen on the chart with prices trading well above the rising 1x1 Fibo fanline. S&P 500, 10min., March 16,2009 Five Waves Up
The man who can see into the future: Bernanke: recession could end in '09 WASHINGTON – America's recession "probably" will end this year if the government succeeds in bolstering the banking system, Federal Reserve Chairman Ben Bernanke said Sunday in a rare television interview. yahoo.com, March 16,2009http://www.elliott-today.com/images/sptd-248_small.gif A clear Elliott channel, five-waves up and the correction underway. Natural support provides the fourth wave of one lesser degree, which is the area of 740 (+/-) in the SPX.
When will bad bankers
go to jail? Wall Street lies in tatters, but we're still waiting for the prosecutions that might reassure investors that the system works. One key issue: Were risk-taking bankers criminals? Or just dumb? msn, March 12,2009
Please See Socionomics : Corporate Scandals >>>
Weekly Update (data through March 12,2009) S&P 500 Index (SPX)
© ELLIOTT today, March 13,2009
http://www.elliott-today.com/images/sptd-246.gifJust on March 6,2009, the day the markets hit a new low and "Stocks suffer their worst week since November" five-waves down of Intermediate degree completed Primary Wave . The "number of the beast" 666 marked the low in the S&P, a loss of -910 points or -57.74%.
Market Dispatches, 3/6/2009
Stocks suffer their worst week since November
A late-day rally can't undo the damage from earlier in the week. Unemployment hits a 25-year high. Apple slumps on a downgrade. Wells Fargo slashes its dividend. Elliott Wave Analysis
The daily chart of the S&P 500 Index dislplays the path of the index since its top of 1576 in October 2007. As can be clearly seen, each downwave divides into five smaller waves (degrees) and each upward wave divides into three smaller waves indicating the bear market is in full rage down. Despite the turmoil in the markets, the wave structure couldn't be better reflecting classic Elliott waves. In fact, emotional markets produce the clearest pattern but also travels within a parallel trend channel. Waves 2 and 4 sport alternation by taking different forms, (zigzag, double zigzag), thus satisfying the most common guideline of impulse wave formations. As you can see, the construction of Intermediate wave (1) displays five waves of one smaller degree, namely Minor waves 1, 2, 3, 4 and 5.
There is a great chance that Primary wave down is complete and the advance since early March 2009 marks the early stages of a more pronounced recovery since Primary wave is in progress.
(The 10minute chart of Friday's trading day is shown below)
Please also see Elliott Wave Structures>>>
S&P 500, 10min., March 13,2009Intermediate (a) http://www.elliott-today.com/images/sptd-247_small.gif The S&P itched a bit higher to complete Minuette wave iii (alternate: Minute wave (iii)) and the following correction formed a simple zigzag (with a very small wave c) thus satiesfying the rule of alternation. (Please see Wave Principle>>>). At the end of the trading day, the market climbed higher above the previous high of wave iii.
S&P 500, 10min., March 12,2009 Bottom Inhttp://www.elliott-today.com/images/sptd-245_small.gif
Primary Wave : On Tuesday, I speculated (also the Wave Principle told me) a bottom is near. We have talked a lot about divergences in the past week. We're going to take our "Crash Alert" flag down for a while. Finally, the Dow shows signs of life. We won't know for a few days, but we'll take a guess: the rally will continueMarket Dispatches 3/12/2009
Dow rises 240 as Madoff goes to jail The market has its best close in two weeks. GE's credit rating is cut, but S&P says the
outlook is stable. Bernard Madoff pleads guilty to 11 fraud charges. Retail stocks jump as February sales aren't as bad as expected. Unemployment claims are ugly.
Market Dispatches 3/10/2009
Dow surges 379 in year's biggest rally Financial stocks set off a huge snap-back rally after Citigroup says it has been profitableso far this year. Fed chief Bernanke says the government will not allow big banks to fail. Gold falls below $900. (please see Gold, March 3, 2009 below)
S&P 500, 10min., March 11,2009 http://www.elliott-today.com/images/sptd-244_small.gif The market popped up to 728,92 slightly exceeding the ML-1 and retraced back to
713,85 forming a pattern which could interpreted as a "Leading Diagonal Triangle Type 2"
(EWP, p.47). That is a variation on this pattern will be found in the A wave position of
zigzags and in the first wave position in "fives" in very rare cases. Thus, while type 1s,
which may be called ending diagonals, appear as wave 5 or C, type 2s, which may be
called leading diagonals, appear as wave 1 or A. S&P 500, 10min., March 10,2009 Bottom In? Yes Or No?http://www.elliott-today.com/images/sptd-243_small.gif Yesterday, I wrote, "To complete the pattern, a five-wave rally in wave c should be next."
That's exactly what happened: the biggest rally in 2009. EWI put this way, today:
"Exactly Who and What Did NOT Drive the Big Rally?" (Elliott Wave International), Mar 10,2009. A brief look at the 10minute chart of the S&P Index shows how the market surged above the
falling 1x2 Fibo fanline at the opening leaving a possible "runaway-gap". With the help of the
ML-1 one can see that prices probably stopped near the ML completing a much bigger
pattern than I foresaw. To identify the pattern please goto Elliott Wave Principle>>> S&P 500, 10min., March 9,2009 Upside Correctionhttp://www.elliott-today.com/images/sptd-242_small.gif The ML-2 of the chart of March 6, 2009 helped us pretty well to identify a possible target for the end of wave a. Monday's whipsaw-trading session traced out what looks like a double zigzag completing wave b. To complete
the pattern, a five-wave rally in wave c should be next.
Too Many Bulls... © ELLIOTT today, March 3,2009
Linear Extrapolation: "Predicting" the Present
Trend extrapolation is the crudest form of technical analysis, and it is employed by nearly all conventional analysts, though they rarely realize it. Mainstream social and economic forecasting has forever been a practice of extrapolating present and recent conditions and trends into the future. More specifically, apparent predictions are simply (1) descriptions of present conditions (2) multiplied by unconsciously calculated moving averages of the trends of those conditions. Obviously, in a changing world, this approach is doomed to fail. Because of this practice, both economists and futurists in general have always been notoriously optimistic at tops and pessimistic at bottoms, producing highly inaccurate forecasts of coming events. Now we know why. Because the forecasters have no reliable basis upon which actually to attempt a forecast, the prevailing social mood has full rein to affect the tone of their conclusions. The stronger the mood, the stronger their conviction, the more inventive their rationalizations, and the more extreme and confident their extrapolation. This means that the closer the social mood gets to the point of change, the greater will be conventional forecasters' convition that it will not change, and the further into the future will be their extrapolation. (The Wave Principle of Human Social Behavior, 1999, Robert R.Prechter)
Gold © ELLIOTT today, March 3,2009 http://www.elliott-today.com/images/sptd-235.gif
Chart: stockcharts.com
Elliott Wave Analysis of May 30, 2008:
On November 7,2007, ELLtoday presented a chart of Gold and said, the recent high of $830
is accompanied with a terrific 92% bulls reading but the market kept on going higher.
At the close of last Monday's session, only 4% of gold traders were bearish, which means
that the average long had a whopping 24 times the size of position as the average short (96/4).
At the same time, The Wall Street Journal instructs investors on "How toSurvive The New Gold Rush."
New? Gold has been rallying for 8 years (!). The 96% bullish extreme means that very few are left to
push gold higher. This sentiment fits perfectly with the wave structure, as prices are completing the
final subdivisions of a five-wave advance from August 1999. We're going out of Gold and quit our long
position on Monday, February 4, 2008, officially.
On January 31, 2008 , EWI published the numbers of bulls & bears
in the Gold market. Only 4% of gold traders were bearish enough to
think that gold was set for a decline, which means that the average
long had a whopping 24 times the size of position as the average
short (96/4). At the same time, The Wall Street Journal instructs investors
on "How to Survive 'The New Gold Rush'." New? Gold has been rallying
for 8 years. The 96% bullish extreme means that very few are left to push
gold higher. The WSJ also reports that "a worldwide scramble to pull
valuable commodities out of the ground is putting by gold and platinum
miners halted production. Bulls will cite the production slowdown to suggest
that these metals are in short supply, but what it really shows is the ferocious
effort to add to supply. This sentiment fits perfectly whith the wave structure,
as prices are completing the final subdivisions of a five-wave advance from
August 1999. EWFF, January 31, 2008 And now, at the end of February 2009?
"There really is no other place to go," says one prominent asset manager.
According to CNBC , the pros say gold will soon "Spike to $3000."
Actually, the Daily Sentiment Index rose to 95% gold bulls last Wednesday,
a level last seen several days prior to gold's March 2008 peak. Actually, I think Gold has topped out in a B-wave
signalling prices are set to break much lower.
DAX - Classic Elliott © ELLIOTT today, March 9 2009
Market Dispatches, 3/6/2009
Stocks suffer their worst week since November
A late-day rally can't undo the damage from earlier in the week. Unemployment hits a 25-year high. Apple slumps on a downgrade. Wells Fargo slashes its dividend.
S&P 500, 10min., March 6,2009
http://www.elliott-today.com/images/sptd-239.gif
How many times have you heard a financial news reporter tell you the market rose or fell because of some particular news item? Advances and declines are the result of processes, not events. The problem with news is that it is, well, news. That means either it's happening now or it already happened. Trading on news is a frustrating game, especially if the market doesn't move in the direction that the news might imply. But, what if you could anticipate what the market is likely to do, and, better still, be prepared ahead of time with alternative trading strategies? Wouldn't that be more useful to you than chasing headlines, along with everybody else? Another "Hero" on the verge of fall? On March 6, 2009, Bloomberg.com run a headline: "Obama Bear Market" Punishes Investors as Dow Jones Industrial Tumble 20%.
The Big Picture Classic Elliott Wave S&P 500 Index (SPX)
© ELLIOTT today, March 7,2009
http://www.elliott-today.com/images/sptd-240.gif
The chart above displays classic Elliott Wave formation, i.e., structures. In the 1930s, Ralph Nelson Elliott discovered that aggregate stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form, but not necessarily in time or amplitude. Elliott isolated and defined thirteen patterns, or “waves”, that recur in market price data. He named and illustrated the patterns. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns at the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle. The Wave Principle is a tool of unique value, the most striking characteristics of which are its generality and its accuracy. Its generality gives market perspective most of the time and its accuracy in identifying , and even anticipating, changes
in direction is at times almost unbelievable. In the excellent “Market Wizards: Interviews with Top Traders,” one famous investor summarized his success this way: “Listen to the market: It will tell you everything you need to know." What an excellent piece of advice. If you refuse to let things that are outside the market – like economic data – confuse you and focus instead on the market's internals, things become much clearer. How many times have you heard a financial news reporter tell you the market rose or fell because of some particular news item? Advances and declines are the result of processes, not events. The problem with news is that it is, well, news. That means either it's happening now or it already happened. Trading on news is a frustrating game, especially if the market doesn't move in the direction that the news might imply. But, what if you could anticipate what the market is likely to do, and, better still, be prepared ahead of time with alternative trading strategies? Our subscriptions combine the high-probability forecasting power of Elliott Wave Analysis along with key measures of market sentiment to help you trade effectively and manage your risk. Whether you subscribe to ourWeekly Update or SP500 TradingDESK (SPTD-07) you get our independent, unbiased analysis of what lies ahead.
and here the chart of Sept 30,2007 - two weeks before the top !!
http://www.elliott-today.com/images/sptd-241.gif
and here the Weekly Update of July 13, 2007: ELLIOTT today, July 13,2007 Weekly Update:
Special Report-S&P 500 Index Friday, July 13,2007 the S&P 500 Index finally reached the high of March 2000. It is interesting to observe that Intermediate wave (c) at 1555 equals the length of Intermediate wave (a). Based on this wave structure, the S&P 500 should have achieved its top. As you can see on the chart, Intermediate wave (b) traced out a contracting triangle ending at 1224. The entire structure since then formed a classic five-wave advance travelling within a parallel trendchannel. The red-dotted line marks the mid-channel though it is not a original Median line, according to Dr.Andrews, but it shows very clear, that the recent high touched that line exactly. A break of 1484 in the S&P will eliminate almost all remaining near-term bullish potential. It may be interesting that in real (gold) terms, both the S&P and the DJIA remain down by well more than half from their July 1999 peaks. With regard of the EW labeling shown on the chart, the Cycle wave B interpretation remains valid. As far as I know, my interpretation of a leading diagonal triangle for wave 1 or A is the only interpretation among various Elliott wave analysts. Too much company is what I don't like. Though it remains to be seen, if this interpretation proofs right. Despite the bullish alternate version, a much bigger correction even under that scenario is due, since Intermediate wave (4) will be in force, shaking market partcipants even higher up and down. (see chart>>>)
S&P 500, 10min., March 5,2009
http://www.elliott-today.com/images/sptd-238.gif
The market's recent low has now touched the falling 1x1
Fibo Fanline, shown yesterday. At the same time, the ROC
(Rate of Change) momentum indicator displays a positive
divergence on the 10min chart.The falling 1x1 Fibo Fanline
drawn from highpoint of January 2000 were slightly broken to
the downside just like at the end of the year 2008.
Market Dispatches 3/5/2009
Dow falls 281 to 12-year low
The S&P 500 falls to its lowest level since 1996. Citigroup briefly falls below $1, and potential downgrades slam other bank stocks. A big question: How bad will Friday's jobs report be?
Hey, Economists! Money and Interest Are Different Things
Mises Daily by Robert P. Murphy
There's an old joke where the first guy says, "What's the difference between drapes and toilet paper?" The second guy says, "I don't know, what?" Then the first guy responds, "You are not allowed in my house!"
After watching the "expert" economists debate our financial crisis during the past year, I realize that we can modify the joke. Today I would ask the econobloggers and op-ed writers, "What's the difference between monetary policy and interest rates?" If an economist answered, "I don't know, what?" then he is not allowed to advise the government. Any "expert" who confuses money and interest is eventually going to give horrible recommendations under certain conditions, as we'll see below.
Money and Interest
Are Different Things
Article >>> LLudwig von Mises Institut, visit the Mises Blog, http://blog.mises.org/blog/
S&P 500, 10min., March 4,2009
http://www.elliott-today.com/images/sptd-237.gif
The S&P 500 traced out a diagonal triangle (EWP, p.31) a terminal pattern signalling a
dramatic reversal ahead. That's just what happened. A rising wedge is bearish and is
usually followed by a sharp decline at least back to the level where the diagonal triangle
began. In this case, the market will at least drop to the level labeled wave b on the chart.
S&P 500, 10min., March 3,2009
http://www.elliott-today.com/images/sptd-236_small.gif
The decline into wave v of iii completed its five-wave structure
and prices advanced. Please note how the low prices came
near the lower parallel trend channel. Although, the advance
traced out a three-wave structure (wave iv in the chart) and
the market declined again.
Modern Portfolio Theory
Ages Badly The Death of Buy and Hold
Barron's , Feb 14,2009
Tautological Rationality
Perhaps the nth degree of dependence upon the rationality model has just been published in an article in the Financial Analysts Journal. It argues that buying because prices are rising is rational, so "rational behavior by individual investors can cause a market bubble," which is defined as "some self-reinforcing, self-perpetuating mechanism that prevents successive security prices from being random." This stance essentially defines nonrationality out of existence. If this theory is correct, then market crashes are rational, too, and so is selling when they occur. Would anyone like to take a affirmative side of that one? The fact is that buying only because prices have been rising is not rational because rising prices mean that the market is that much closer to a top. For the same reason, selling only because prices have been falling is not rational, either. In the next few days the media will try to rationalize the "surprising decline" around the world on February 27,2007.
Die Drei-Millionen-Marke wird geknackt
Ein Ende des Aufschwungs am Arbeitsmarkt ist nicht in Sicht. Im Gegenteil: Er wird mindestens bis 2009 anhalten, ist DIW-Chef Klaus Zimmermann überzeugt. Im stern.de-Interview sagt er voraus, dass die gute Konjunktur 2008 auch in der breiten Bevölkerung ankommen wird. Spiegel.de, Jan 3,2008
S&P 500, 10min., March 2,2009
http://www.elliott-today.com/images/sptd-234_small.gif
Yesterday's big slump eliminated the alternate scenario
presented last Saturday. Although the 1-year and 2-year chart both show
positive divergences according to several measures, i.e., RSI. As the chart
displays, an orderly decline in terms of Elliott Waves can be clearly seen signaling
the market is in latter stages of this tremendous decline.
Market Dispatches 3/2/2009
300-point loss drops Dow below 6,800 Continued fears about teetering global credit markets and a $62 billion loss from American International Group combine to batter stocks. Warren Buffett sees a mess of an economy in 2009. Americans are saving more -- and spending more
Stocks Hit '97 Level, Signaling Long Slump
The Dow Jones Industrial Average fell 299.64 points, or 4.24%, to drop below 7000 at 6763.29, the lowest close since April 25, 1997. WSJ, Mar 3,2009
Warren Buffett Loses His Way
by Mike Shedlock
Bloomberg is reporting Berkshire Profit Plunges 96% on Stock Market Bets.Warren Buffett's Berkshire Hathaway Inc. posted a fifth-straight profit drop, the longest streak of quarterly declines in at least 17 years, on losses from derivative bets tied to stock markets. safehaven.com, Mar 1, 2009
January 2009
February 2009
March 2009
Bank Stocks Lead Rally in Europe
European stocks traded higher, as bank shares rose. Germany's DAX climbed 3.1% and the U.K.'s FTSE gained 1.5%. WSJ, April 10, 2009
Buy ‘Cyclical’ Stocks
as Worst Is Past, Goldman Says Bloomberg, April 10, 2009 Bear Markets and the Lagging Indicator:
Employment Report
By Donna Heidkamp, April 6, 2009 , Fast Break
Since the monthly employment report is always released the first Friday of the month, it seemed fitting to take a closer look at the unemployment data. Non-farm payroll data, released by the Bureau of Labor Statistics on Friday, is a lagging indicator since companies tend to be slow to cut their workforce during recessions and equally slow to hire new workers during times of expansion. To be counted as unemployed, a person must be actively looking for a job or waiting to be recalled to a job if over the age of 16. The pool of people looking for a job also tends to expand as the economy and consumer confidence improve, causing the unemployment rate to further increase after a recession ends.
When we compare the most well-known bear stock markets over the past 100 years with the unemployment rates, it is quite clear that unemployment is a delayed economic indicator. The unemployment rates used in the example below come from the U.S. Bureau of Labor Statistics and www.recession.org.
Bear Markets:
1929-1932: Stock market fell 89.2% over 34.2 months (Dow Crash). Unemployment remained in double digits until 1941.
1973-1974: Stock market fell 48.2% over 20.7 months (Oil Crisis). Unemployment peaked in May 1975 at 9%.2000-2002: Stock market fell 49.1% over 30.5 months (Technology Bubble). Unemployment peaked in 2003 at 6.3%.2007-??: To date, the stock market has fallen 51.9% from the highs. Unemployment is still climbing at 8.1% as of the March 2009 unemployment report with only 21 months into the ongoing recession.
History Repeats...
January 24, 1930
“Trade recovery now complete President told. Business survey conference reports industry has progressed by own power. No Stimulants Needed! Progress in all lines by the early spring forecast.” – New York Herald Tribune.
March 8, 1930
“President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days.” – Washington Dispatch.
May 1, 1930
“While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States – that is, prosperity.” – President Hoover
June 29, 1930
“The worst is over without a doubt.” – James J. Davis, Secretary of Labor.
August 29, 1930
“American labor may now look to the future with confidence.” – James J. Davis, Secretary of Labor.
September 12, 1930
“We have hit bottom and are on the upswing.” – James J. Davis, Secretary of Labor.
October 16, 1930
“Looking to the future I see in the further acceleration of science continuous jobs for our workers. Science will cure unemployment.” – Charles M. Schwab.
October 20, 1930
“President Hoover today designated Robert W. Lamont, Secretary of Commerce, as chairman of the President’s special committee on unemployment.” – Washington dispatch.
October 21, 1930
“President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter.” – Washington Dispatch
November 1930
“I see no reason why 1931 should not be an extremely good year.” – Alfred P. Sloan, Jr., General Motors Co.
January 20, 1931
“The country is not in good condition.” – Calvin Coolidge.
June 9, 1931
“The depression has ended.” – Dr. Julius Klein, Assistant Secretary of Commerce.
August 12, 1931
“Henry Ford has shut down his Detroit automobile factories almost completely. At least 75,000 men have been thrown out of work.” – The Nation.
July 21, 1932
“I believe July 8, 1932 was the end of the great bear market.” – Dow Theorist, Robert Rhea.IWF sagt Deutschland drastischen Konjunktureinbruch voraus Spiegel de., April 11, 2009
Weekly Update © ELLIOTT today, April 10,2009 http://www.elliott-today.com/images/sptd-276.gifAsean-Gipfel wegen Protesten in Thailand abgebrochen.
Yahoo.com, April 11, 2009
Nato-Gegner stecken Häuser
und Hotel in Brand
The average conflict during the bear market will be far greater than it was during the bull market and will lead to periods of turmoil, not just in financial markets, but in society. Indeed, the trends now implied by long term market patterns have always produced dramatic social upheaval.
Elliott Wave Analysis The market exceeded the ML-1 as shown on the chart by a small margin. However, the falling 1x1 Fibo Fanline at the same time could mark a short term resistance level. The 10minute-chart shows the market touched already the 2x1 Fibo fanline and the wave count could be complete, i.e, five-waves up ! 830.00 is key - however a 38.2% retracement of the entire rally lies at 783.42. The personality of each wave in the Elliott sequence is an intregal part of the reflection of the mass psychology it embodies. The progression of mass emotions from pessismism to optimism and back again tends to follow a similar path each time around, producing similar circumstances at corresponding points in the wave structure. Second waves often retrace so much of wave one that most of the profits up to that time are eroded away by the time it ends. Second waves typically recreate the emotions present at the preceding major turn, so psychology in the wave rally should be extremely exuberant, reflecting certainty that the bull market has resumed. Be prepared to resist the relentless drumbeat of hopeful opinion that will accompany most of the first and second waves of the bear market. Their hallmarks will be that (1.) "there are too many bears..." and "Stocks are so cheap..." After the peak of wave , the buy-and-hold philosophy will begin its long process of melting away, just as the short term trading psychology of ten to fifthteen years ago ultimately did. Even during the first half of wave , many commentators will justify their bullish opinion on the grounds that the market has fallen so much, so it will be important to maintain perspective. For the majority, the "point of recognition" that the trend has changed for real will occur in a panic with the center of wave of C, essentially the
same position it occurred in the opposite direction on the way up. Ultimately, the deeper the bear market goes, the more news-oriented "reasons" people will find to become bearish on their investments.The waxing bewilderment that will have characterized the mindset of the bulls up to that point will change to concern. Hope will melt into fear, and fear will ultimately give way to panic. At 90% down, buying weakness will not be in fashion. The old arguments about bears
and bargains will eventually be thrown aside, right about the time both are actually true. At the bottom, there will be no discernible news-oriented reasons to own stocks, precisely because news is produced by the same psychology that moves markets. With that small bit of profound knowledge, you can spend all the time that most people are in panic calmly making plans to take advantage of the historic buying opportunity that awaits us at the upcoming bottom.
(At the Crest of the Tidal Wave, 1995, Robert R.Prechter)
Wirtschaftskrise
Obama verkündet erste Hoffnungsschimmer
In der Konjunkturkrise gibt es gute Nachrichten aus den USA: US-Präsident Barack Obama sieht erste Fortschritte, die ihn sicher sein lassen, dass es mit der Wirtschaft wieder aufwärts geht. Stern de., April 11, 2009BUSINESS APRIL 11, 2009,
Sales of Luxury Goods Seen Falling by 10% WSJ, April 12, 2009
April 7 - Financial Times (Deborah Brewster): "Art prices plunged during the first quarter of the year as cash-strapped collectors looked to unload works by postwar masters that had earlier boomed in price along with the stock market. The Mei Moses index... shows art prices fell 35% in the first quarter, having held up during earlier months of the financial crisis." safehaven.com, April 12, 2009
April 9 - Bloomberg (Oshrat Carmiel): "Home sales in the Hamptons, the New York oceanside resorts favored by financiers and celebrities, plunged 67% in the first quarter as Wall Street job cuts and bank failures stifled demand for second homes."
April 7 - Bloomberg (David M. Levitt): "Manhattan office rents fell 6% in the first quarter as financial companies cut jobs and relinquished space amid the U.S. recession. Rents dropped to $65.01 a square foot from $69.44..." safehaven.com, April 12, 2009
New York Autoshow - SUVs are back
FTD de., April 11,2009Weekly Update © ELLIOTT today, April 10,2009 Thailand announces state of emergency in capital Yahoo.com, April 12, 2009
NASDAQ Composite Index
http://www.elliott-today.com/images/sptd-277_small.gif Friday's close above the falling 1x1 Fibo fanline marked the 7th month when prices turned back to that line and slightly above.Measured from the high of January 6, 2009, Intermediate wave (5) dropped -24%, just close to an exact wave length relationship with Intermediate wave (1), which dropped -24.6%, producing wave length equality. The red line shows the possible path of Primary wave for the next weeks or so. A reasonable target for that wave may be the area of a 50% retracement of the preceding decline and that is 2.063 (+/-). The market now trades near the high-point of Intermediate wave (4) and it is quite possible that the rally continues to the 1,800 level, before a bigger correction sets in.
Weekly Update © ELLIOTT today, April 4,2009 "Elliott was the first person to relate stock cycles to the unthinking collective action of herds of investors. This revolutionary idea is still unaccepted today by virtually all of our academic, corporate and government leaders. Every day our print and TV media attribute changes in stock prices to a real or imagined external event in our society.These conclusions are wrong, completely wrong. Elliott and experts, who followed him, have proven conclusively that mass changes in social mood are the cause of stock market cycles. External news events, even very major ones, have only a temporary effect on the stock market, sometime lasting only a few hours or a day."
All the Same Structures - All the Same News..? News doesn't drive the stock market. Psychology does. The Elliott Wave Principle is a detailed description of how markets behave. The description reveals that mass investor psychology swings frompessimism to optimism and back in a natural sequence, creating specific patterns in price movement. Each pattern has implications regardingthe position of the market within its overall progression, past, present and future. The purpose of this publication and its associated services isto outline the progress of markets in terms of the Elliott Wave Principle and to educate interested parties in the successful application of the Elliott Wave Principle. This is probably the most comprehensive trading education on how to project high probability time & price targets based on Elliott Wave pattern structure.
S&P 500, 10min., March 31,2009 5 Waves Uphttp://www.elliott-today.com/images/sptd-265_small.gif Dispite the bad news, the market rallied and traced out a five-wave elliott structure which ended slightly below an exact 61.8 Fibonacci retracement of the preceeding
decline.
Obama Said to Find Bankruptcy Likely for GM, Chrysler Bloomberg.com, April 1, 2009 Manufacturing Probably Shrank as U.S. Slump Hit 70-Year Record April 1 (Bloomberg) -- U.S. manufacturing probably shrank further in March, a report may show today as the recession enters its 17th month and becomes the longest since the 1930s.Bloomberg.com, April 1, 2009
Home Prices in 20 U.S. Cities Fell by a Record 19% March 31 (Bloomberg) -- Home prices in 20 U.S. cities fell 19 percent in January from a year earlier, the fastest drop on record, as demand plummeted and foreclosures rose.Bloomberg.com, April 1, 2009
The Elliott Wave PrincipleIn the 1930s, Ralph Nelson Elliott, a corporate accountant by profession, studied price movements in the financial markets and observed that certain patterns repeat themselves. He offered proof of his discovery by making astonishingly accurate stock market forecasts. What appears random and unrelated, Elliott said, will actually trace out a recognizable pattern once you learn what to look for. Elliott called his discovery "The Elliott Wave Principle," and its implications were huge. He had identified the common link that drives the trends in human affairs, from financial markets to fashion, from politics to popular culture.
Robert Prechter, Jr., president of Elliott Wave International, resurrected the Wave Principle from near obscurity in 1976 when he discovered the complete body of R.N. Elliott's work in the New York Library. Robert Prechter, Jr. and A.J. Frost published Elliott Wave Principle in 1978. The book received enthusiastic reviews and became a Wall Street bestseller. In Elliott Wave Principle, Prechter and Frost's forecast called for a roaring bull market in the 1980s, to be followed by a record bear market. Needless to say, knowledge of the Wave Principle among private and professional investors grew dramatically in the 1980s.
When investors and traders first discover the Elliott Wave Principle, there are several reactions:
Disbelief – that markets are patterned and largely predictable by technical analysis aloneJoyous “irrational exuberance” – at having found a “crystal ball” to foretell the futureAnd finally the correct, and useful response – “Wow, here is a valuable new tool I should learn to use.”Just like any system or structure found in nature, the closer you look at wave patterns, the more structured complexity you see. It is structured, because nature’s patterns build on themselves, creating similar forms at progressively larger sizes. You can see these fractal patterns in botany, geography, physiology, and the things humans create, like roads, residential subdivisions… and – as recent discoveries have confirmed – in market prices. Natural systems, including Elliott wave patterns in market charts, “grow” through time, and their forms are defined by interruptions to that growth.Here's what is meant by that. When your hands formed in the womb, they first looked like round paddles growing equally in all directions. Then, in the places between your fingers, cells ceased growing or died, and growth was directed to the five digits. This structured progress and regress is essential to all forms of growth. That this “punctuated growth” appears in market data is only natural – as Robert Prechter, Jr., the world's foremost Elliott wave expert and president of Elliott Wave International, says, “Everything that thrives must have setbacks.”
http://www.elliottwave.com/club/members/tutorial/images/fig_2.gif
The first step in Elliott wave analysis is identifying patterns in market prices. At their core, wave patterns are simple; there are only two of them: “impulse waves,” and “corrective waves.”Impulse waves are composed of five sub-waves and move in the same direction as the trend of the next larger size (labeled as 1, 2, 3, 4, 5). Impulse waves are called so because they powerfully impel the market.A corrective wave follows, composed of three sub-waves, and it moves against the trend of the next larger size (labeled as a, b, c). Corrective waves accomplish only a partial retracement, or "correction," of the progress achieved by any preceding impulse wave.
As the figure to the right shows, one complete Elliott wave consists of eight waves and two phases: five-wave impulse phase, whose sub-waves are denoted by numbers, and the three-wave corrective phase, whose sub-waves are denoted by letters.
What R.N. Elliott set out to describe using the Elliott Wave Principle was how the market actually behaves. There are a number of specific variations on the underlying theme, which Elliott meticulously described and illustrated. He also noted the important fact that each pattern has identifiable requirements as well as tendencies. From these observations, he was able to formulate numerous rules and guidelines for proper wave identification. A thorough knowledge of such details is necessary to understand what the markets can do, and at least as important, what it does not do.
You have only just begun to learn the power and complexity of the Elliott Wave Principle. So, don't let your Elliott wave education end here. Join Elliott Wave International's free Club EWI and access the Basic Tutorial: 10 lessons on The Elliott Wave Principle and learn how to use this valuable tool in your own trading and investing.
Realtime Elliott Wave Structures
(c) ELLIOTT today, December 2005
R.N.Elliott’s Discovery
In the 1930s, Ralph Nelson Elliott discovered that aggregate stock market prices trend and reverse in
recognizable patterns. The patterns he discerned are repetitive in form, but not necessarily in time or
amplitude. Elliott isolated and defined thirteen patterns, or “waves”, that recur in market price data.
He named and illustrated the patterns. He then described how they link together to form larger versions
of themselves, how they in turn link to form the same patterns at the next larger size, and so on,
producing a structured progression. He called this phenomenon The Wave Principle.
Many areas of mass human activity display the Wave Principle, but it is most popularly applied to stock
market averages. There is voluminous, meticulously tabulated data on fincancial markets because people
deem them important. Actually, the stock market is far more significant to the human condition than it
appears to casual observers and even to those
who make their living by it. The level of aggregate stock
prices is a direct and immediate measure of the popular valuation of man’s total productive capability.
That this valuation has a form is a fact of profound implications that should ultimately revolutionize the
social sciences.
While Elliott progressed to the recognition of patterns and their linkage by a painstaking process of
cataloging the minute details of price movement, we will forego such exercises and proceed directly
to a description of the overall pattern.
The Essential Design
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Source: Elliottwave International
1) The Five-Wave Pattern
In markets, progress ultimately takes the form of five waves of a specific structure. Waves (1), (3) and (5) actually effect the directional movement. Waves (2) and (4) are countertrend interruptions. The two interruptions are apparently a requisite for overall directional movement to occur. Elliott noted three consistent aspects of the five wave form. They are: Wave two never moves beyond the start of wave one, wave three is never the shortest wave, and wave four never enters the price territory of wave one. The stock market is always somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.
DJIA, August 1998 - January 2000
The "Five Wave Structure"
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Figure 1
In his 1938 book, The Wave Principle, and again in a series of articles published in 1939 by Financial World magazine, Elliott pointed out that the stock market unfolded according to a basic rhythm or pattern of five
waves up and three waves down to form a complete cycle of eight waves. The three waves down are referred
to as a "correction" of a preceding five waves up. The basic concept of five waves in the direction of the main trend following by three corrective waves is shown in real-time on the chart of the DJIA from August 1998 to January 2000.
The impulse subdivides into five waves, which may be labeled 1,2,3,4 and 5.
Late November 1986 right in time with the so called Boesky-affaire ["Wall Street" - Michael Douglas & Charly Sheen] the DJIA finished wave e of a triangle in Intermediate wave (4). At the high of July 1986 the DJIA already gained 1.618 times the length of wave (1) and at that time we expected wave (5) to unfold to new record highs to complete the primary degree five wave structure from the low of 577 points back in 1974.
Figure 2 shows the detail of 5 Minor waves to complete Intermediate wave (5). As you can see, not only does
the wave subdivide i,ii,iii,iv and v , but it also travels within a parallel trend channel. Waves 2 and 4 sport alternation by taking different forms (zigzag and triangle), thus satisfying the most guideline of impulse wave formation.
Here is the point of discussion. The herding impulse, rather than the rational neocortex, drives the decisions
of most financial market participants. Both the herding impulse and its attendant emotions are hard-wired nearly identically into people's unconscious minds. Whatever certain individuals may decide rationally, such decisions are diverse, and the herding impulseis ubiquitous. Thus, in the aggregate, individual rational decisions tend to cancel out, leaving herding impulses to determine the market's overall trend.
(EWT, March 2001). DJIA September 1986 - August 1987
Elliott Wave Princple>>>
The Five-Wave Structure
In The S&P500 10min ChartS&P 500 Index (SPX) 7/13/04-7/19/2004
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Figure 2
A clear five-wave structure of small degree from the high of wave IV can be seen on the chart. Wave 3 is not the shortest wave and wave 4 did not move beyond the end of wave 1. On a smaller degree, waves i,iii and v as labeled on the chart, each subdivide into five waves. Waves ii and iv each subdivide into a corrective pattern. The guideline of alternation touches almost every aspect of The Wave Principle and is a useful one to keep in mind when analyzing wave formations and assessing future possibilities. the guideline tells us to expect alternating patterns in virtually all wave movements. If, for example corrective wave two cuts sharply against the trend, expect wave four to be a sideways correction, and vice versa. Figure 1 shows the most characteristic breakdowns of impulse waves, both up and down, as suggested by the guideline of alternation. Waves i and iii formed almost exactly the same pattern (!), a 5-3-5 zigzag, therefore, the count violates the guideline of alternation and should be considered wrong. Figure 2 shows an alternate count. Elliott Wave Princple>>> The Five-Wave Structure
In The S&P500 10min ChartS&P 500 Index (SPX) 7/13/04-7/19/2004
Alternate Count
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Figure 3
Elliott used parallel trend channels to assist in determining normal wave targets and
to provide clues to possible development of trends. In The Wave Principle, he asserted
that as a wave progresses , "it is necessary that the movement be channeled between
two parallel lines." He regarded trend channeling as an important tool in establishing
wave completion targets and in the segregation of individual waves.
Here I labeled the second wave, wave ii as a more complex correction, a double three
a-b-c x a-b-c. Note, the first a-b-c as an "expanded flat", a 3-3-5 structure and the
second a-b-c as a "running flat." This is a rare variation on the 3-3-5 flat , which
we call a "running correction," Wave b terminates well beyond the beginning of wave
a as in an expanded flat, but wave c fails to travel its full distance, falling short of
the level at which wave a ended. Elliott Wave Princple>>> S&P500 Chart,10min., 7/23/04 - 7/29/04
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Figure 4
From the wave iv high at 1105 the market declined to below 1080 tracing out another
five-wave structure. On 7/26/04 the market retraced sharp and formed a clear cut
five-wave structure in the opposite direction. This first wave up was labeled as wave a
of a possible larger a-b-c. On 7/28 the market fell sharply and the steep decline looked
impulsive. Notice that while impulse waves have a total count of 5,9,13 or 17 waves, and
so on, corrective waves have a count of 3,7, or 11 waves , and so on. In this case, the
S&P traced out 7 waves down. Therefore the labeling is correct. Another helpful tool in
this case was the fact, that prices hit the lower channel line of the midline (yellow dotted)
exactly to the minute.From of the low of 7/28/05 another sharp advance started tracing out three waves.
The arrow at the top of the chart points to the previous fourth wave, a natural stopping
point. Although wave iii has not yet reached wave iv, wave on the other hand, did. From
here the market declined sharply in a five-wave affair, i.e., wave c of an expanded flat
(3-3-5). Elliott Wave Princple>>> S&P 500 Daily Chart6/7/2004-8/2/2004
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Figure 5
Here is the daily chart from June 7 to August 2,2004. The S&P500 reached 1108.60 and
completed a three-wave structure from the low of 1078.78. The high of 1108.60 should
be labeled wave b of the second a-b-c of a double zigzag correction. Nevertheless, the
sharpest decline followed and the S&P500 lost almost 40 points in four trading days.
On August 13, 2004 the S&P 500 Index bottomed at 1060 and completed a five-month
corrective pattern. Elliott Wave Princple>>>
2) Special's: Expanding Triangles
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Figure 6
There are several real life examples of triangles in the charts of this website. As you
will notice, most of the subwaves in a triangle are zigzags, but sometimes one of the
subwaves (usually wave c) is more complex than the others, and can take the shape
of a regular or expanded flat. In rare cases, triangles will protract into nine waves, so
that one of the subwaves (usually wave e) itself is a triangle. Thus, triangles, like
zigzags, occasionally display a development which is analogous to an extension.
One example occurred in the SPX 7/12/04 to 7/16/04 on a 10minute chart.
On July 13,2004 the S&P500 formed a small degree contracting triangle for wave b of b.
On July 15,2004, the S&P500 formed another small degree contracting triangle for
wave eof a higher degree expanding triangle. Elliott Wave Princple>>> 3) Wedges Expanded Wedge
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Figure 7
R.N.Elliott observed a pattern in the market that he named a "diagonal triangle."
Figure ..shows a classic diagonal triangle, a 3-3-3-3-3 pattern within converging lines
that slope in the same general direction (up in a bull market, down in a bear), unlike
the converging lines of a corrective-wave triangle, which slope in opposite directions.
This pattern always appears as the final wave in an impulsive or corrective pattern;
it is usually wave five, but sometimes wave C. Knowledge of the diagonal triangle has
been indispensable to several of the most dramatic calls - to the day or hour.
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Figure 8
Contracting triangle wave b, leading diagonal triangle wave 1 of an expanding wedge (wave c).
4) Diagonal TrianglesEnding DT, Leading DTDiagonal Triangle Wave C
(Ending DT)
DJIA, 15min., April12,2002
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Figure 9
Diagonal triangle. Ending Pattern. A "diagonal triangle" is a special type of wave which occurs primarily in the fifth wave position at times when the preceding move has gone "too far too fast", as Eliott put it. A very small percentage of diagonal triangles occur in the C wave position, usually as the last C wave in a double or triple three. In either case, they are phenomena which are found at the termination points of larger patterns, indicating exhaustion of the larger movement. (EWP, p.31). Elliott Wave Princple>>> Leading Diagonal Triangle, Type 2
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Figure 10
Diagonal Triangle Type 2. When diagonal triangles occur in the fifth or C wave
position, they take the 3-3-3-3-3 shape that Elliott described. However, it
has recently come to light that a variation on this pattern will be found in the
A wave position of zigzags and in the first wave position in "fives" in very rare
cases. The characteristic overlapping of waves one and four and the convergence
of boundary lines into a wedge shape remain as in the standard diagonal
triangle. However, the subdivisions are different, tracing out a 5-3-5-3-5
pattern. (EWP, p.47) Elliott Wave Princple>>>A leading diagonal triangle (Type 2) can be seen on the chart of the DJIA.
The structure of this formation fit the spirit of the Wave Principle in that the
five-wave subdivisions in the direction of the larger trend communicate a
"continuation" message as opposed to the "termination" implication of a
three-wave subdivisions in the standard diagonal triangle.
5) The Fourth Of The ThirdJuly 2002, Elliott Wave International published an article to subscribers, entitled
"The Fourth Wave of the Third Wave" and pointed out, "whithin most five-wave
declines, there is one point that repeatedly provides , in the ensuing upward
correction, both a magnet for rising prices and a ceiling of resistance for further
advance. That point is the (usually small) fourth-wave rally within the third wave
down. The level of the "fourth of the third" wave is a reliable target for a rally
when wave four peaks lower than wave four of three and when the third wave is
fairly long relative to the first wave." This is actually the most common development, so the target is often applicable.
this target is less often valid when wave five is extended , in which case the
ensuing rally generally tops between the peak levels of wave two of five and wave
four. This target is almost never valid when the first wave is extended because, by the
rules of wave construction, wave three is then shorter than wave one , and wave
five is even shorter than wave three. In these cases, the ensuiung rally typically
carries to around the peak of the preceding wave two or even wave four of one.
This retracement is not common to reactions in bull markets. It seems to come into
play after a short fifth wave. Normally, though, the area of the preceding fourth
wave is the most common target for bull market corrections. (EWT, 02/07).
S&P500 Index (SPX), 10min., 10/04-10/09/2002
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Figure 11
As can be seen on the chart (figure 7) wave c of 4 of the expanded flat retraced back
to the area of the "fourth wave of one lesser degree", as outlined in EWP. Even more
important, waves a and (iv)on October 4 and october 7, both retraced back to the
"fourth of the third." Readers will note, that wave a of the expanded flat correction
from October 8 to October 9, 2002 "stretched" up and could be misleaded as a "five".
S&P 500 Index, (SPX), 60min., 03/16-04/12/2005
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Figure 12
The 60minute chart of the S&P 500 Index as shown in figure 10 displays a similar
picture as in figure 9. This time around the S&P 500 Index formed a 3-3-5 flat
correction after touching a low on March 29,2005. Again, the upward correction
stopped almost exactly at the "fourth of the third", this time at the end of wave
e of a rising wedge, which ended on March 22,2005.
It is interesting to observe, that on March 22 wave e of iv ended with a wedge shape
formation (diagonal triangle) and about the same level on April 8 ended a DT in wave v
of (c) of 2. The entire structure from the low of March 29 to April 8 counts as a flat.
Depth Of Corrective Waves
March Crude Oil, February 12,2005
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Figure 13
No market approach other than Elliott gives as satisfactory an answer to the question,
"How far down can a bear market be expected to go?" The answer to this question alone
is sufficient importance to entitle Elliott to a special place in market analysis, as only the
Wave Principle can tell the investor what reasonable to expect. In November 2004 Crude Oil
finished a five-wave structure, as wave (v) of 5 reached exactly the upper parallel of a
classic Elliott trend channel. From that top the market traced out a clear three-wave
structure labeled (a)-(b)-(c) which in Elliott terms is named a zigzag (5-3-5).
As you can see on the chart wave (c) ended right in the area of the previous fourth wave
of one lesser degree (see arrow). Indeed the market started an advance to about $50.00.
I may add, that retracement ended short of a 0.618 Fibonacci retracement, too.
6) The Fibonacci 0.618 RetracementDJIA, 10min., 09/16/04-09/22/04
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Figure 14
A classic 0.618 Fibonacci retracement. The Mid-Line technique did a pretty good job to identify possible targets for a countertrend-rally. The intersection of the Fibonacci 0.618 retracement together with the ML (dotted line) gave strong indication that the market has run its course. (10.270)
DJIA, 10min., 11/17-11/17/2004
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Figure 15The chart displays four retracements as they occured live in the DJIA:
0.382, 0.50, 0.618 and 0.786.
SPX, 10min., 11/23/2004
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Figure 16
Starting with a small-degree five-wave decline (i,ii,iii,iv and v) the ensuiung correction
traced out a three-wave structure. Wave b of the three-wave structure traced out a
contracting triangle.Since triangles as a general rule occur only in positions prior to the
final movement in the direction of the larger trend, i.e., as wave four or B, the next move
of importance is considered down. From 1185 to 1168 the S&P 500 lost -17 points and
again formed a "five-wave structure" down. The following correction again traced out
what looks like a "three", an a-b-c x a-b-c double zigzag correction. Note the declining
momentum as indicated by the RSI (bottom blue line) as the second a-b-c progresses.
Again, the market stopped shy of a 0.618 Fibonacci retracement of the preceding decline.
Example Of A 0.885 Retracement
S&P 500 Index (SPX)
February 2000-December 2000
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Figure 17
The Top in the S&P 500 Index (SPX) on March 24,2000. In a relatively short time
the index delined -16% (1553-1339). Again, the form gave an early warning of
more to come to the downside. A rising wedge is considered a very bearish pattern.
(1339-1530).
7) Time & Price
(c) ELLIOTT today, March 12,2000
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Figure 18Time & Price displays the Fibonacci ratio.
DJIA, September 1986-August 1987
Elliott Channel, Five Wave Structure, Triangle, Fibonacci & Time
http://www.elliott-today.com/images/ewstru16_small.gif
Figure 19
The famous crash of October 1987 occurred like textbook Elliott. On August 25,1987 a five-wave structure of Intermediate degree from November 1986 completed a larger degree Primary degree from 1980. The following "crash" corrected 50% of the distance 729 to 2733*. (*2733 is the hourly high on August 25,1987). TimeZone did a pretty good job to nail the top in time, because a web of Fibonacci time relationships came together on August 25,1987. From an Elliott point of view, the market reached the upper channel line of a classic Elliott trend channel and it was time for a reversal.
The Famous 61.8% Fibonacci
Retracement In Nasdaq of 2000(c) ELLIOTT today, August 2000
http://www.elliott-today.com/images/ewstru17_small.gif Figure 20Nasdaq Composite: A classic 61.8 % Fibonacci Retracement:5039 - 3042 = -1997. 1997 x 0.618 = 1234.14
3042 +1234.14 = 4276.14 (+/-2.14)More examples of 0.618 Fibonacci retracements in the markets>>> http://www.elliott-today.com/images/ewstru21.gif Chart: futuresource.com Figure 21December DAX 2002, 60min.: Here we have a triangle in the 4th wave position (left on the chart), a five-wave advance and a five-wave decline. Next, there is a 0.618 Fibonacci retracement of the preceding decline together with a three-wave structure. The following decline was sharp, (wave iii) as it should be. The following "sideways" movement traced out a clear contracting triangle (in Elliott terms) and retraced 0.382 of the preceding decline. Since triangles precede the final wave in a five-wave sequence, the five-wave decline to 3040 marked the end of the movement from 3480, at least temporarily and the ensuing correction should terminate in the area of the 4th wave of one lesser degree: and it did so in textbook fashion. In the 1930s , Ralph Nelson Elliott discovered that aggregate stock market prices trend and reverse in recogniziable patterns. That patterns he discerned are repetitive in form, but not necessarily in time or amplitude. Elliott isolated and defined thirteen pattern, or “waves,” that recur in market price data.He named and illustrated the patterns.
Describing in What Ways Waves Are Identical
and in What Ways They Are Variable The concept of a robust fractal is difficult to depict visually because a single illustration cannot convey both
those aspects of an Elliott wave that are invariant and those that are variable, i.e., what its manifestations
have in common and what they need not. We can draw the essence of an Elliott wave but not state the precise
path that any manifestation of it will actually take. Elliott waves in reality always conform to a few simple rules
of patterning, but vary considerably within that format. Elliott described five elementary patterns in the stock market,
which he called impulse, diagonal triangle, zigzag, flat and triangle. The first two occur in motive mode (i.e. when
prices are moving in the direction of the trend of one larger degree, effecting the larger wave’s progress), while the
latter three occur in corrective mode (i.e. when prices are moving opposite the direction of the trend of one
larger degree, punctuating its progress). In corrections, sometimes two of the patterns will occur side by side,
interrupted by an intervening zigzag, as noted under the heading, “Double Three.” Each of the five elementary patterns has its own description as well as a short catalog of variations that are similarly
delineated by differences in form . For instance, sometimes both boundary lines of a triangle slope toward each other ,
and sometimes either the top or bottom line is horizontal. As another example, somtetimes wave B of a flat ends
at the level of the start of wave A , and sometimes it ends beyond it. Elliott attached
a name to each of these differences in form so that with his terms, we know immediately what form and variation we
are talking about. (The Wave Principle Of Human Social Behavior, 1999, Robert R. Prechter.) If Elliott was anything,
he was menticulous. His description of waves, their position within larger waves, and their relative frequency of
occurrence have stood the test of sixty years’ intensive application by some very dedicated practitioners,
with only minor modifications.
(The Wave Principle of Human Social Behavior and the New Science of Socionomics, Robert R.Prechter, 1999. S.57-60.)"According to the rules and guidelines of the Wave Principle, the most important is wave pattern. The biggest signal
that the bear market is underway was the five wave decline in the S&P 500 and the NASDAQ Index from March 2000
to September 2001. Those patterns are unmistakable. They say in no uncertain terms that the major trend is down.
The internal wave structure supports the outlook for an ending diagonal triangle for wave C. EWP, p.31:
“Diagonal triangle take wedge shape within two converging lines, with each subwave, including the impulse waves,
subdividing into a ‘three’. A rising wedge is bearish and is usually followed by a sharp decline retracing at least back
to the level where the diagonal triangle began.”
http://www.elliott-today.com/images/ewstru23.gif
Source: Elliottwave International
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S&P 500 ChartMap>>>
Elliott Fractals>>>
The Elliott Wave Principle Key To Stock Market Profits
by Frost & Prechter
(Expanded Edition1990)
Basic Tenets of the Wave Principle
This chapter provides a succinct overview of the Wave Principle so that those new to the concept can get the idea as quickly as possible. That way, we can move on to address the validity of the concept of the Wave Principle and then discuss its implications and application. Full details are available in Elliott Wave Principle (1978/1998). This chapter is necessarily dry as a bone, but I promise that the steam will rise as we move along.
R.N.Elliott’s Discovery
In the 1930s, Ralph Nelson Elliott discovered that aggregate stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form, but not necessarily in time or amplitude. Elliott isolated and defined thirteen patterns, or “waves”, that recur in market price data. He named and illustrated the patterns. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns at the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle.
Many areas of mass human activity display the Wave Principle, but it is most popularly applied to stock market averages. There is voluminous, meticulously tabulated data on fincancial markets because people deem them important. Actually, the stock market is far more significant to the human condition than it appears to casual observers and even to those
who make their living by it. The level of aggregate stock prices is a direct and immediate measure of the popular valuation of man’s total productive capability. That this valuation has a form is a fact of profound implications that should ultimately revolutionize the social sciences.
While Elliott progressed to the recognition of patterns and their linkage by a painstaking process of cataloging the minute details of price movement, we will forego such exercises and proceed directly to a description of the overall pattern.
The Five-Wave Pattern
In markets, progress ultimately takes the form of five waves of a specific structure. Waves (1), (3) and (5) actually effect the directional movement. Waves (2) and (4) are countertrend interruptions. The two interruptions are apparently a requisite for overall directional movement to occur. Elliott noted three consistent aspects of the five wave form. They are: Wave two never moves beyond the start of wave one, wave three is never the shortest wave, and wave four never enters the price territory of wave one. The stock market is always somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it.
Component Structures
Figure 1 shows the first two waves in greater detail. Notice the difference in their subdivisions, which reflect the two
modes of wave development: motive and corrective. The two modes are fundamentally different in both their roles and construction.
A motive wave (also called a “five”) has a five-wave structure. Its subwaves are denoted by numbers (in this case 1,2,3,4,5). Both the five-wave pattern and its same-directional components, i.e., waves (1),(3) and (5), employ motive mode. Their structures are called “motive” because they powerfully impel the market. A corrective wave (also called a “three”) has a three-wave structure or a variation thereof. Its subwaves are denoted by letters (in this case, A, B, C).
All countertrend interruptions, which include waves (2) and (4) employ corrective mode. Their structures are called “corrective” because each one appears as a response to the preceding motive wave yet accomplishes only a partial retracement of the progress it had achieved, “correcting” its extremity.
Self-Similarity and Degree When the motive wave ends, a corrective wave of corresponding size follows, so that overall, the result looks like Figure 1. Observe that the overall form is the same as that of its own subwaves (1) and (2), depicted in Figure 1. The word “degree” has a specific meaning and does not mean “scale”. Component waves vary in size, but it always takes a certain number of them to create a wave of the next higher degree. Thus, each degree is identifiable in terms its relationship to higher and lower degrees. This is unlike the unfinite scaling relating to say, seacosts. Each same direction component of a motive
wave (i.e., wave one, three or five) and each full-cycle component (i.e. waves one + two, or waves three + four) of a complete cycle is a smaller version of itself.
In Fig. 1, each subwave 1, 3,and 5 is a motive wave that must subdivide into a “five”, and each subwave 2 and 4 is a corrective wave that must subdivide into a “three”. Waves 1 and 2, if examined under a “microscope” , would take the
same form as waves (1) and (2), and in further detail, waves and , Regardless of degree, the form is constant.
We can use Fig.1 to illustrate two waves, eight waves or thirty-four waves, depending upon the degree to which we
are refering.
The Essential Design
http://www.elliott-today.com/images/elliot58.gif Figure 1
The Essential Design
Now observe that within the corrective pattern illustrated as wave (2), waves A and C , which point downward, are each composed of five waves: 1,2,3,4,and 5. Similarly, wave B, which points upward , is composed of three waves:A,B and C. This construction discloses a crucial point: Motive waves do not always point upwards, and corrective waves do not always point downward. The mode of a wave is determined not by its absolute direction but primarly by its relative direction. Aside from four specific exceptions, which are discussed in the literature, a wave divides in motive mode (five waves) when trending in the same direction as the wave of one larger degree of which it is a part, and in corrective mode (three wavesor a variation) when trending in the opposite direction. Waves A and C
[ (A) and (C) ]
are motive, trending in the same direction as wave . Wave (B) is corrective because it corrects wave (A) and is countertrend to wave . In summary, the essential underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves at all degree of trend.
The phenomena of form, degree and relative direction are carried one step further in figure 1. This illustration reflects the general principle that in a market cycle , waves will subdivide a shown in the table below.
Number of Waves at Each Degree
Impulse
+
Corrective
=
Cycle
Largest waves
1
1
2
Largest subdivisions
5
3
8
Next subdivisions
21
13
34
Next subdivisions
89
55
144 etc.
Following the form, this larger cycle automatically becomes two subivisions of the wave of next higher degree. As long as progress continues, the process of building to greater degrees continues. The reverse process of subdividing into lesser degrees apparently continues indefinitely as well. As far as we can determine, then, all waves both have and are (or at the largest degree, will be) component waves.
Why 5-3 ?
Elliott himself never speculated on why the market’s essential form was five waves to progress and three waves to regress. He simply noted that it was happening. Does the essential form have to be five waves and three waves? I think so.
First, were there no fluctuation, there would be no progress. A steadily increasing trend of 3% per year, for instance, would be stasis; nothing would ever change. Fluctuation in a net sideways trend, i.e., one with no net change, would also be stasis. Progress must include setbacks and net change over time. From the point of view of a participant, punctuated progress is the only kind of progress that is possible to perceive.
Second, the 5-3 pattern is the minimum requirement for, and therefore the most efficient method of, achieving both fluctuation and progress in linear movement when the only constraint is that the lengths of odd-numbered waves of each degree be longer than those of the even-numbered ones. One wave does not allow fluctuation. The fewest subdivisions to create fluctuation is three waves. Three waves in both directions do not allow progress. To progress in one direction despite fluctuation, movements in the main trend must be at least five waves, simply to cover more ground than the three waves. While there could be more waves than that, the most efficient form of punctuated progress is 5-3 , and nature typically follows the most efficient path.
Notation and Nomenclature
Waves are categorized by degree. The degree of a wave is determined by its size and position relative to component, adjacent
and encompassing waves.
Elliott named nine degrees of waves, from the smallest discernible on an hourly graph of stock prices to the largest he could assume existed from the data then available. He chose the following terms for these degrees, from largest to smallest: Grand Supercycle, Supercycle, Cycle, Primary, Intermediate, Minor, Minute, Minuette, Subminuette. Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor waves, and so on. This specific terminology is not critical to the identification of degrees, although out of habit, longtime practitioners have become comfortable with Elliott’s nomenclature.
It is important to understand that these names and labels refer to specifically identifiable degrees of waves. By using a nomenclature, an analyst can identify precisely the positon of a wave in the overall progression of the market , much as longitude and latitude are used to identify a geographical location. To say, “The Dow Jones Industrial Average is
in Minute wave (v) of Minor wave 1 of Intermediate wave (3) of Primary Wave 5 of Cycle wave I of Supercycle wave (V) of the current Grand Supercycle” is to identify a specific point along the progression of stock market history.
Variations on the Basic Theme
The basic model is simple, but reality is a bit more complex, as there are specific variations on the underlying theme that Elliott catalogued in detail. He also noted the important fact
that each pattern has identifiable rigidities
as well tendencies. From
these observations, he was able to formulate descriptions of typical wave behavior and therefore rules and guidelines for proper wave identifications. For example, in the five-wave pattern (termed an “impulse”) , the middle wave is usually the longest, and the two corrective waves usually alternate in form, the first “sharp” , the second “sideways”. A thorough understanding of such details is necessary to know what the market can do, and at least as important,what it does not do. However,as the purpose of this chapter is limited to introducing the general hypothesis,a discussion of such nuances is omitted.
Modern Science Comments on the Wave Principle Hypothesis
1996 was an important year for the Wave Principle. In that year, the Journal of Physics published
a scientific study entitled ”Stock Market Crashes, Precursors and Replicas” by Didier Sornette and Anders Johansen, then of the Laboratoire de Physique de la Matiere Condensee at the University of Nice, France, and collaborateur Jean-Philippe Bouchard. The authors make this statement:
It is intriguing that the log-periodic structures documented here bear some similarity with the “Elliott waves” of technical analysis (citation Elliott Wave Principle). Technical analysis in finance can be broadly defined as the study of financial markets, mainly using graphs of stock prices as a functions of time, in the goal of predicting future trends. A lot of effort has been developed in finance both by academic and trading institutions and more recently by physicists (using some of their statistical tools developed to deal with complex time series) to analyze past data to get information on the future. The “Elliott wave” technique is probably the most famous in the field. We speculate that the “Elliott waves” … could be a
signature of an underlying critical structure of the stock market. 2
1 Elliott, R.N. (1938). The wave principle.
2 Sornette,D., Johansen A., and Bouchard, J.P. (1996). “Stock market crashes, precursors and replicas.” Journal de Physique I France 6, No.1,pp.167-175.
The Wave Principle of Human Social Behavior and The New Science of Socionomics,©1999 by Robert R. Prechter Jr.
Terminology and Labeling
Wave Degree5's With the Trend3's Against the TrendGrand Supercycle Supercycle(I)(II) (III) (IV) (V)(A) (B) (C)Cycle I II III IV V A B CPrimary Intermediate(1) (2) (3) (4) (5)(a) (b) (c)Minor 1 2 3 4 5 abcMinute (i)(ii)(iii)(iv)(v) (a) (b) (c)Minuettei ii iii iv v abcSubminuette .i.ii.iii.iv.v.a.b.c (Labeling adjusted, Elliott today) Literatur : The Wave Principle of Human Social Behavior and the New Science of Socionomics,
1999, Robert Rougelot Prechter,Jr., New Classics Library, Gainesville, GA, USA Elliott Wave Principle, Expanded Edition, Frost & Prechter, 1990
DJIA September 1986 - August 1987
http://www.elliott-today.com/images/fibona2.gif
Figure 2
Late November 1986 right in time with the so called Boesky-affaire ["Wall Street" - Michael Douglas & Charly Sheen] the DJIA finished wave e of a triangle in Intermediate wave (4). At the high of July 1986 the DJIA already gained 1.618 times the length of wave (1) and at that time we expected wave (5) to unfold to new record highs to complete the primary degree five wave structure from the low of 577 points back in 1974.
Figure 2 shows the detail of 5 Minor waves to complete Intermediate wave (5). As you can see, not only does the wave subdivide i,ii,iii,iv and v , but it also travels within a parallel trend channel. Waves 2 and 4 sport alternation by taking different forms (zigzag and triangle), thus satisfying the most guideline of impulse wave formation.
Here is the point of discussion. The herding impulse, rather than the rational neocortex, drives the decisions of most financial market participants. Both the herding impulse and its attendant emotions are hard-wired nearly identically into people's unconscious minds. Whatever certain individuals may decide rationally, such decisions are diverse, and the herding impulseis ubiquitous. Thus, in the aggregate, individual rational decisions tend to cancel out, leaving herding impulses to determine the market's overall trend. EWT, March 2001
http://www.elliott-today.com/images/MW200x49.gifPrechter'sForecast For The Superbullmarket
13.September 1982 + 6.April 1983
This is a thrilling juncture for a wave analyst. For the first time since 1974, some incredible large wave patterns may have been completed, patterns that have important implications for the next five to eight years. The technical name for wave IV by this count is a “double-three”, with the second “three” an ascending triangle. This wave count argues that the Cycle wave IV correction from 1966 ended last month (August 1982). The lower boundary of the trend channel from 1942 was broken briefly at the termination of this pattern. A brief break of the long term trendline, I should note, was recognized as anoccasional trait of fourth waves, as shown in R.N.Elliott’s Masterworks.The task of wave analysis often requires stepping back and taking a look at the big picture and using the evidence of the historical patterns to judge the onset of a major change in trend. Cycle and Supercycle waves move in wide price bands and truly are the most important structures to take into account. They indicate, a period of dramatically stability and soaring stock prices has just begun. One must conclude that a bull market beginning in August 1982 would ultimately carry out its full potential of five times its starting point, thus targetring 3885.
A normal fifth wave will carry , based on Elliott’s channeling methods, to the upper channel line, which in this case cuts through the price action in the 3500-4000 range in the latter half of the 1980’s. Elliott noted that when a fourth wave breaks the trend channel , the fifth will often have a throw-over, or a brief penetration through the same trend channel on the other side.
What might we conclude about the psychological aspects of wave V?
As the last hurrah, it should be
characterized , at its end, by an almost unbelievable institutional mania for stocks and a public mania for stock index futures, stock options, and options on futures. In my opinion, the long term sentiment gauges will give off major trend sell signals two or three years before the final top, and the market will just keep on going. In order for the Dow to reach the heights expected by the year 1987 or 1990, and in order to set up the U.S. stock market to the Wave Principle, is due to follow wave V, investor mass psychology should reach manic proportions, with elements of 1929, 1968 and 1973 all operating together , and, at the end, to an even greater extreme.
http://www.elliott-today.com/images/elliot2.gif
"Motive waves do not always point upward,
and corrective waves
do not always point downward."
(The Wave Principle of Human Social Behavior
and the New Science of Socionomics, Robert R.Prechter, 1999. p.26-27.) Corrective WavesThe single most important rule that can be gleaned from a study of the various corrective patterns is that corrections can never be fives. Only impulse waves can be fives. In other words, an initial five-wave movement against the larger trend is never the end of a correction, only part of it. "Motive waves do not always point upward, and corrective waves do not always point downward." (The Wave Principle of Human Social Behavior and the New Science of Socionomics, Robert R.Prechter, 1999. p.26-27.)
Describing in What Ways Waves Are Identical
and in What Ways They Are VariableThe concept of a robust fractal is difficult to depict visually because a single illustration cannot convey both those aspects of an Elliott wave that are invariant and those that are variable, i.e., what its manifestations have in common and what they need not. We can draw the essence of an Elliott wave but not state the precise path that any manifestation of it will actually take. Elliott waves in reality always conform to a few simple rules of patterning, but vary considerably within that format. Elliott described five elementary patterns in the stock market, which he called impulse, diagonal triangle, zigzag, flat and triangle. The first two occur in motive mode (i.e. when prices are moving in the direction of the trend of one larger degree, effecting the larger wave’s progress), while the latter three occur in corrective mode (i.e. when prices are moving opposite the direction of the trend of one larger degree, punctuating its progress). In corrections, sometimes two of the patterns
will occur side by side, interrupted by an intervening zigzag, as noted under the heading , “Double Three.” Each of the five elementary patterns has its own description as well as a short catalog of variations that are similarly delineated by differences in form . For instance, sometimes both boundary lines of a triangle slope toward each other , and sometimes either the top or bottom line is horizontal. As another example, somtetimes wave B of a flat ends at the level of the start of wave A , and sometimes it ends beyond it. Elliott attached a name to each of these differences in form so that with his terms, we know immediately what form and variation we are talking about. If Elliott was anything, he was menticulous. His description of waves, their position within larger waves, and their relative frequency of occurrence have stood the test of sixtiy years’ intensive application by some very dedicated practitioners,
with only minor modifications. (The Wave Principle of Human Social Behavior and the New Science of Socionomics, Robert R.Prechter, 1999. S.57-60.) Now observe that within the corrective pattern illustrated as wave (2) , waves a and c, which point downward, are each composed of five waves: 1,2,3,4 and 5. Similarly, wave b , which points upward is composed of three waves: a,b and c.
This construction discloses a crucial point:Motive waves do not always point upward, and corrective waves do not always point downward. The mode of a wave is determined not by its absolute direction but primarily by its relative direction. Aside from four specific exceptions, which are disscussed in the literature, a wave divides in motive mode (five waves) when trending in the same direction as the waves of one larger degree of which it is a part, and in corrective mode (three waves or a variation) when trending in the opposite direction. Waves a and c are motive, trending in the same direction as wave (2). Wave b is corrective because it corrects wave a and
is countertrend to wave (2). In summary, the essential underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves, while reaction against the one larger trend develops in three waves, at all degree of trend. (The Wave Principle of Human Social Behavior and the New Science of Socionomics, Robert R.Prechter, 1999. S.26-27.)Realtime Elliott Wave Structures
As They Occured Live In The Markets
(c) ELLIOTT today, 2005
ExamplesThe Alltime-high January 14,2000DJIA 1998 - Five Waves Up
The Alltime-high January 14,2000DJIA 1998 - 2000"Five Waves Up"
http://www.elliott-today.com/images/elliot6.gif
Sign Of A Top Die Abbildung zeigt den DJIA vom Oktober 1998 bis Januar 2000. 5 Wellen vom Tief vom Oktober 1998 wurden am 14.Januar 2000 komplettiert. Die Struktur ist eine klassische Elliott Wave Impulswelle. Wenn 5 Wellen komplett sind braucht es kein Warum, Wenn und Aber - die folgende Sequenz ist eine Korrektur - eine a-b-c (Variationen) Struktur. Alle Begründungen, Meinungen, künstlich hergestellte kausale Zusammenhänge, haben keine Bedeutung. Der Markt hat immer Recht ! There is more information the market or the market structure has given to us. According to Elliott the supposed setback will carry the market back to the price zone of the previous fourth wave of one lesser degree.
Wave Principle: The Preferred & the Alternate Counts
5/24/2007 3:21:25 PM
Those who are new to the Wave Principle sometimes wish that it would identify one wave count on a price chart as the one and only correct count. What they forget is that wave analysis is no magic bullet for seeing into the future, just as no other tool of technical or fundamental analysis is a magic bullet. Like most analytical tools, the Wave Principle involves probabilities. Price charts offer probable wave counts, and an investor must choose the one that seems to be most probable, the next most probable, and so on. The Wave Principle does offer an advantage, though: It provides rules and guidelines that help investors to determine which wave count is most likely and to know when a wave count no longer applies. In this excerpt from Bob Prechter and A.J. Frost's seminal book about R.N. Elliott's Wave Principle, the authors explain why the alternate count matters to anyone who trades.
**** *
Excerpted from Chapter 2 of Elliott Wave Principle: Key to Market Behavior by A.J. Frost and Robert Prechter
The Preferred Count – Limiting the Possibilities
Without Elliott wave analysis, there appear to be an infinite number of possibilities for market action. What the Wave Principle provides is a means of first limiting the possibilities and then ordering the relative probabilities of possible future market paths. Elliott's highly specific rules reduce the number of valid alternatives to a minimum. Among those, the best interpretation, sometimes called the 'preferred count,' is the one that satisfies the largest number of guidelines. Other interpretations are ordered accordingly. As a result, competent analysts applying the rules agree on both the list of possibilities and the order of probabilities for various possible outcomes at any particular time. That order can usually be stated with certainty.
Do not assume, however, that certainty about the order of probabilities is the same as certainty about one specific outcome. Under only the rarest of circumstances do you ever know exactly what the market is going to do. You must understand and accept that even an approach that can identify high odds for a fairly specific event must be wrong some of the time.
The Alternate Count – Putting Unexpected Market Action into Perspective
You can prepare yourself psychologically for such outcomes through the continual updating of the second best interpretation, sometimes called the "alternate count." Because applying the Wave Principle is an exercise in probability, the ongoing maintenance of alternative wave counts is an essential part of using it correctly. In the event that the market violates the expected scenario, the alternate count puts the unexpected market action into perspective and immediately becomes your new preferred count. If you're thrown by your horse, it's useful to land right atop another.
Always invest with the preferred wave count. Not infrequently, the two or even three best counts comfortably dictate the same investment stance. Sometimes being continuously sensitive to alternatives can allow you to make money even when your preferred count is in error. For instance, after a minor low that you erroneously consider to be of major importance, you may recognize at a higher level that the market is vulnerable again to new lows. This recognition occurs after a clear-cut three-wave rally follows the minor low rather than the necessary five, since a three-wave rally is the sign of an upward correction. Thus, what happens after the turning point often helps confirm or refute the assumed status of the low or high, well in advance of danger.
A Built-in, Objective Method for Placing a Stop
Even if the market allows no such graceful change of opinion, the Wave Principle still offers exceptional value. Most other approaches to market analysis, whether fundamental, technical or cyclical, have no good way of forcing a reversal of opinion or position if you are wrong. The Wave Principle, in contrast, provides a built-in objective method for placing a stop. Since wave analysis is based upon price patterns, a pattern identified as having been completed is either over or it isn't. If the market changes direction, the analyst has caught the turn. If the market moves beyond what the apparently completed pattern allows, the conclusion is wrong, and any funds at risk can be reclaimed immediately.
Of course, there are often times when, despite a rigorous analysis, there is no clearly preferred interpretation. At such times, you must wait until the count resolves itself. When after a while the apparent jumble gels into a clear picture, the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%. It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.
Those who are new to the Wave Principle sometimes wish that it would identify one wave count on a price chart as the one and only correct count. What they forget is that wave analysis is no magic bullet for seeing into the future, just as no other tool of technical or fundamental analysis is a magic bullet. Like most analytical tools, the Wave Principle involves probabilities. Price charts offer probable wave counts, and an investor must choose the one that seems to be most probable, the next most probable, and so on. The Wave Principle does offer an advantage, though: It provides rules and guidelines that help investors to determine which wave count is most likely and to know when a wave count no longer applies. In this excerpt from Bob Prechter and A.J. Frost's seminal book about R.N. Elliott's Wave Principle, the authors explain why the alternate count matters to anyone who trades.
picture tells more than a thousand words............. Related articles: Elliott Wave Principle >>>EW Specials >>>SPX Specials >>>Chart of the Week >>>Elliott Wave Principle Key To Stock Market Profits by Frost & Prechter
(Expanded Edition1990) Elliott Wave Principle >>>
[ 本帖最后由 hefeiddd 于 2009-4-23 12:24 编辑 ]
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New Stocks To Watch HEE ! Watch The PatternJPM, December 13,2007 Fibonacci - At It's Best © ELLIOTT today, Nov 7,2007,Carl H. Lachmann
http://www.elliott-today.com/images/market12.gifAs the labeled chart reveals, JPM undertook a 24% slump from its high of $53.03 on May 10,2007 . The revovery so far reached exactly
the famous 61.8% Fibonacci retracement measured from the low of November 21,2007 ($40.15). Elliott channels and EW labeling is an
original overlay of the chart prestented on December 9,2007. Who says forecasting is not possible? (Maria Kostelletou-Lachmann) General Motors (GM)
© ELLIOTT today, Nov 7,2007 open chart General Electric,11/07/2007 http://www.elliott-today.com/images/market8_small.gif GM SAID it will book a $39 billion third-quarter noncash charge from a write-down tied to tax credits it would have used in the event it was profitable. WSJ, Nov 7,2007 As the labeled chart reveals, GM undertook an 80% slump from its high of $93.43 on April 2000. The revovery so far reached a 33% retracement measured from the low of December 26, 2005. open chart General Electric,12/15/2007http://www.elliott-today.com/images/market15.gif (Maria Kostelletou-Lachmann) IBM
© ELLIOTT today, Oct 24,2007,Carl H. Lachmann open chart IBM,10/24/2007
http://www.elliott-today.com/images/market4_small.gif
(Maria Kostelletou-Lachmann)
http://www.elliott-today.com/images/market13.gif
(Maria Kostelletou-Lachmann)
GE
© ELLIOTT today, Oct 24,2007,Carl H. Lachmann open chart General Electric,10/24/2007
http://www.elliott-today.com/images/market6_small.gif
(Maria Kostelletou-Lachmann)
http://www.elliott-today.com/images/market14.gif
(Maria Kostelletou-Lachmann)
Citygroup - (C)C Falls Further
© ELLIOTT today, Nov 7,2007,Carl H. Lachmann open chart Citigroup,11/07/2007
http://www.elliott-today.com/images/market9_small.gif (Maria Kostelletou-Lachmann)
Citygroup - (C)© ELLIOTT today, Oct 24,2007,Carl H. Lachmann open chart Citigroup,12/15/2007
http://www.elliott-today.com/images/market7_small.gif (Maria Kostelletou-Lachmann)
SP500 Chart MAP
Elliott Wave, Pattern & Outcome ! Examples
SPX, 8/6/2004SPX,daily ,8/5/2004
SPX,10min.,8/4/2004SPX,daily 8/3/2004 SPX, 06/22/05http://www.elliott-today.com/images/sp500i91_small.gif http://www.elliott-today.com/images/sp500i88_small.gif http://www.elliott-today.com/images/sp500i87_small.gif http://www.elliott-today.com/images/sp500i85_small.gif http://www.elliott-today.com/images/esp.ht20_small.gif
High of January 11,2006
(C) ELLtoday, Jan12,2006Five Waves Up CompleteFor the most part, five-wave formations have clear cut wavelike characteristics with infrequent irregularities. Most contain what Elliott called extensions. Extensions are exaggerated or elongated movements which generally appear in one of the three impulse waves (1, 3 or 5). At times the subdivisions of an extended wave are nearly the same amplitude and duration as the other four main waves, giving a total count of nine waves of similar size rather than the normal count of "five" for the sequence. (EWP, p.25)
High of June 22,2005Median Line Technique in Action
(c) ELLIOTT today
http://www.elliott-today.com/images/sp500t25.gif
SPX; 06/23/2005. Once again, the market held above the ML-2 shown on June 21,2005. (see chart below). Yesterday's fractionally new high CAN be labeled as a "thrust out of a triangle" as shown on the chart. The following decline traced out what looks like a five-wave structure on the line chart and
stopped slightly above the ML-1. Waves a and b formed three-wave structures and the advance in wave c is a five. The bounce pulled back into the area of 1216 as forecasted on 06/22/2005:"The upper channel line of ML-2 is virtually important, since the highs of 1219 and 1216 failed
at that line and in each case a decline followed." Again, that area seems to be of importance, since the upper channel line of ML-1 points to 1216-1217.
SPX, 06/24/2005. 10min. chart, closing prices. whenever the market is moving back and forth in a narrow range, tracing out emotional and frustrating three wave movements, it's a strong betthat a triangle is in progress. The wave structure shown on the chart is a series of "threes" contained within converging lines , the classic depiction of a contracting triangle. The following "thrust out of the triangle" marked the top closing price on June 22,2005, 148 calender days from the low of January 24,
2005 and 467 calender days from the high of March 5,2004. (467/2 = 233.5). The S&P declined in five small waves to 1212.49 and started a countertrend move in three waves, labeled a-b-c forming a classic expanded flat (irregular flat) for wave (ii). Wave (ii) retraced almost exactly 0.618 of the preceeding
decline and from that point the biggest decline of the last 10 weeks started. A fibonacci 0.236 retracement measured from 1136 to 1219 is 1199 (almost there) and a 0.382 retracement comes in at 1187. The wave structure calls for a slight new low and then a countertrend move to about 1208 and thereafter another wave down (v).
SPX, 30min., 06/24/2005
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SPX, 06/23/2005. Short term, the picture is mixed. As long as the recent low holds the market is poised for a counter trend rally most likely into the area of the ML-2. And there is a gap left open at 1216.50.
SPX, 06/24/2005. Whenever the market is moving back and forth in a narrow range, tracing out emotional and frustrating three wave movements, it's a strong bet that a triangle is in progress. The wave structure shown on the chart is a series of "threes" contained within converging lines , the classic depiction of a contracting triangle. The following "thrust out of the triangle" marked the top closing price on June 22,2005, 148 calender days from the low of January 24, 2005 and 467 calender days from the high of March 5,2004. (467/2 = 233.5). The S&P declined in five small waves to 1212.49 and started a countertrend move in three waves , labeled a-b-c forming a classic expanded flat (irregular flat) for wave (ii). Wave (ii) retraced almost exactly 0.618 of the preceeding decline and from that point the biggest decline of the last 10 weeks started.
The High Of June 2004
SPX, 06/24/2004SPX, 06/24/2004. Five waves up from the low of June 22,2004. The market traced
out an expanded fifth wave (i.e., extension, EWP p.24). Extensions are exaggerated or elongated movements which generally appear in one of the three impulse waves
(1,3 or 5). At times, the subdivisions of an extended wave are nearly the same
amplitude and duration as the other four main waves, giving a total count of nine waves
of similar sizes rather than the normal count of "five" for the sequence. Note how the ML-1(red dotted line) "catched" wave V to the minute. Prices declined later into the low
of August 13,2004
at 1060.
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SPX,12/16/2004. The 5min.-chart reveals a classic diagonal triangle 5th wave ended today. At least , after the DT is complete, the market retraces back to where the DT began.
SPX,12/16/2004. Five waves down can be counted on the 5min. chart. A Fibonacci 0.618 retracement for wave ii comes in at 1204. The decline traced out an extended fifth wave, though the possibility for a countertrend move back to the fourth wave of even 1205 may be a possibility. What matters is form. A three-wave structure against the impulse wave down is a correction.
http://www.elliott-today.com/images/sp500t139.gif
SP500 Index,10min.,chart, 01/28/05.Yesterday I speculated wheather the wedge formation is a DT type 2. The decline occured as a clear cut three-wave structure,
a 5-3-5 a-b-c zigzag. Prices should move higher next week. (DT type 2 = leading
diagonal triangle, 1 or a.)
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SPX,10minute chart, 01/27/2005. A wedge-shaped formation (DT possible) seems is near completion. A break of 1172 points to lower prices.Question:IS it a LEADING DT?
S&P 500 Index
© ELLIOTT today,April 8,2004 http://www.elliott-today.com/images/sp500i31_small.gifChart: www.tradesignal.com
S&P 500 IndexThe Top Of March 5,2004"Early Warning - Wedge Shaped"
© March 5,2004 - ELLIOTT today
Short term update, March 5,2004,S&P 500 Index S&P 500 "topped"
© ELLIOTT today,March 5,2004: "The hardest thing is to believe what You see !" Hamilton Bolton
http://www.elliott-today.com/images/sp500c2_small.gif
Figure 1Chart: www.tradesignal.com None of these stocks are buy or sell recommendations. There is a high degree of risk in trading.This chart contains information that we reserve for subscribers.So please understand, that the whole Elliott Wave count cannot be displayed. Choose a subscription that's right for you. >>>INFO http://www.elliott-today.com/images/sp500c3_small.gifChart: www.tradesignal.com None of these stocks are buy or sell recommendations. There is a high degree of risk in trading.
...and the outcome
S&P 500 Index - The Top Of March 2004"A Picture Worth More Than 1000 Words"
© March 26,2004 - ELLIOTT today
S&P 500 Index, March 26,2004: The S&P 500 fell -76 points in 13 trading days....S&P 500 Index, Januar 31,2004:
©ELLIOTT today, K.H.Lachmann
On November 15,2003 I presented a chart of the S&P with the headline: “Sierpinski’s Triangle Numbers In The S&P 500.”
I than labeled the low of July 24,2002 as Primary Wave . The low on July 24,2002 occurred at 775. Now observe 775 x 2 = 1550 just shy off 3 points of the alltime-high on March 24,2000. The distance from July 24,2002 to January 26,2004 is 542 days.
542 divided by 1155 gives .469, shy off .466 the Sierpinski number.
The number of days from the alltime-high to January 26,2004 is 1382. On March 24,2000 the S&P registered an alltime-high-price of 1553 points. Now observe 1553 x .885 = 1374,4 [+/-7.6].
Price and time met on January 26,2004 almost perfectly: 1553-768= -785 points. October 10,2002 to January 26 gives 466 days. The ratio is .5936, close to .618.These relationships do not merely produce striking after-the-fact formulations, but conform to formulations long ago recognized. The (a)-(b)-(c) zigzag correction since October 10,2002 formed another striking example of these numbers discussed here: Wave (a) traveled +186 points or 24,2% and wave (c ) traveled +366 points or 46,38% [.466 x 100]. The ratio is .5217 close to .5265 . A.J. Frost often noted prices travel by squares, i.e. 34x34=1156.Remember the low price of March 12,2003? 784 = 28x28 shy off 5 points of the actual low of 789.
The main point to make is that a critical juncture has been reached, one that was identified well in advance.Given the market’s action last week the striking clue is that the S&P 500 formed an weekly-outside-reversal ! It happened before as you can see on the chart. Watch the lower trendchannel-line, it usually happens in wave three.
S&P 500 Index10min. Chart of March 5,2004
"Fibonacci"
© March 5,2004 - ELLIOTT today
http://www.elliott-today.com/images/sp500t20_small.gif
None of these stocks are buy or sell recommendations. There is a high degree of risk in trading. Alert Update - Topped
S&P 500 Index, March 5,2004:
Five waves up from Wednesday, March 3,2004 can be counted as complete.
On Friday, March 5,2004 at 10.30 the S&P 500 reached 1163,23 close
to our longstanding target of 1160 first presented on January 21,2004:
Short term update, S&P 500 Index, January 21,2004:
ELLIOTT today, January 21,2004:
"After the wave (iv) correction, the S&P 500 may be on its way to 1160,50
."
Within 30 minutes the S&P 500 fell sharply more than 10 points indicating a small wave (i) down has been in place. The recovery looks like a corrective structure which ended at 1160, the point of a Fibonacci 78.6% retracement. Prices now should start a decline most likely below 1148-1149.
Elliott Wave Fractals
© ELLIOTT today,March 2004
The foremost aim of wave classification under the Elliott system is to determine where we are in the stock market cycle. This exercise is easy as long as the wave counts are clear, as in fast moving markets, particularly in impulse waves, when minor movements generally unfold in an uncomplicated manner. However, in lethargic or choppy market actions, particularly in corrections, wave structures are more likely to be complex and slow to develop. They are part of the reality of the market, though, and must be taken into account. The wave counts presented on the charts fits Elliott's theme of the "right look." The construction of the (a)-(b)-(c) (x) formation from December to January has an uncanny resemblance to the markets structure from February to March. Following an (a)-(b)-(c) zigzag with wave (b) a triangle, the market advanced in three waves up and completed wave (x) on January 13,2003. The decline from that high traced out five waves down for wave (a) and three waves up for wave (b). As the chart shows , both first initial declines have the same length [point (c) December and point (a) February but slightly different patterns. Elliott described how waves at each degree become the components of waves of the next higher degree, and so on, producing a structured progression. Component waves vary in size, but it always takes a certain number of them to create a wave of the next higher degree. Thus, each degree is identifiable in terms
of itsrelationship to higher and lower degrees. Elliott found, that there are specific patterns to the stock market
fractal that are neverthless highly variable within a certain definable latitude. In other words, some aspects of their form are constant andothers are variable. Component patterns do not simply display discontinuity similar to that of larger patterns, but they form,with a certain latitude, replicas of them.In the 1930s , Ralph Nelson Elliott discovered that aggregate stock market prices trend and reverse in recogniziable patterns. That patterns he discerned are repetitive in form, but not necessarily in time or amplitude. Elliott isolated and defined thirteen pattern, or “waves,” that recur in market price data. He named and illustrated the patterns. He then described how they link together to form larger versions of themselves, how they in turn link to form the same pattern at the next larger size, and so on, producing a structured progression. He called the phenomenon The Wave Principle. It is particulary evident in those free markets where public participation in price movements is extensive. Those who have attempted to deal with the market’s movement have failed to recognize the extent to which the market is a psychological phenomen. They have not grasped the fact that there is regularity underlying fluctuations of the market, or, stated otherwise, that price movements in stocks are subject to rhythmus, or an ordered sequence. The wild, senseless and apparently uncontrollable changes in prices from year to year, from month to month, or from day to day, link themselves inta law-abiding rhythmic pattern of waves. The same rules apply to the price of stocks, bonds, grains, cotton, coffee, and all the other activities previously mentioned.¹ ) R.N.Elliott’s Masterworks (1980/1998) by Frost & Prechter, which includes all of Elliott’s original books,
articles and major essays, as well as a biography.
² ) Elliott Wave Principle – Key To Stock Market Behavior (1978/1998) by Frost & Prechter, a concise
summary of Elliott’s work.
DAX
©ELLIOTT today, March 2004
http://www.elliott-today.com/images/Elliot16.gif
Chart: futuresouce.com Five waves down, three waves up. Wave ii traveled to the fourth wave of one lesser degree,
which in this case was a contracting triangle (EWP,p.41). The DAX declined into March 2003
to 2188 for a loss of roundabout 1000 points ! ELLIOTT WAVE PRINCIPLE, Frost & Prechter
Nasdaq 100 ©ELLIOTT today, March 2004 http://www.elliott-today.com/images/Elliot19.gif Chart: technical-investor.de On March 13, 2002 the market "gapped" down from a completed diagonal triangle 5th wave. The ending pattern itself completed five-waves up for wave (c). Since diagonal triangles preceed dramatic reversals ahead, the "unexpected" fall was normal occurrence under the rules and guidelines of the Elliott Wave Principle. ELLIOTT WAVE PRINCIPLE, Frost & Prechter
DJ Transportion ©ELLIOTT today, March 2004 http://www.elliott-today.com/images/Elliot20.gif Chart: tradesignal.com Another example of a dramatic reversal after a diagonal triangle has been completed.ELLIOTT WAVE PRINCIPLE, Frost & Prechter
Contracting Triangle in the S&P 500(c) ELLIOTT today, Sept.9,2003:
http://www.elliott-today.com/images/Elliot8.gif
ELLIOTT today, Sept.9,2003:
In targeting the ultimate low-end of the triangle the following Fibonacci calculation was made: 1018-960= -58 points. 58 x .618 = 35,8. 1018-35,8=982,2. Wave e ended at 983 completingwave iv of the triangle and from there another powerful advance started.
ELLIOTT today, Update: Fibonacci,January 4,2004:
Often wave four divides an impulse into the "Golden Section". If so, wave v should top out at 1133 points. Why?788-960=195 or 24,74%. 24,74% times .618 = 15,29%. 9.83 x 15,29 = 150,30. 983+15,29=1133,3.
Another guideline deals with typical Fibonacci relationships between price lengths of waves, which allow forecasting to be even more specific. Wave i traveled +107 points and 107 times 1.618 gives 173 points. When added to the low of the triangle at 960 the target will be 1133. The next powerful resistance level in the S&P should be the 50% retracement level measured from the alltime-high: 1553-768= -785. 785/2=392,5. 768+392,5= 1160,5.
These developments are remarkable high enough, but substantially more is involved in the fascinating mathematical relationships of the wave structure.
High Of December 2,2002
©ELLIOTT today, Dec.2,2002
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Chart: quote.comWave (a) traced out what looks like a "diagonal triangle type 2", .
Note the wave ii low came close to the low of wave (b). Connecting waves ii and iv and drawing a parallel across the top wave iii "catched" the top of wave v of (c) of 2 right to the minute. A perfect example of R.N.Elliott's description of market behavior. The S&P 500 declined to768 on March 12,2003.
and the DOW...
©ELLIOTT today, Dec.2,2002
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Chart: futuresourceELLIOTT today,December 2,2002: In the Dow, the a-b-c zigzag correction in wave (b) is clear visible. Within wave iii waves ii and iv sport alternation by forming different structures: zigzag and flat, and again zigzag and double three. Wave b in the first three of the double-three correction in wave iv may have taken the form of an expanded flat. Note the parallel trend channel which is drawn according to the description in The Wave Principle. Wave v of (c) reached the upper parallel line exactly to the minute. The five-wave advance in wave v in the Dow is more clearly visible than the same wave in the S&P 500. From there, the DJIA fell to 7416[-1638 points or 18%]
on March 12,2003.
The Record
© ELLIOTT today
Here You find examples of successful forecasts by ELLtoday
using the Elliott Wave Principle.
Forecast & Outcome Nasdaq Composite
(c) ELLIOTT today, April 6, 2002
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Chart: Quote.comOutcome: The NASDAQ Composite Index continued to decline into October 10,2002 and bottomed at 1109. On April 2002, ELLIOTT today presented
the following EW-update & forecast:
Special-Report April 2002
Nasdaq Composite
(c) ELLIOTT today"A
0,786 multiplication with the all-time high (5132)
would call for a drop to 1099 points."The Weekly-Chart of the Nasdaq Composite display a very simple form, but if you take a closer look into the waves, channels and Fibonacci numbers you will immediately get a fascinating picture. The picture is cleary striking. Nasdaq’s decline from its March 2000 all-time high offers one of the most dramatic pictures among all the major stock market averages. Notice the percentage swings between waves in the Fibonacci section of this report. If there were ever a proof for market timing, technical-analysis, Elliott Wave or Fibonacci-price relationships – the Nasdaq produced them all together with remarkable accuracy. ”Imagine all the people…”, we do not refer to one of the last songs of John Lennon, but anyone who bought into the euphoria at the all-time high or the bull trap highs of early September and late January, would have losses mounting –40 %, -47%, 38 % and even –68 % at the March 2001 low. As history shows that the action during 1997-1999 has been quite similar to that of 1928-1929. The so called ‘Great Crash’ of 1929 to 1932 retraced
89,52 %
from the September high of 382 to 40. A similar occurrence would bring the Nasdaq down to 565 points ! A mania is a rare event and examples show , manias are always more than fully retraced. The herding impulse,
rather than the rational neocortex , drives the decisions of most financial market participants. Both the herding impulse and its attentant emotions are hard-wired nearly identically into people’s unconscious minds. Whatever certain individuals may decide rationally, such decisions tend to cancel out, leaving herding impulses to determine the market’s overall trend.
(Socionomics>>>)
The Wave Principle describes the order and pattern of human herding. Ironically, emotional markets are more orderly than non-emotionally markets because they more pureley reflect the aggregate impulse to herd. People feel and therefore almost universally believe that emotional markets are disorderly, but that is only because their limbic system at such times give off emotions that create stress. As you can see , not
only does the Primary wave 3 subdivide into five waves of Intermediate Degree (1),(2),(3),(4),(5) , but it also travels within a parallel trend channel. Waves (2) and (4) provides alternation by taking different forms (zigzag and flat), thus satisfaying the most common guideline of impulse wave formation (EWP, Frost & Prechter, 1990, S.54). The upper parallel of the trendchannel of Primary degree contains wave (c) and (e) of the Primary degree triangle of wave four. Target of Primary Wave 5 : If Primary wave 5 covers almost exactly the same distance as Primary wave 1 (- 37 %) than Primary Wave 5 would bottom at 1226. Triangle wave (e) topped at the weekly chart at 1946 points.(1946 x 0,37 = 720. 1946-720=1226). It’s interisting to observe, that a 0,382 multiplication with the low of the first wave (3227) gives 1232, not far from 1226. After a triangle is complete, the final impulse wave is generally swift and travels approximately the distance of the widest part of the triangle (S.42 EWP). The widest part of the triangle in in this case are the waves
(a) and (b). The distance is 941 points (2328-1387) ). 941 points substracted from wave (e) of the triangle points down to 1005, a level that would bring in a whopping
- 80 % loss from the all-time high. A
0,786 multiplication with the all-time high (5132) would call for a drop to 1099 points. Note at this point that a
0,618 multiplication with the all-time high is 1961, not far from the end of the triangle (5132 x 0,618 = 3171. 5132-3171=1961). What’s more ? A
0,618 multiplication of the Primary wave 3 low at 1619 would exactly point down to 1000,54 ! The elements of a forecast under the Wave Principle, in order of predictability, are direction, degree, extent (price target, wheather it outcomes is another question), pattern and duration. Time then, is the least predictable element. (Elliott Wave Principle>>>)
DJIA, "High Of May 2002"
(c) ELLIOTT today"Thrilling Juncture"
http://www.elliott-today.com/images/tracre17_small.gifChart: Technical Investor
ELLIOTT today, May 31,2002: DJIA - The wave pattern presented mid May is a thrilling juncture for a wave analyst. "Some incredibly larger wave pattern may have been completed, patterns which have important implications for the next five to six months. From May 6,2002 to May 20,2002 the Dow formed an Elliott a-b-c structure known as a zigzag , which ended with another well known Elliott-pattern: Wave (v) of C traced out an ending diagonal triangle and signaled the end of the small countertrend move. The next 10 days, prices fell to where they started: DJIA 9800. The chart of the DJIA presents another great example of the value of The Elliott Wave Principle. Needless to say where prices headed thereafter: On October 2002, the DJIA fell below 7200 points - a loss of more than 3000 points ! (Elliott Wave Principle>>>)
S&P 500, December 2,2002
(c) ELLIOTT today"Has The Top Been Seen?"
http://www.elliott-today.com/images/tracre7_small.gifChart: Quote.com S&P 500, December 2,2002:
"Has the top been seen?" From the low of November 13 the market traced what looks like wedge-shaped formation for wave (a). Wave (b) was a zigzag, a normal correction. Wave (c) contains five waves up within a nice trend channel. Wave v of (c) reached exactly the upper parallel of that channel and prices fell imediately.Wave (c) stopped two points of a Fibonacci 1.236 times of wave (a). On March 12,2003 the S&P 500 made a low at 768
- a loss of -186 points !
(Elliott Wave Principle>>>)
ELLIOTT today's Forecast For 2007 Here's the original chart with Elliott wave labeling posted to subscribers on January 27,2007: Weekly Update © ELLIOTT today, January 27, 2007 DJIA
S&P 500 Index, 10min.,
(C) ELLIOTT today, June 24,2005
EW Analysis & Forecast Before The Opening Bell as of June 23,2005. Original chart as presented to subscribers before the opening bell on June 24,2005
http://www.elliott-today.com/images/sp500t25_small1.gif
SPX; 06/23/2005. Once again, the market held above the ML-2 shown on June 21,2005. (see chart below). Yesterday's fractionally new high CAN be labeled as a "thrust out of a triangle" as shown on the chart. The following decline traced out what looks like a five-wave structure on the line chart and stopped slightly above the ML-1. Waves a and b formed three-wave structures and the advance in wave c is a five. The bounce pulled back into the area of 1216 as forecasted on 06/22/2005: "The upper channel line of ML-2 is virtually important, since the highs of 1219 and 1216 failed at that line and in each case a decline followed." Again, that area seems to be of importance, since the upper channel line of ML-1 points to 1216-1217.
The Low of October 25,2004 DJIA, October 22,2004
(c) ELLIOTT today
Forecast
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There is every case to believe that a bottom is near. A trendline drawn connecting the previous lows in May and August points to a move slightly below 9800 and then a powerful reversal.
The Low of August 13,2004 SPX, 10min., August 13,2004 Forecast
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Chart: quote.com SPX, 8/12/2004. The "thrust out of the triangle" completed wave c of ii and stopped quite close at the Fibonacci 0.786 (square root of phi). Note the similarity of waves a and c and both ended with a "spike-high" above ML-1 (dotted line). SP500 Index, July 11,2005
Gann notes July 7 to 10, 21 to 27 and again you’ll notice, July 7,2005 will be remembered as the day of the “London Bombing”. The next 90 day cycle low will be due on July 20,2005 and that date will be the 176thday since January 24. (176/2=88). But there is more: July 11,2005 counts as day number 839 from the March 2003 low and August 13, 2004 divides the distance into the “Golden Section.” (511/839=0.609). The recent upmove brought the S&P 500 Index slightly above the upper ML-2 line and right into the ML-3 (yellow) but remains below the longer term ML-1.
SPX, August 13,2004 ...outcome
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Chart: quote.com SPX, 8/13/2004. Only two hours of trading brought the SP500 Index back to the level where it was on Tuesday/Wednesday. The wave structure is not yet complete and one more wave to the downside is needed to complete five-waves down.
SP500 Index,
(c) ELLIOTT today, May 14,2005
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SP500 Index, 05/14/2005. "Bottoms above 50 percent of the range or of the high indicate that the stock is strong", (p.49, Gann Made Easy, William McLaren). Measured from the alltime-high to the low of October 2002 the midpoint or 50% level is 1161. The high of March 2004 was 1163 and was basically forecasted on January 21,2004 as a probably target for the end of the countertrend rally. As youcan see on the daily chart (SPX, YTD) price movements continue to oscillate above and below 1163. Friday's low of 1146.18 marks a Fibonacci 0.786 retracement of the distance 1136-1179 (43x 0.786 = 33.8. 1179-33.8=1145.20 (+/-1) and the 50% Fibonacci retracement of the distance from the low of August 13,2004 at 1060 and the high of March 7,2005: 168/2=84.2. 1060.72+84.2=1144.92 (+/-1.26). The chart displays the probability of an ongoing "wedge" as one of three scenarios outlined last week. IF so, the market now trades in wave 5 of that "leading wedge" and should decline into the 1124-1125 area, which also marks a Fibonacci 0.618 retracement of the distance from August 13,2004 low to the March 7,2005 high. A move above the upper boundary line of the "wedge" would eliminate that count.
You already may have noticed that Friday's low touched the longer term ML-1 exactly and the market turned immediately after the "touchdown" was perfect. The upper channel line of ML-1 points to 1182-1185 depending on the time the market needs to reach that level. 1182.5marks just another 50% retracement of the distance 1229- 1136. A move above 1192 would add to the strongest Elliott evidence in favor of our DT scenario.
The High of March 19,2002
"Kicking The Bearish Blues"DJIA,
(c) ELLIOTT today, March 24,2002
http://www.elliott-today.com/images/DJIA-I7_small.gif
Chart: Technical Investor open windowDJIA,March 24,2003
Corrective Waves: The single most important rule that can be gleaned from a study of the various corrective patterns is that corrections can never be fives. Only impulse waves can be fives. In other words, an initial five-wave movement against the larger trend is never the end of a correction, only part of it. .What YOU SEE ? We wrote: "The rally from the low of September 21,2001 has a three-wave structure. Thus the best interpretion of the current wave status is that an a-b-c zigzag unfolded from the September low and Intermediate Wave (2) reached Fibonacci resistance. Five waves up for wave c can be counted as complete.
. 2583 added to the low
of 8063 gives 10646 a reasonable target for the end of that counter
trend rally"
"Kicking The Bearish Blues" sounded the headline of Barron's monthly edition of May, 6,2002. They wrote:"A surprising number of portfolio managers expect the market doldrums to end soon, with the Dow vaulting pas 11,000 this year."
"Think Positive" was another headline in the same paper. "April showers haven't squeled money managers' bullish views" says the writer and
"47 % of the professional money managers responding to our spring 2002 big money poll declared themselves bullish about the stock market's prospects through the end of 2002. To be sure, that's down from a blusterous 67 % of respondents surveyed last fall, just after the terrorist attecks that destroyed the WTC . But its still impressive, given the daily drumbeat of negativenews coming from the corporate sector."
"The bullish managers believe a pick-up in earnings in this years third and fourth quarters will drive the market higher, lifting the Dow above 11,000 in the month ahead". ELLIOTT today had a totally contrary positon and projected the coming down-wave in red ink. Our analysis based on Elliott patterns, sentiment figures and time zone analysis served us well.The DJIA fell a whopping -3476 points or -32.5% to a low on October 10,2002.Important sentiment measures have bullish extremes. In January, the consensus of investment advisors was more positive than at any of the Dow's eight trips to 11,000 since May 1999.
DJIA, April 11,2002
(c) ELLIOTT today"An Elliott Pattern & A Forecast"
http://www.elliott-today.com/images/sptrad35_small.gif
Chart: Quote.comFrom April 8 to April 11, 2002
the DJIA formed a diagonal triangle for wave C (EWP, p.31), which is a very bearish formation and usually followed by a sharp decline retracing back at least to the level where the diagonal triangle began. That's exactly what happened. By October 2002 the DJIA dipped
below 7200 !
(Elliott Wave Principle>>>)
Partying Like It’s 2008
Germany is one of the worst-hit economies in the developed world. So why is everybody so calm? The economic crisis has taken its toll in Europe. Governments in the Czech Republic, Hungary and Latvia have collapsed. Violent street protests have erupted in France and Britain. Yet Germany remains unfazed. While its economy is forecast to contract by 5.3 percent this year—compared with 4 percent in the U.S., 3.7 in Britain and 3.3 in France—Germans are remarkably angst-free about their prospects. Newsweek, April 14, 2009
DAX: Classic Elliott
Five Waves Down... © ELLIOTT today, April 14, 2009
http://www.elliott-today.com/images/dax.ht11.gif
Chart: futuresource.com
DAX: Rally © ELLIOTT today, March 13, 2009
http://www.elliott-today.com/images/dax.ht8.gif
Chart: futuresource.com
German DAX - Classic Elliott © ELLIOTT today, March 9 2009
Everything falling...sinking....declining...dying downwards – deflation...deflation...deflation...
What is happening?
http://www.elliott-today.com/images/dax.ht6.gif
Chart: futuresource.com on mouse over see chart of January 2008
The Big Fall © ELLIOTT today, October 24 2008
http://www.elliott-today.com/images/dax.ht5_small.gif
Chart: futuresource.com
Elliott Wave Analysis On January 4,2008 ELLIOTT today presented a weekly chart of the German DAX
presenting the overall picture of the German stock market since 2003.
ELLIOTT today's headline was loud and clear: "Topping"
How could I say that?
The Elliott labelling on the chart shows a clear five-wave advance from the low of 2003
to the high of 2007. According to the rules of the Wave Principle, wave (3) is not the
shortest of the three impulse waves in a five-wave sequence. A hard and fast rule which
has great practical utility in correct counting. Elliott states in "Nature's Law" that wave
four in a five-wave sequence should not overlap wave one except within diagonal triangles.
Another hard and fast rule which should not be broken unless all other Elliott considerations
force the analyst to accept that conclusion. A final rule to observe is that while fifth waves
are somewhat flexible in that they may fail to move beyond the end of wave three, second
waves can never retrace more than 100%. (Elliott Wave Principle, Frost & Prechter , 1990)
Channeling is another tool to identify the end of a move. Among other analysis tools than
Elliott Wave Principle I use is Cycles, Dr.Andrew's Midline technique and Fibonacci fanlines.
Fibonacci fanlines are very useful to identify strong or weak markets.
Placing the 1x1 Fibonacci fanline on the major low of 2003, the picuture reveals that
since mid-June of 2004 the DAX traded below the rising 1x1 Fibonacci line indicating
the internal conditions of the market are weak. Gann felt that a 1x1 trend line provided major
support during an uptrend, and when the trend line is broken, that a major reversal to the trend
was being established. As can be seen on the chart Intermediate wave (1) fell short below the
Fibonacci Fanline 1x2 and the market "recovered" in an Elliott wave two
(2). In terms of Fibonacci retracements wave (2) gained 55% of the
previous decline. The next decline, Minor wave 1 of Intermediate wave (3)
tanked even closer to the overall 38.2% retracement level shown on the
chart. Interestingly enough, the ensuing pullback in Minor wave 2 retraced
back to the broken Fibonacci fanline and stalled. From that point on (DAX 6600)
the market started down in Intermediate wave (3), according to R.N.Elliott most
often the "strongest and longest wave" in a five-wave sequence. Another task worth noting is R.N.Elliott's description of Extensions.
Extensions are exaggerated or elongated movements which generally
appear in one of the three impulse waves (1, 3 or 5). To make it short,
the most empirically derived rule is that when the fifth wave of an advance
is an extension, wave A of the ensuing correction will be sharp and retrace
to the level of the low of wave 2 of the extension. The bull market of the 80s
and 90s counts as Cycle wave five and contains an extension that started in
the year 1990.
EZB/Nowotny: Gute Gründe für erhöhte Wachsamkeit bei Inflation
WIEN (Dow Jones)--Der neue Gouverneur der Oesterreichischen Nationalbank, Ewald Nowotny, hat vor anhaltenden Inflationsrisiken im Euroraum gewarnt. Bei seiner ersten Pressekonferenz als Notenbankgouverneur und Ratsmitglied der Europäischen Zentralbank (EZB) sagte Nowotny am Freitag, der Anstieg der Verbraucherpreise im Euroraum scheine zwar den Gipfel erreicht zu haben, Zweitrundeneffekte drohten aber die Inflation auf einem hohen Niveau zu halten.
Es gebe weiterhin ausreichend Gründe für eine erhöhte Wachsamkeit hinsichtlich der Inflationsgefahren, betonte Nowotny. Er forderte Politiker, Unternehmen und Beschäftigte in Europa auf, bei Ausgaben, Preiserhöhungen und Tarifverhandlungen maßvoll vorzugehen.Die EZB alleine könne die Inflation nicht unter Kontrolle halten. Nowotny hat zum 1. September die Nachfolge von Klaus Liebscher angetreten.
DAX, January 4, 2008 © ELLIOTT today, July 4 2008
on mouse over please see DAX of July 4, 2008 Out of the Channel
http://www.elliott-today.com/images/dax.ht3.gif
Chart: futuresource.com
More Media News........
Deutsche Autobranche Hersteller und Händler vor harten Zeiten
FTD, July 2, 2008
Pfandbriefhandel liegt auf Eis
FTD, Mar 14,2008
Märkte geraten außer Kontrolle
FTD, Mar 14,2008
Banker verzweifeln - Politik machtlos
Spiegel de., Mar 19,2008
Bear Stearns geht unter - US- Finanzminister in der Kritik
Eine Traditionsbank versinkt, die
Pfandbriefhandel liegt auf Eis
FTD, Mar 14,2008
Märkte geraten außer Kontrolle
FTD, Mar 14,2008
Banker verzweifeln - Politik machtlos
Spiegel de., Mar 19,2008
Bear Stearns geht unter
US- Finanzminister in der Kritik
Eine Traditionsbank versinkt, die
Börse wird panisch: Das Investmenthaus Bear Stearns entgeht haarscharf der Pleite - und wird zum Ramschpreis an einen Konkurrenten verkauft.
Spiegel de., Mar 17,2008
Toyota Feels Pinch
Toyota Feels Pinch
The auto industry's sales slump deepened sharply in March amid a powerful economic downdraft, and even once-invincible Toyota Motor Corp. took a big hit. WSJ, April 02, 2008
Pfandbriefe
Spaniens Immobilienkrise verschärft sich
Wie von einigen Beobachtern erwartet, beginnt das Ausmaß der krisenhaften Entwicklung an Spaniens Immobilienmarkt nach den Wahlen immer deutlicher zu werden. Nach einer „sanften Landung“ sieht es immer weniger aus. FAZ, April 4,2008
USA verlieren massenweise Jobs
Erstmals seit zweieinhalb Jahren ist die Arbeitslosenquote in den USA auf mehr als fünf Prozent gestiegen.
Aus der Sicht von Volkswirten ist die Lage schlecht und die Rezession ganz nahe. FTD, April 5,2008
German Bank Sets Bigger Write-Down
April 4, 2008. A large German-owned bank, BayernLB, said Thursday that it would write down 4.3 billion euros ($6.7 billion), double its previous estimate, as the contagion from the tight credit market continued to spread tostate-owned banks in Germany. New York Times, April 4, 2008
Anleger ignorieren schlechte Nachrichten
Die gestiegene Arbeitslosenquote in den USA lässt die Anleger kalt. Viele sind offenbar zuversichtlich, dass eine lange Rezession noch verhindert werden könnte. Zuversichtlich schauen sie nach vorn - auf den Start der neue Quartalssaison. Und die könnte den Aktienmarkt sogar beflügeln. FTD, April 6, 2008
Immobilienkrise erreicht New Yorks Reiche
In den subprime-verseuchten USA gilt Manhattan als Insel der Seligen - noch. Zwar steigen die Wohnungspreise. Aber selbst das werten Experten schon als Krisensignal. FTD, April 6, 2008
Aktien übergewichten!
Die Dresdner Bank empfiehlt Aktieninvestoren eine Erhöhung der Aktienquote sowie die Übergewichtung von Aktien im Depot. Der Dollar wird wieder stärker.
Boerse-online.de, April 5, 2008
DAX ist bärenstark
Trotz der deutlich schlechter als erwarteten US-Arbeitsmarktzahlen beendet der deutsche Blue-Chip-Index den Tag und auch die Woche im Plus. Boerse-online.de, April 5, 2008
DAX, March 24,2007Pullback Complete?(c) ELLIOTT today
http://www.elliott-today.com/images/dax.ht8_small.jpg
Chart: futuresource.com
Planet Yelnick just released an article entitled "Tech IPO's keep coming." Yelnick wrote, "The recent spike down
in the markets have not spooked investors (yet) from speculative offerings." This is classic B-wave behavior! As of
Friday's close the DJIA retraced just 62% of the preceding decline, the same is true in the NASDAQ Composite.
Watch Fibonacci! http://yelnick.typepad.com/yelnick/ DaimlerChrysler - Chronik einer Auto-Ehe
Als Vision einer „Welt AG“ gestartet, steht die Auto-Ehe zwischen Daimler-Benz und Chrysler wegen Problemen bei Chrysler erneut vor großen Problemen. Mai 1998: Die Stuttgarter Daimler-Benz AG und die amerikanische Chrysler Corporation verhandeln über einen Zusammenschluss mittels eines Aktienumtauschs. Daimler-Benz-Chef Jürgen Schrempp
sieht darin seine Vision einer „Welt AG“. 17. November 1998: Der Zusammenschluss wird vollzogen, und es entsteht der drittgrößte Autohersteller der Welt. Schrempp und Chrysler-Chef Robert Eaton führen den Konzern zunächst gemeinsam. Die DaimlerChrysler-Aktie wird erstmals an der New Yorker Börse gehandelt.17. November 2000: Nach anhaltenden Verlusten wird James Holden entlassen, der für Eaton im Frühjahr an die Chrysler-Spitze gewechselt war. Neuer Chef des in einer Absatzkrise steckenden Autobauers wird Dieter Zetsche. Dieser kündigt umgehend Stellenstreichungen an: 30 000 Chrysler-Mitarbeiter sollen gehen.
Konzern zu verkaufen
Wie Daimler Chrysler vertickt
Mit Chrysler wollte Daimler zum Weltkonzern aufsteigen. Daraus wurde nichts, die amerikanischen Autosparte sorgte für Milliardenverluste. Nun will sich Konzern-Chef Dieter Zetsche von Chrsyler trennen. Die Bieterschlacht hat angeblich schon begonnen. Die Welt 24.3.2007
Inclusion/Exclusion:
A rising mood leads to feelings of social brotherhood and acceptance among races, religious and political territories, as well as toward animals, plants and proposed aliens. A falling mood leads to apartheid, religious animosity, cavalier cruelty, sezession, independence movements and images of aliens as monsters. (The Wave Principle of Human Social Behavior, 1999, Robert R.Prechter)
50 JAHRE EU
Gemeinschaft in der Midlife-Crisis
In dem Text von Spiegel online heisst es u.a. "Europa hatte zum ersten Mal erlebt, was für ein Geschacher die Herstellung von Kompromissen zwischen Nationalstaaten bedeutet. Allein die Frage, ob geräucherter Schinken als Agrarprodukt zu gelten habe und damit von der ersten Stufe der Wirtschaftgemeinschaft ausgenommen werden könne, führte die Verhandlungsführer
an den Rand der Verzweiflung. Zu allem Unglück machte sich Großbritannien daran, mit Dänemark, Österreich, Norwegen, Portugal, Schweden und der Schweiz eine Art Gegengemeinschaft zu eröffnen - die Europäische Freihandelsassoziation (Efta)."
Der Spiegel online, 24.3.2007
Celebrating the DAX,(c) ELLIOTT today, February 3, 2007. Feierlaune: Die Börsianer in Frankfurt
sind gut gestimmt wie lange nicht mehr.
DAX, March 14,2007(c) ELLIOTT today
http://www.elliott-today.com/images/dax.ht7_small.jpg
Chart: futuresource.com
Achtung! Börse Online
DAX-Stimmung von Kursverlusten überraschend unbeeindruckt
Donnerstag 1. März 2007
Die Reaktion der Investoren am deutschen Aktienmarkt auf die DAX-Entwicklung seit Wochenbeginn ist überraschend: Nur wenige Bullen wandern ins Bärenlager. Die (immer noch) überwiegend optimistische Stimmung birgt weiterhin Nachfragepotenzial.
Despite a lack of fear confidence is still riding high as some headlines suggest: "Now Isn't Time to Panic Over Market."
"Prepare for Yet More Bull in the Market"
"Wall Street Still Running With Bulls"
"Accept Market's Volatility"
"It's a Fluctuation, Not a Market Crash: No Cause for Panic"
"Why I'm the Mr.Happy of the Stock Market"
Börsen nach dem Kursrutsch
Nervöse Zuckungen
Japan steht noch immer unter Schock, in den USA dagegen hat sich die Lage beruhigt: An der Wall Street entwickelten sich die Kurse wieder kräftiger. Die Börse in Tokio aber rutschte wieder ins Minus – der deutsche Leitindex Dax erholte sich.
Die Welt online, .6.3.2007Börsen nach dem Kursrutsch? How will they know?Complacency!?
OUT OF THE BLUE?DAX - Classic Elliott5 Waves UP(c) ELLIOTT today,03/06/2007
http://www.elliott-today.com/images/dax.ht5_small.jpg
Chart: futuresource.com
Achtung! Börse Online
DAX-Stimmung von Kursverlusten überraschend unbeeindruckt
Donnerstag 1. März 2007
Die Reaktion der Investoren am deutschen Aktienmarkt auf die DAX-Entwicklung seit Wochenbeginn ist überraschend: Nur wenige Bullen wandern ins Bärenlager. Die (immer noch) überwiegend optimistische Stimmung birgt weiterhin Nachfragepotenzial.
Umfrage
Fondsmanager setzen weiterhin auf Aktien
15. Februar 2007 Fondsmanager haben nach der aktuellsten globalen Umfrage von Merrill Lynch
ihre bisher etwas skeptischen Konjunkturerwartungen „überholt“ und sind optimistischer geworden.
FAZ, 17.02.2007
Schweiz
Börsianer stürmen den Gipfel
Der Schweizer Aktienindex SMI hat die magische 9000er-Marke genommen.
Wie Anleger am weiteren Anstieg verdienen können. Focus, 2.2.2007
Socionomics erklärt:Linear Extrapolation: "Predicting" the Present
(The Wave Principle of Human Social Behavior, 1999 by Robert R. Prechter)
Trend extrapolation is the crudest form of technical analysis, and it is employed by nearly all conventional analysts, though they rarely realize it. Mainstream social and economic forecasting has forever been a practice of extrapolating present and recent conditions and trend into the future.
The basis of the Wave Principle is that prices unfold in "five waves" of crowd psychological development
when moving in the direction of the one larger trend, and "three waves" when moving against. The size of
the trend, per se, and whether the trend of one larger degree is up or down, per se, are not determinants
of the subdivisions. Thus, in a Primary uptrend, an Intermediate advance occurs in five waves, moving up-down-up-down-up according to certain rules, and an Intermediate reaction occurs in three waves (down-up-down). While knowledge of current events and extramarket conditions has almost no value in predicting the stock market, knowledge about the position of the market can help predict changes in outside conditions. The Wave Principle provides a basis for speculating upon upcoming changes in market trends and therefore the events that result from the social psychology that the trend changes represent. (The Wave Principle of Human Social Behavior, 1999, Robert R.Prechter)
Fans of Elliott wave analysis know that the position of the stock market shows more than just the combined value of its stocks. The stock market is also a barometer of the society's collective emotion - or social mood, as Elliotticians call it. What's more, the trend in stocks is a usually a leading indicator of the changes in business and investor sentiment numbers. When stocks fall, they signal a worsening mood, when common feelings of pessimism start to take over. And as you can see, the DAX has been in the doldrums since mid-May, indicating a shift in the mood to the negative.
"Expectations about the coming months in the manufacturing and retailing sectors have worsened," say economists about the drop in Germany's business sentiment. Fine, they have worsened -- but what does that explain? Nothing; worse, is does nothing to help you forecast the economic trends. Based on this information, what would you say the Ifo business climate index will do in September -- fall some more or rise "unexpectedly"? If only traditional economists saw the stock market for what it really is -- i.e., the economy's leading indicator -- they would get far fewer surprises…
Global Markets Fall Again on Fears About U.S. Economy
Stock markets fell sharply across most of Asia again today and continued declining in Europe, as investors worried about the drop on Tuesday in American stock indices and a Commerce Department report. NYT Feb 28,2007
Global markets struggle to recover from sell-off
February 28, 2007
(CNN) -- Global markets are struggling to recover from a massive sell-off Tuesday that pummeled stocks and sent shock waves through the investment world. The rout -- which started in China and snowballed into Europe and Wall Street -- slowed slightly on Wednesday as investors bought up stocks at the lower prices and many analysts called for calm.
and rationalization:
Zhou Lin, of Huatai Securities, added: "The medium- and long-term outlook for the market is not bad. If the index doesn't fall again tomorrow, the market might start recovering."
Frankfurt
Die neue runde Börse
Der Handelssaal der Frankfurter Börse ist wiedereröffnet. Fünf Millionen Euro hat der viermonatige Umbau gekostet. Eher eine symbolische Investition: Auf dem Parkett wird kaum mehr gehandelt. Wie zur Feier des Tages steigt der Dax wieder über 7000 Punkte.
AKTIEN AUF TALFAHRT
Dax nach asiatischem Börsenbeben noch tiefer im Minus
Geht es weiter bergab oder war es nur eine kurzfristige Korrektur? Börsianer schauen nach dem schwarzen Dienstag gebannt auf die Kurse. Die Anleger stießen nach einem Einbruch der Börse von Schanghai am Dienstag ihre Papiere zum Teil panikartig ab. Besonders die Börse von Singapur, an der viele chinesische Unternehmen notiert sind, ging auf Talfahrt. Auch der Tokioter Handel verzeichnete durchweg Verluste. In Schanghai selbst stabilisierten sich die Kurse. Focus money, 02/28/2007
Shanghai Selloff Forces Investors to Reassess Economic Outlook
A dramatic plunge in stocks world-wide is forcing global investors to reevaluate their appetite for risk. The Dow industrials sank 416.02 points, or 3.3%, to 12216.24, their worst one-day decline since Sept. 17, 2001. The retreat was triggered by an 8.8% selloff in Shanghai overnight. Markets in France and Germany fell 3% and Brazil lost 6.6%. A sudden 200-point tumble in the Dow at 3 p.m. was the result of a glitch in how Dow Jones calculates the average.
WSJ, Feb 28, 2007
Latest Market Update
February 28, 2007
With many believing that the stock market had gotten ahead of itself, it appears Tuesday's drubbing may have been the long-overdue consolidation that had been talked about for some time. As a result, a sense that yesterday's...
Stocks suffered their worst losses since the Sept. 11, 2001, terror attacks, prompted by a huge sell-off in China's stock market, higher oil prices and some disappointing economic news.
The Dow Jones industrials, briefly down as much as 545 points, finished the day off 416 points, or nearly 3.3%, to 12,217. The Nasdaq Composite Index plunged more than 96 points, or 3.9%, to 2,408, and the Standard & Poor's 500 Index tumbled about 50 points, 3.47%, to just under 1,400, its lowest level in nearly three months.
The U.S. market may well face more turmoil tomorrow. In mid-morning trading in Tokyo on Wednesday, the benchmark Nikkei 225 index was down 606 points, 3.4%, to 17,534.
The market decline wiped out all of the year's gains for the Dow, the S&P 500 and the Nasdaq. The Dow is now down 2% for the year; the S&P 500 is down 1.4%. The Nasdaq is off 0.3%; a week ago it had been up 4.5%.
The sell-off was compounded when computers controlling orders to the New York Stock Exchange couldn't keep up with the record volume. The computers used to tabulate the Dow also couldn't keep up.
The declines were the largest for the major averages since markets reopened on Sept. 17, 2001, after the terror attacks on the twin towers of the World Trade Center and the Pentagon. That day, the Dow fell nearly 685 points, the S&P plunged nearly 54 points, and the Nasdaq sank 116 points.
Today's Dow's loss was also the biggest percentage decline since the index fell 3.67% on March 24, 2003 -- just before the United States invaded Iraq.
The selling produced the biggest volume ever on the New York Stock Exchange -- about 2.3 billion shares. Down volume on the NYSE was 2.2 billion shares. Volume on Nasdaq hit a record 2.78 billion shares.
"When trends reach extremes, reporters no longer require the services of financial professionals to express an opinion; the continuation of the trend is so obvious to them that they become convinced that anyone can do it, and they take on the forecasting themselves. Error at such times is guaranteed." (The Wave Principle of Human Social Behavior)
Today, total margin debt for NYSE and NASD firms has set a new record. Mutual funds cash to asset ratio is at a record low. I could go on and on recognizing financial and social signs of a peaking financial mania with facts and figures, but that holds little sway against entrenched consensus -- especially one in party mode. Alan Hall, EWI, 02/20/2007
CELEBRATING THE DAXDAX, February 03, 2007
(c) ELLIOTT today,02/03/2007
http://www.elliott-today.com/images/dax.ht4_small.jpg
Chart: futuresource.comUnless the market is going to produce an extension, the top should be in ! Note: since June 2004 the market trades below the rising 1x1.
DAX, daily(c) ELLIOTT today,01/16/2007
http://www.elliott-today.com/images/dax.ht3_small.jpgChart: futuresource.comSlightly different labeling, but the message remains the same: close to target.
Five Waves UP & an Elliott Parallel TrendchannelDAX, weekly (c) ELLIOTT today, January 13,2007
http://www.elliott-today.com/images/dax.ht1_small.jpg
Chart: futuresource.com
Elliott used parallel trend channels to assist in determining normal wave targets and to provide clues
to possible development of trends. In The Wave Principle, he asserted that as a wave progresses,
"it is necessary that the movement be channeled between two parallel lines." He regarded trend channeling as an important tool in establishing wave completion targets and in the segregation of individual waves. The complete channeling technique involves several steps and revisions.
It requires at least three reference points before two parallel lines can be drawn. As the waves nears completion, the line which connects the ends of wave one and four is the most reliable lower parallel for constructing the final trend channel. If waves one and three are normal, the upper parallel is most accurate when drawn touching the peak of the third wave .The guideline of alternation touches almost every aspect of the Wave Principle and is a useful one to keep
in mind when analyzing wave formations and assessing future possibilities. The guideline tells us to expect alternating patterns in virtually all wave movements. If, for example, corrective wave two cuts sharply against
the trend, expect wave four to be a sideways correction, and vice versa. As can be seen on the chart the upper parallel of the channel touches the scale in the DAX to the minute.
DAX, dailyhttp://www.elliott-today.com/images/dax.ht2_small.jpg
Chart: futuresource.comFive waves up, nearly so.
DAX & Social Mood(c) ELLIOTT today, 14.Dez 2006
Bundesregierung: Der Aufschwung ist da" Die Zeit, 8.Sept. 2006Artkel einer großen deutschen Tageszeitung, erschienen am 14.Dezember 2006 mit dem Titel:
"Aufschwung 2007" und die "Die Aussichten sind günstig" heisst es,
"Wirtschaftsinstitute und Wirtschaft überschlagen sich mit guten Nachrichten:
RWI und Ifo-Institut erhöhen ihre Prognosen für 2007, der Deutsche Industrie- und
Handelskammertag rechnet mit 200.000 neuen Jobs."
Und weiter heißt es:
"Der kräftige Konjunkturaufschwung in Deutschland, sind sich die Wirtschaftsforschungsinstitute einig,
wird im kommenden Jahr nicht abreißen."
Wegen günstiger Investitionsbedingungen und des positiven internationalen Umfelds werde die Wirtschaft um 1,9 Prozent
wachsen, teilte das Rheinisch-Westfälische Institut für Wirtschaftsforschung (RWI) heute mit.
Bislang waren die Forscher von 1,7 Prozent ausgegangen. Für das laufende Jahr gehen sie von 2,5 Prozent aus.
Auch das Münchner Ifo-Institut sagt für 2007 ein Plus von 1,9 Prozent voraus, das Kieler IfW sogar eines von 2,1 Prozent.
Auch der Bankenverband erhöhte seine Prognose von einem auf bis zu 1,5 Prozent.
Nach Angaben des Ifo-Instituts ist die Auslandsnachfrage die treibende Kraft des Booms in Deutschland. Diese habe trotz
der diesjährigen kräftigen Aufwertung des Euro gegenüber dem Dollar aufgrund der schwungvollen Weltkonjunktur erneut
sehr kräftig zugelegt. Anders als im Vorjahr sei aber auch die Binnenkonjunktur in Schwung gekommen.
Linear Extrapolation: "Predicting" the Present
Trend extrapolation is the crudest form of technical analysis, and it is employed by nearly all conventional analysts, though they rarely realize it. Mainstream social and economic forecasting has forever been a practice of extrapolating present and recent conditions and trend into the future.
(The Wave Principle of Human Social Behavior, 1999 by Robert R. Prechter)
open chart DAX, Dec 1,2006
http://www.elliott-today.com/images/dax.ht9_small.gif
Chart: futuresource.com
Ein Markt-Kommentar vom 30.Novmeber 2006 ist der Meinung, daß "Auf den Börsen lastete aber vor allem der Konjunkturindex der Einkaufsmanager aus dem Großraum Chicago (PMI), der im November unerwartet auf
den tiefsten Stand seit fast vier Jahren gefallen war." Das an den Finanzmärkten stark beachtete Barometer sank auf 49,9 Punkte und signalisierte damit erstmals seit
dreieinhalb Jahren eine Kontraktion. Weiter heißt es, "Die Märkte wurden von dieser Entwicklung überrascht, da Volkswirte mit einem Anstieg
gerechnet hatten."Surprise, surprise.
"Der PMI ist schwächer als erwartet, diese Nachricht wird nicht gern gehört", sagte....von....mit Blick auf die
unterschwellige Sorge der Anleger um das künftige Wirtschaftswachstum. Unterschwellige Sorge!"Die Investoren zögern, den Markt weiter in die Höhe zu treiben", sagte ..."Doch die Impulse waren nicht eindeutig." Andererseits seien nämlich Fonds-Manager vor dem Jahresende auf Einkaufstour und brächtenso die Wall Street in
Schwung, sagte... 11/30/2006
http://www.elliott-today.com/images/socion12.gif
The chart of the Ifo Business Climate Index displays a clear five-wave structure according
to the Wave Principle, indicating German business sentiment heads toward a top. See Socionomics The Economy The standard presumption is that the state of the economy is a key determinant ofthe stock market’s trends. All day long
on financial television and year after year in financial print media, investors debate the state of the economy for clues to the future course of the stock market.If this presumed causal relationship actually existed, then there would be some evidence that the economy leads the stock market. On the contrary, for decades, the Commerce Department of the federal government has identified the stock market as a leading indicator of the economy, which is indeed the case. If the standard presumption were true, then changes in the economy would coincide with or precede trend changes in aggregate stock prices. However, a study of Figure 1 will show that changes in the economy coincide with or follow trend changes in aggregate stock prices. Except for the timing of the recession of 1946 (which supports neither case), all economic contractions came upon or after a downturn in aggregate stock prices, and all economic recoveries came upon or after an upturn in aggregate stock prices. In not one case did a contraction or recovery precede a change in aggregate stock prices, which would repeatedly be the case if investors in fact reacted to economic trends and events. This chronology persists back into the nineteenth century as far as the data goes.
The socionomic hypothesis explains the data. Changes in the stock market immediately reflect the changes in endogenous social mood. As social mood becomes increasingly positive, productive activity increases; as social mood becomes increasingly negative, productive activity decreases. These results show up in lagging economic statistics as expansions and recessions. The standard presumption has no explanation for the relative timing of these two phenomena.
Socionomics erklärt: "A rising mood leads to substantial consensus in politics, culture and social vision; a falling mood leads to a divided, radical climate. After the social mood has risen for a number of years, the society tends to be peaceful; after it has fallen for a number of years, it tends to become involved in wars." (The Wave Principle of Human Social Behavior, Robert R.Prechter,1999).
Um nicht mißverstanden zu werden: Selbstverständlich wünschte ich Deutschland, der Euro-Zone und der ganzen Welt einen langanhaltenden Aufschwung. Aber... Die renommierte ResearchfirmaBCA Research (Independent Investment Research Since 1949)
kommt in ihrer jüngsten Analyse zu der folgenden Einschätzung
Euro Area Economic Growth: Peaking
December 05, 2006
The euro area economy is likely at the point of maximum acceleration.
A host of recently released data show that the euro area economy is in great shape—in stark contrast to the U.S.. Both industrial and consumer confidence are surging higher, and the unemployment rate has dropped to multi-year lows. Looking ahead, this apparent decoupling with the U.S. (and Japan) is unlikely to persist. Historically, the highly cyclical euro area industrial confidence indicator lags the U.S. ISM by roughly 6-months. If past patterns hold, euro area growth momentum is currently at a peak. Nonetheless, a big savings cushion and ample liquidity conditions should ensure that the growth slowdown is limited. Bottom line: the euro area economy should hold up better than most expect, but a marked decoupling from the U.S. is unlikely. http://www.bankcreditanalyst.com/public/story.asp?pre=PRE-20061205.GIF
http://www.elliott-today.com/images/dax.ht10_small.gif
Chart: futuresource.com
At its core, Elliott wave analysis is all about "fives and threes." If you can count on a chart five waves in one direction and then three waves in the opposite direction (and make sure that all 3 Rules of Elliott and the maximum number of guidelines are observed) chances are, you've got a completed -- and likely tradable -- wave count.
DAX, Weekly Chart, December 1,2006 © ELLIOTT today, December 1, 2006 http://www.elliott-today.com/images/dax.ht7_small.gif Chart: Futuresource.com According to P.Q.Wall research, October 8 through 10,2002 was the end of a 5,5 year Kitchin cycle. It was the low for the
DJIA, the NASDAQ Composite Index, the NASDAQ 100 and the New York Composite Index. On October 10 the Industrials '
dipped to 7197. In the end the intra-day spring low of March 12 was 7416. So Wall Cycle One of the new Kitchen Cycle has accomplished a scorching net gain of 200 points! But the truth was that since October the downward momentum was drying
up and stocks began refusing to fall further. On December 02, 2005, ELLIOTT today had this to say: A bullish alternate count points to 5863, the 0.618 Fibonacci retracement of the decline from the year 2000.
Waves 1,2,3 and 4 off the August 2004 low can be counted as a bullish 1-2, (i)-(ii), too, suggesting a superbullish
wave 3 of 5 of (c) lies ahead. If so, (we are dealing with possibilities) such a target could be achieved in the first quarter
of 2006. For the time being, we're watching the levels given by the Gann lines at 4800, 4600 and 4100. So far, this was a good description of what has been developing. From an Elliott standpoint, the big news is that the DAX
has just traced out five waves up from the March 2003 low, a clear cut impulse wave. From awave perspective, the upper parallel trend channel line points to much higher prices, probably into
the 6500s area, depending on the time window. Under the preferred interpretation, which views the pattern as a five-wave structure, wave (1) gained 90%, wave (3) gained 71%. Thus, wave (5) now underway should be shorter thanwave (3) since
wave three "is often the longest and never the shortest of the three impulse waves in a five-wave sequence." (EWP,p.53). In markets, progress ultimately takes the form of five waves of a specific structure. Waves 1, 3 and 5 actually effect the directional movement. Waves 2 and 4 are countertrend interruptions. The two interruptions are apparently a requisite for
overall directional movement to occur. Elliott noted three consistent aspects of the five-wave form. They are: Wave two never moves beyond the start of wave one, wave three is never the shortest wave, and wave four never enters the price territory of
wave one. The stock market is always somewhere in the five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed by it. In the case of the DAX,
the five pattern is clearly visible. The only question is, whether its wave five of large degree or wave A as part of a much
bigger corrective formation.The May to June/July swan is best counted as wave four and the fact that the correction displayed a 38.2% Fibonacci retracement of wave (3) supports the analysis. Further evidence for a wave four triangle can be gleaned from the fact, that
at the end of the triangle, wave (4) corrected 23.6% which is 0.618 of 38.2%. The steady upward move since August confirms the action following a triangle, in fact R.N. Elliott called it a "thrust." More often than not, fifth waves tend to reach the upper parallel line of an Elliott trend channel which in the case
of the DAX is the area of 6800+ and that's also the area of a 0.786 Fibonacci retracement of the decline 8136 to 2188. This doesn't mean the DAX has to go to that level. As the chart reveals, five waves up from the July lows can be counted as complete or nearly so indicating the market may have reached an important juncture. Going all the way back to October/December 1974, important lows (in the Dow) occurred in March 1978, September 1981, July 1984, October 1987, Janaury 1991, April 1994 and October 1997. Each is separated by 3 years plus 3-6 months, the only exception being the 1984 low, which came five months early. Since 1990, each 3.3 year cycle correction has been outrageously shallow, which has thrown us off the track three times. It bottomed again on schedule at the October 1997 low. The 1997 bottom brought
the infamous market meltdown in Asia. Its next scheduled bottom was September 2001 right in time with the terrorist attack against the WTC in New York. In August 2004 the cycle was relative mild and the leap out of the bottom produced a very strong up move supporting the fact that wave (3) in the DAX was underway. If this cycle progresses accordingly the next major cycle low is expected in late 2007. When larger cycles are down (as in this case the 5.5 year Kitchen), smaller cycles often top early, and when they do, they end in a crash, as in 1929 and 1987.Summary: Elliott waves, momentum, sentiment indicators and cycles indicate that the 3.3. year cycle is being overwhelmed
by bearish forces right now. As the chart reveals, the 5.5 year Kitchen cycle is declining sharply against an upward bias in the market and a drop larger than the April-Juni 2006 correction strongly suggests, that the DAX has reached a top of major proportion. It would therefore constitute a warning that larger downward forces have gained the upper hand.
CNBC Market Dispatches
6/23/2005 Crude at $60, trade concerns pummel stocks Just having crude touch $60 unnerves investors; Dow off 166. Senators debate whether China can buy Unocal and plays fair on trade. Today's market close was a shock, and that's an understatement. When the price of crude oil hit $60 a barrel in mid-afternoon trading, a mixed stock market suddenly turned into a battered market. The Dow Jones industrials finished down 166 points. The Nasdaq Composite, which had been up until about 2 p.m., fell back to a 21-point loss, and the Standard & Poor's 500 Index fell more than 11.5 points. The Dow's point loss was its worst since June 3 and its first loss greater than 100 points since May 12. Msn Market Dispatches 7/17/2006
Mideast violence threatens stocks
Investors react to each bit of news out of the Middle East. Oil prices retreat.
Market Dispatches 9/11/2006
Oil slides, but so do stocks
Crude falls below $66 per barrel as OPEC meets today.
Market Dispatches 9/12/2006 Lower rates, falling crude push Dow up 101
Crude falls under $64, and interest rates fall. Dow jumps more than 101, nears May 10 high.
Market Dispatches 9/14/2006
Stocks slip on falling energy prices
Dow off nearly 16, but natural gas tumbles nearly 10% on unexpected supply gains. The charts speak for themselves. The notion that "higher energy prices are bad for the stock market" is fiction poorly disguised as fact. The charts prove it beyond a reasonable doubt. Said Elliott Wave International's Market Watch: "Oil prices are making headlines again. The London-traded Brent crude oil set a new record today and is now 37% higher on the year. At the same time, the six major European stock indexes are up an average of 19% for the year, too." The media, however, continues latching on to this argument.
Socionomics explains: What do these fixations have in common? First, they reveal a desire among investors to have one simple indicator of the future course of stock prices. Second, not one of them is an indicator derived from market activity itself; each
one is from outside the market and simply presumed to have an impact upon it. Third, all have apparently logical explanations. Fourth, intense scrutiny of each one of these "key figures" was in fact counterproductive to a correct assessment of the trend of the stock market. All served to keep investors' eyes off the ball. Finally, each new key-relationship claim appeared at first blush to sound reasonable, but it was the least bit investigated, as in each case, a brief glance at
a graph would have instantly debunked the claim. Nobody, it seems, ever bothered to look.
Commodity Prices and Inflation:
What's the Connection?
Daily Article by Frank Shostak | Posted on 7/1/2008
The latest data show that the yearly rate of growth of the US consumer price index (CPI) climbed to 4.1% in May from 3.9% in the month before. Most economists and Federal Reserve policy makers attribute this to sharp increases in commodity prices.
In his speech at the Federal Reserve Bank of Boston, Fed Chairman Bernanke said,
Inflation has remained high, largely reflecting sharp increases in the prices of globally traded commodities.
There is almost complete unanimity among economists and various commentators that inflation consists in general increases in the prices of goods and services. From this it is established that anything that contributes to price increases sets inflation in motion. A decrease in unemployment or an increase in economic activity is seen as a potential inflationary trigger. Some other triggers, such as increases in commodity prices or workers wages, are also regarded as potential threats.
If inflation is just a general increase in prices, as popular thinking has it, then why is it regarded as bad news? What kind of damage does it do?
Mainstream economists maintain that inflation causes speculative buying, which generates waste. Inflation, it is maintained, also erodes the real incomes of pensioners and low-income earners and causes a misallocation of resources. Inflation, it is argued, also undermines real economic growth.
Why should a general increase in prices hurt some groups of people and not others? And how does inflation lead to the misallocation of resources? Why should a general increase in prices weaken real economic growth? If inflation is triggered by other factors, then surely it is just a symptom and can't cause anything as such.
We know that a price of a good is the amount of money paid for the good. From this we can infer that for any given amount of goods, a general increase in prices can only take place in response to the increase or inflation of the money supply.
Most economists, when discussing the issue of general increases in prices, which they label inflation, never mention the word money. The reason for that is the lack of a good statistical correlation between changes in money and changes in various price indexes such as the CPI. Whether changes in money cause changes in prices cannot be established by means of statistical correlation. We suggest that a statistical correlation, or lack of it, between two variables shouldn't be the determining factor in establishing causality. One must figure out by means of reasoning the structure of causality.
The Essence of Inflation
Historically, inflation originated when a king would force his citizens to give him all their gold coins under the pretext that a new gold coin was going to replace the old one. In the process the king would falsify the content of the gold coins by mixing it with some other metal and return to the citizens diluted gold coins. On this Rothbard wrote,
More characteristically, the mint melted and recoined all the coins of the realm, giving the subjects back the same number of "pounds" or "marks," but of a lighter weight. The leftover ounces of gold or silver were pocketed by the King and used to pay his expenses.
Because of the dilution of the gold coins, the ruler could now mint a greater number of coins for his own use. (He could now divert real resources to himself.) What was now passing as a pure gold coin was in fact a diluted gold coin.
The expansion in the diluted coins that masquerade as pure gold coins is what inflation is all about. As a result of the increase in the amount of coins, prices in terms of coins now go up (more coins are being exchanged for a given amount of goods). What we have here is inflation, i.e., an expansion of coins. As a result of inflation, the ruler can engage in an exchange of nothing for something. Also note that the increase in prices in terms of coins results from the coin inflation.
Under the gold standard, the technique of abusing the medium of exchange became much more advanced through the issuance of paper money unbacked by gold. Inflation therefore means here an increase in the amount of paper receipts resulting from the increase in receipts that are not backed by gold yet masquerade as the true representatives of money proper: gold.
The holder of unbacked receipts can now engage in an exchange of nothing for something. As a result of the increase in the number of receipts (inflation of receipts) we now also have a general increase in prices. Observe that the rise in prices develops here because of the increase in paper receipts that are not backed by gold. Also, what we have is a situation where the issuers of the unbacked paper receipts divert to themselves real goods without making any contribution to the production of goods.
In the modern world, money proper is no longer gold but rather paper money; hence inflation in this case is an increase in the stock of paper money. Please note we don't say, as monetarists do, that the increase in the money supply causes inflation. What we are saying is that inflation is the increase in the money supply.
We have seen that increases in the money supply set in motion an exchange of nothing for something. They divert real funding away from wealth generators toward the holders of the newly created money. This is what sets in motion the misallocation of resources, not price increases as such.
Real incomes of wealth generators fall not because of a general rise in prices but because of increases in the money supply. When money is expanded — i.e., created out of "thin air" — the holders of the newly created money can divert to themselves goods without making any contribution to the production of goods. As a result, wealth generators who have contributed to the production of goods discover that the purchasing power of their money has fallen since there are now fewer goods left in the pool — they cannot fully exercise their claims over final goods since these goods are not there.
Once wealth generators have fewer real resources at their disposal, this will obviously hurt the formation of real wealth. As a result, real economic growth is going to come under pressure.
General increases in prices, which follow increases in money supply, only point to an erosion of real wealth. Price increases, however, didn't cause this erosion.
Likewise, it is monetary inflation, and not increases in prices, that erodes the real incomes of pensioners and low-income earners. As a rule, they are the last receivers of money — often called the "fixed-income groups."
According to Rothbard,
Particular sufferers will be those depending on fixed-money contracts — contracts made in the days before the inflationary rise in prices. Life insurance beneficiaries and annuitants, retired persons living off pensions, landlords with long-term leases, bondholders and other creditors, those holding cash, all will bear the brunt of the inflation. They will be the ones who are "taxed."
Can Increases in Commodity Prices Cause Inflation?
We have seen that, according to Bernanke and most economists, it is increases in commodity prices such as oil that are behind the recent strong increases in the prices of goods and services.
If the price of oil goes up, and if people continue to use the same amount of oil as before, people will be forced to allocate more money to oil. If people's money stock remains unchanged, less money is available for other goods and services, all other things being equal. This of course implies that the average price of other goods and services must come down. Remember: a price is the sum of money paid for a unit of a good. (The term "average" is used here in conceptual form. We are well aware that such an average cannot be computed.)
Note that the overall money spent on goods doesn't change; only the composition of spending has altered, with more on oil and less on other goods. Hence the average price of goods or money per unit of good remains unchanged.
Likewise, the rate of increase in the prices of goods and services in general is going to be constrained by the rate of growth of money supply, all other things being equal, and not by the rate of growth of the price of oil.
It is not possible for increases in the price of oil to set in motion a general increase in the prices of goods and services without corresponding support from the money supply.
Can Inflation Expectations Trigger a General Price Rise?
We have seen that as a rule a general increase in the prices of goods can emerge as a result of the increase in the amount of money paid for goods, all other things being equal. The key then for general increases in prices, which is labeled by popular thinking as inflation, is increases in the money supply, e.g., the supply of US dollars. But what about the situation when increases in commodity prices ignite inflation expectations, which in turn strengthens the rate of inflation? Surely then inflation expectations must be also an important driving factor of inflation? According to Bernanke inflation expectations are the key driving factor behind increases in general prices,
The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations. The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation.
Once people start to anticipate higher inflation in the future, they increase their demand for goods at present thus bidding the prices of goods higher. Also, according to popular thinking, workers expectations for higher inflation prompt them to demand higher wages. Increases in wages in turn lift the cost of producing goods and services and force businesses to pass these increases on to consumers by raising prices.
It is true that businesses set prices and it is also true that businessmen, while setting prices, take into account various costs of production. However, businesses are ultimately at the mercy of the consumer, who is the final arbiter.
The consumer determines whether the price set is "right," so to speak. Now, if the money stock did not increase, then consumers won't have more money to support the general increase in prices of goods and services.
Also, because of expectations for higher prices in the future, consumers will not be able to increase their demand for goods at present and bid the prices of goods higher without having more money. Consequently, the amount of money spent per unit of goods will stay unchanged.
So irrespective what people's expectations are, if the money supply hasn't increased, then people's monetary expenditure on goods cannot increase either. This means that no general strengthening in price increases can take place without an increase in the pace of monetary pumping.
Imagine that somehow the Fed did manage to convince people that central bank policies are aimed at stopping inflation and maintaining price stability, yet at the same time the central bank also increased the rate of growth of money supply. Even if inflationary expectations were stable, that destructive process would be set in motion, regardless of these expectations, because of the increase in the rate of growth of money. People's expectations and perceptions cannot offset this destructive process. It is not possible to alter the facts of reality by means of expectations. The damage that was done cannot be undone by means of expectations and perceptions.
Some economists, such as Milton Friedman, maintain that if inflation is "expected" by producers and consumers, then it produces very little damage. The problem, according to Friedman, is with unexpected inflation, which causes a misallocation of resources and weakens the economy. According to Friedman, if a general increase in prices can be stabilized by means of a fixed rate of monetary injections, people will then adjust their conduct accordingly. Consequently, Friedman says, expected general price increases, which he calls expected inflation, will be harmless, with no real effect.
Observe that, for Friedman, bad side effects are not caused by increases in the money supply but by its outcome — increases in prices. Friedman regards money supply as a tool that can stabilize general increases in prices and thereby promote real economic growth. According to this way of thinking, all that is required is fixing the rate of money growth, and the rest will follow.
The fixing of the money supply's rate of growth does not alter the fact that money supply continues to expand. This, in turn, means that it will lead to the diversion of resources from wealth producers to non–wealth producers. The policy of stabilizing prices will therefore generate more instability through the misallocation of resources.
Can Inflation Emerge While Prices Stay Unchanged?
Now, if for a given stock of goods an increase in the money supply occurs, this would mean that more money is going to be exchanged for a given stock of goods. Obviously then the purchasing power of money is going to fall, i.e., the prices of goods are going to increase (more money per unit of a good). In this case the general increase in prices is associated with inflation.
But now consider the following case: the rate of growth in money is in line with the rate of growth in goods. Consequently, the prices of goods on average don't change. Do we have inflation here or don't we? For most economists, if an increase in the money supply is exactly matched by the increase in the production of goods, then this is fine, since no increase in general prices has taken place and therefore no inflation has emerged. We suggest that this way of thinking is false since inflation has taken place, i.e., the money supply has increased. This increase cannot be undone by the corresponding increase in the production of goods and services.
For instance, once a king has created more diluted gold coins that masquerade as pure gold coins he is now able to exchange nothing for something irrespective of the rate of growth of the production of goods. Regardless of what the production of goods is doing, the king is now engaging in an exchange of nothing for something, i.e., diverting resources to himself by paying nothing in return. This diversion is possible because of the increase in the number of diluted coins, i.e., the inflation of coins.
The same logic can be applied to paper-money inflation. The exchange of nothing for something that the expansion of money sets in motion cannot be undone by an increase in the production of goods. The increase in money supply — i.e., the increase in inflation — is going to set in motion all the negative side effects that money printing does, including the menace of the boom-bust cycle, regardless of the increase in the production of goods.
According to Rothbard,
The fact that general prices were more or less stable during the 1920s told most economists that there was no inflationary threat, and therefore the events of the great depression caught them completely unaware.
Conclusion
Contrary to the popular definition, inflation is not about a general rise in prices but about increases in money supply. The general increase in prices as a rule develops because of the increase in money. The harm that most people attribute to increasing prices is in fact due to increases in money supply. Policies that are aimed at fighting inflation without identifying what it is all about only make things much worse.
When inflation is seen as a general increase in prices, then anything that contributes to price increases is called inflationary. It is no longer the central bank and fractional-reserve banking that are the sources of inflation, but rather various other causes.
In this framework, not only does the central bank have nothing to do with inflation but, on the contrary, the bank is regarded as an inflation fighter. On this Mises wrote,
To avoid being blamed for the nefarious consequences of inflation, the government and its henchmen resort to a semantic trick. They try to change the meaning of the terms. They call "inflation" the inevitable consequence of inflation, namely, the rise in prices. They are anxious to relegate into oblivion the fact that this rise is produced by an increase in the amount of money and money substitutes. They never mention this increase. They put the responsibility for the rising cost of living on business. This is a classical case of the thief crying "catch the thief." The government, which produced the inflation by multiplying the supply of money, incriminates the manufacturers and merchants and glories in the role of being a champion of low prices.
_____________________________
Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. He is chief economist of M.F. Global. Send him mail and see his outstanding Mises.org Daily Articles Archive. Comment on the blog.
Notes
Ben S. Bernanke. "Outstanding Issues in the Analysis of Inflation." Speech at the Federal Reserve Bank of Boston June 9, 2008.
Murray N. Rothbard. What Has Government Done to Our Money?
Murray N. Rothbard. What Has Government Done to Our Money?
Ben S. Bernanke. "Outstanding Issues in the Analysis of Inflation." Speech at the Federal Reserve Bank of Boston June 9, 2008.
See Friedman's Dollars and Deficits, Prentice Hall, 1968, pp.47–48.
Murray N. Rothbard. America's Great Depression. 153.
Ludwig von Mises. Economic Freedom and Interventionism. 94.
General Motors (GM) Chart of June 28,2008
http://www.elliott-today.com/images/studie5.gif
Again, Five-waves down from the top !!
DAX © ELLIOTT today, posted April 17,2008
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Chart: futuresource.com Elliott Wave analysis called for a decline to the "previous fourth wave support..."
DAX Chart of January 23, 2008 © ELLIOTT today, posted April 17,2008
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Chart: futuresource.com
EUR/CHF
© ELLIOTT today, April 5,2008
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Chart: futuresource.comR.N.Elliott’s Discovery
In the 1930s, Ralph Nelson Elliott discovered that aggregate stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form, but not necessarily in time or amplitude. Elliott isolated and defined thirteen patterns, or “waves”, that recur in market price data. He named and illustrated the patterns. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns at the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle.
Many areas of mass human activity display the Wave Principle, but it is most popularly applied to stock market averages. There is voluminous, meticulously tabulated data on fincancial markets because people deem them important. Actually, the stock market is far more significant to the human condition than it appears to casual observers and even to those
who make their living by it. The level of aggregate stock prices is a direct and immediate measure of the popular valuation of man’s total productive capability. That this valuation has a form is a fact of profound implications that should ultimately revolutionize the social sciences.
While Elliott progressed to the recognition of patterns and their linkage by a painstaking process of cataloging the minute details of price movement, we will forego such exercises and proceed directly to a description of the overall pattern.
The Five-Wave Pattern
In markets, progress ultimately takes the form of five waves of a specific structure. Waves (1), (3), (4) and (5) actually effect the directional movement. Waves (2) and (4) are countertrend interruptions. The two interruptions are apparently a requisite for overall directional movement to occur. Elliott noted three consistent aspects of the five wave form. They are: Wave two never moves beyond the start of wave one, wave three is never the shortest wave, and wave four never enters the price territory of wave one. The stock market is always somewhere in the basic five-wave pattern at the largest degree of trend. Because the five-wave pattern is the overriding form of market progress, all other patterns are subsumed.
http://www.elliott-today.com/images/logo-short-bluebg.gif
Source: Elliott Wave International
The Elliott Wave Financial Forecast
March 31,2000 Broadstreet
The following chart (Pioneering Studies in Socionomics, (c) 2003, Robert R.Prechter) of annual gross
revenues for Broadway theaters paints a revealing portrait of the correlation between a rising social mood
and the demand for popular stage shows. Over the last half century, Broadway's box office performance
has ebbed and flowed with the Cycle-degree trends in the stock market. Just like stocks, ticket sales had
a long rise to a double top in 1966 and 1668 (attendance topped in 1966 and revenues in 1968 ) a major
bottom in 1974 and another long advance through the end of the 1990s. Broadway's recent take suggests
that a trend change is at hand. Projections for the year ending May 31 call for little more than a slight
increase of $1 million. This slowing would fit our Elliott wave case for stock market downturn of at least
Cycle degree.
Lending support to this quantitatiive assessment is the more qualitative analysis that appeared in the
August 1997 issue of the The Elliott Wave Theorist. A study of New York City's theater district at past
peaks revealed a clear tendency to finish long advances with a flourish of activity and showmanship.
"Entertainment industry histories covering the Supercycle peaks of 1835 and 1929 show that flashy
but shallow drama is a recurrent theme in fifth waves of Cycle degree. " The same word, "spectacles,"
continually surfaces in descriptions of Broadway's earlier fifth wave peaks and its latest era. "You have
two kinds of shows on Broadway - revivals and the same kind of musicals over and over again, all
spectacles," laments Stephen Sondheim, who was recently tabbed "the Broadway musical's last great
artist." "Broadway today is more than ever about spectacle than real drama or real emotions, more
about giving audiences an 'experience,' " Like the figures for Broadway ticket sales, this more
subjective confirmation of a fifth wave als carries a clear sign its impending demise. "Cats, the longest
running production on Broadway history will close June 25," says The New York Times. "Cats fundamentally
reshaped the Broadway landscape by ushering in the era of megamusicals: big flashy spectacles that
required little theatrical sophistication or knowledge of the English language to appreciate." Cats came
to Broadway on October 7, 1982. When the curtain falls June 25,Cats many critics will undoubtedly
applaud, but probably not for long. "In 1930," Times Square, a history of the NYC district notes, "the
frivolity of the 1920s gave way to a serious, if not grim tone." By 1932 only six years shows were playing
on Broadway. That compares to an all-time high in 1928 of 294! The show will go on, but not without drastic
changes in tone and reductions in number.
Elliott Wave International
The Elliott Wave Theorist
March 27,1998
A Socionomic Study of Restaurants
Munching on Evidence of a Grand Supercylce Peak
When people feel good, they like to got out, be seen, eat well and dring socially. This makes restaurants
a focal point for the expression of a bull market mood. In our town, chain restaurants now seem to spring
up a row in time, which led us to dig the following highlights in the history of the restaurant industry.
Data show that the urge to eat out has been synonymous with the urge to buy stock for the duration of the
Grand Supercycle bull market . The first true restaurant was the Grande Taverne de Londres, which was
established in Paris around 1782, approximately the year that we believe Supercycle wave (I) began.
Delmonico's , the first American restaurant, was established dring the final leg of Supercycle wave (I).
Between its establishment and the stock top of 1835, the Delmonico brothers and two other proprietors
became the first to "operate multiple restaurants, which functioned as a complex organism - the use of the
same name, almost duplicate menus, and similar genetic consistencies to create clones," according to the
book, From Boarding House to Bistro. Through the middle of the 19th century, restaurants became more
common, but the choppy stock market conditions were reflected in a high failure rate. Of the 497 different
addresses in New York City from 1950 to 1860, only 11, or 2% , were open under the same proprietor in
both years. True chains appeared after the Civil War, as Supercycle wave (III) began its steady advance. In
1875, in the middle of wave (III), the Harvey House, which ultimately grew to a highly standardized family of
50 restaurants, revolutionized the industry. "Like the Delmonicos, Fred Harvey was at the right spot at the
right time," records American Eats Out, a history of the restaurant business. " effect was immediate,
populist, and spread through the entire country, the course of culinary history."
In the bull market of the 1920s, cafeteries, speakeasies and White Castle hamburger joints rapidly across
the country. Howard Johnson, Marriott Corp. and countless other "white box" hamburger stands tapped into
the mass appeal that White Castle had uncovered. The nest "revolution" was called "fast food," which
From Boarding House to Bistro dates to 1949, the exact year of the start of Supercycle wave (V) in
inflation-adjusted stock prices, when the McDonald brothers established a walk-up hamburger stand.
In many ways, "McDonald's story was a reenactment of the in the 1920s."
In 1954, as the "third of the third wave" entered its acceleration phase, Ray Kroc bought the francise rights,
capturing what may be America's No.1 brand name by introducing speed, efficiency and mass marketing
to the industry. McDonald's capped off a decade of rapid growth with the first major offering of a restaurant
stock in 1965, a few months before the wave III peak.
Through the first 200 years of the Grand Supercycle bull market, the relatively fragmented and faddish nature
of the industry kept most eateries from being listed on the stock exchange. McDonald's still makes up almost
80% of the S&P restaurant index because it remains one of just four well-established restaurant-chain stocks.
Appropriately, however, in this final decade of the advance, the public has assumed much of the risk that is
inherent in catering literally to tastes. In the 1990s, the number of restaurant stock offerings has mushroomed
into the 100s, financing an unprecedented boom in restaurant-industry growth. Almost 45% of the money spent
on food now is spent in restaurants. In some multi-purpose establishments, dining has been upgrated to a
full-sensory experience known as "entertainment." At the Rainforest Cafe, patrons are treated to an
"environmentally conscious 'family adventure' featuring live tropical birds, simulated nature sounds, waterfalls,
aromatic scents and a gift shop retail area." Plane Hollywood packages its fare around the aura of celebrities from
movies, sports and music. Both are publicly traded.
The stock market is an advance-warning device, so it is of interest that the stocks of these two companies have
fallen substantielly. In fact, it's hard to find a restaurant stock that is still participating in the bull market. Even
McDonald's is struggling to regain "it's golden touch." Over the last two years, McDonald's shares have been flat
versus a 70% gain in the S&P. Suddenly, "the company that once seemed a half-step ahead of pop culture" cannot
even "construct an appealing new lunch sandwich." Our view is that McDonald's and the restaurant business are
powerful reflections of a positive social mood. The quantity, diversity and increasing complexity of restaurants reflect
the same aspects of the bull market. The inability of their stock prices to match the bull market hints of a coming
retrenchment in the industry. That , in turn, portends an end to the long term economic uptrend that has supported
their success.Elliott Wave International (Pioneering Studies In Socionomics, 2003, Robert R.Prechter jr.)
McDonald (MCD) open chart McDonald,12/03/2007
http://www.elliott-today.com/images/studie2_small.gif
(Carl H.Lachmann)
A TRACK RECORD OF WP APPLICATION TO THE STOCK MARKET Part I
This essay by Robert R. Prechter, Jr. originally appeared in The Elliott Wave Theorist in December 2004.
According to leading physicists and mathematicians who propose a fractal nature to financial markets, forecasting specific market developments is impossible. You can get an idea of this viewpoint from two quotations from eminent scholars in this area:
Coastlines are good examples of random fractals. Stock prices are comparable to coastlines.
—Edgar E. Peters (1991, p.51)
I agree with the orthodox economists1 that stock prices are probably not predictable in any useful sense of the term.
—Benoit Mandelbrot and Richard Hudson (2004, p.6)
The conclusion that forecasting specific developments within the stock market fractal is impossible derives from the assumption that financial markets – like clouds, rivers and coastlines — form indefinite or “random” fractals, which have no specifiable or anticipatable pattern. In contrast, The Wave Principle of Human Social Behavior (1999) offers a new hypothesis: that price movements in the stock market form what is termed in that volume a robust fractal, which, while quantitatively variable, is a hierarchical iteration of a certain form, such as occurs in trees. Most fundamentally, the form in financial markets is the iteration of alternating movements of 5 and 3 waves of a certain description. At the next level of complexity, it comprises linked repetitions of five essential price patterns — termed impulse, flat, zigzag, triangle and diagonal triangle — which occur at specific points in the development of the wave structure. The description of this form and its sub-patterns constitutes a model of the stock market called the Wave Principle (WP). WP is described and illustrated in detail in the literature (Elliott 1938, 1946; Frost and Prechter 1978/2005; Prechter 1999).
What we may call the “Indefinite Fractal” model of Mandelbrot (1999) improves upon the Random Walk model and economists’ bell-curve assumptions regarding risk by quantifying more accurately the frequency of extreme events in financial markets. It has nothing to say about when such events will occur, however, so it has no real-time, practical forecasting value. Both of these models are compatible with the idea that movements in markets are unpredictable in terms of specific events, paths or patterns. Some models from the financial profession (such as the Cyclic model, which postulates that markets are the product of periodic, harmonic time cycles) do presume specific patterns and predictability, but they have not yet been adequately chronicled and assessed.
A Note On Some Models That Purport To Describe Financial Markets
A reasonable measure of the validity of various models of the stock market is how well they describe the past. Historical stock market prices and random walks yield very different results on randomness tests;2 in other words, random walks do not describe historical stock prices well with respect to what these tests measure. The Indefinite Fractal model of Mandelbrot successfully describes the stock market but only as far as it attempts to do so, which is not very far. It is limited to a mathematical expression of its “roughness.” WP postulates a specific form, and in doing so it subsumes the useful aspects of the Indefinite Fractal model.
Competing models from the financial profession sometimes fail adequately to account for past market action. For example, cycles sometimes repeat at a certain frequency and then inexplicably change frequency or disappear. WP, in contrast, accounts well for detailed stock market movement over for the past 90 years and for all U.S. and English stock market data, which go back over 300 years, at large degrees of trend.3 WP’s results on randomness tests, moreover, are nearly identical to the results for historical stock market prices,4 implying a possible affinity between the WP model and past stock market action, at least in terms of what these tests measure.A Useful Model for Forecasting Financial Markets
A more revealing question is how well various stock market models describe the future. Few models of stock market behavior can claim to be successful in specific market forecasting. The Wave Principle has a documented 70-year history of application. How has it fared? One way to test this question is to identify crucial turning points in the stock market and investigate whether WP provided an analyst at the time with enough information to make a correct assessment of future market prospects. Figure 1 shows the stock market for the past seven decades. On it are marked the major and intermediate turning points from 1937 to the present.5 This study begins in 1937 because that year contains the first turning point to which any Elliottician’s outlook pertained.
Computations to determine major turning points are based upon daily closing readings in the Dow Jones Industrial Average (DJIA) or in the DJIA divided by the Producer Price Index, an index called the “constant-dollar Dow,” and are rounded to the nearest one percent. A Major Bottom is defined as any price point that (1) follows a price decline of at least 40 percent without an intervening lower price point and (2) precedes a price rise of at least 200 percent without an intervening lower price point. A Major Top is defined as any price point that (1) follows a price rise of at least 200 percent without an intervening higher price point, (2) precedes a price decline of at least 25 percent (i.e., to an intermediate bottom) without an intervening higher price point and (3) precedes a price decline of at least 40 percent that allows for intervening higher price points but not by more than one percent per ensuing year.6 Figure 1 marks the Major Tops and Bottoms that occurred either in the DJIA or the constant-dollar Dow. The only time that these two indexes differed significantly from each other was in the 1968-1982 period. The DJIA made a Major Bottom in December 1974; the constant-dollar Dow made a Major Bottom in 1982 (see Figure 12).
Computations to determine intermediate turning points are based upon daily closing readings in the DJIA7 and are rounded to the nearest one percent. An intermediate bottom is defined as any price point that (1) follows a decline of at least 25 percent without an intervening lower price point, (2) precedes a rise of at least 30 percent without an intervening lower price point and (3) is not a Major Bottom. An intermediate top is defined as any price point in the DJIA that (1) follows a rise of at least 30 percent without an intervening higher price point, (2) precedes a decline of at least 25 percent without an intervening higher price point and (3) is not a Major Top. I have added one instance (called “update”) to this list: the low in 1953. The reason is that this year marked the return of an Elliottician to the forecasting scene after a five-year hiatus, and his publication that year presented both a near term and long term perspective on the stock market based on WP, confirming and updating the outlook presented at the Major Bottom of 1942. Figure 2 Overall, our test period contains 6 major turning points and 15 intermediate ones, which are marked in Figure 1. Figure 2 shows those same major and intermediate turning points marked with the success or failure of the opinion that the recognized expert Elliottician of the time offered in print. The details of these market forecasts are listed in Table 1.
To summarize, WP provided a basis for a successful market opinion for 6 out of 6 major turning points at which an Elliottician expressed an opinion in writing, a 100 percent accuracy rate. It is 5 out of 5 if we discount the inferred opinion of 1937 (see full discussion on pp. 5-6). WP provided a basis for a successful market opinion for 11 out of 15 intermediate turning points for which comment is available or inferable, a 73 percent accuracy rate. If we discount the three inferred outlooks, then the result is 8 out of 12, a 67 percent accuracy rate. (The evidence for my inferences is fully provided in ensuing discussions.) The exceptionally accurate assessment of 1953 (not to mention many others) is not counted in these totals. In four of the five cases of error (every one except intermediate o), the Elliottician involved accurately assessed the wave structure at one larger degree but simply missed the smaller-degree turn.It is fortunate for our purposes that during the first 60 years since the WP’s discovery in the 1930s, there has been only one noted Elliottician publishing at a time. The only exception was 1975-1979, when both Russell and Prechter were commenting intermittently, but in that case the two practitioners were in complete agreement. In other words, for this study we are not choosing, and indeed cannot choose, among competing market outlooks based upon WP, as there were none.8 Table 2 lists the times when each analyst was publishing market forecasts based upon WP.
The track record in Table 1 is not a matter of simply recording a bullish or bearish statement. Analysts issue such statements all the time, and they change their minds often enough that someone could easily produce well-timed “accurate” excerpts from written material on such a basis. The most important column in this table is the one labeled, “If yes, degree understood?” A “yes” in this column means that the Elliottician of the time correctly assessed the relative price extent and/or the degree label (which amounts roughly to the same thing) of the forthcoming move in the opposite direction. This is no mean feat; compared to the quality of most forecasts, getting the degree of a new or coming trend right — after correctly forecasting or recognizing the change in direction in the first place — is a rare achievement. (Keep in mind that by the data, and virtually by definition as well, these market turning points are junctures at which most economists, analysts and investors share a strong conviction that the old trend of largest degree will not reverse direction.)
The notes on the right side of Table 1 state in capsule form some insights that the forecasters added to their outlooks. These insights are not culled from countless varying statements but rather were the essence of the Elliottician’s forecast at the time. Attending this study are excerpts from the published market outlooks, to provide detail and context. Appendix A and the endnotes provide every necessary reference for those who wish to peruse the original material in full. The reader is invited to study the original material to satisfy himself that the added assessments in Table 1 and the related excerpts are fair and accurate.
These data show that WP is an exemplary model for market forecasting at crucial market junctures. I am aware of no competing model that has offered — or can offer — any such value. One reason for this accuracy could be that WP accurately models the stock market.12
Excerpts from the Published Record
On the following pages appear the essence of each Elliottician’s forecast at each of the Major turning points, 1 through 6. (The most pertinent portions are marked in bold print.) This material shows that the forecasts of the past 70 years are consistent, not only with WP in general but also with the ongoing assessment of the market’s progress within the model. The analysts explained each time where the market was within the idealized WP structure and therefore what to expect in terms of market behavior. For the most part, subsequent market action proved the conclusions correct.
Major 1: March 1937 Top, R.N. Elliott (Implied Bearish)
There is no record of R.N. Elliott’s outlook for the stock market in March 1937, but, as cited in Table 1, his market assessment of the time is implied. On November 28, 1934, Elliott sent a letter to investment counselor Charles J. Collins introducing his model and added, “Incidentally, permit me to forecast that the present major bull swing will be followed by a major bear collapse. This is not an opinion but simply the application of a rule.”
It is clear from this otherwise vague language that in referring to “the present bull swing” Elliott was not yet bearish. Figure 3, showing the DJIA from the 1932 low through November 1934, illustrates the market’s wave labels that Elliott implied at the time. “The present major bull swing” refers to the as-yet-unfinished five-wave “impulse” pattern upward from 1932. Based on an application of WP, he would have turned bearish no earlier than late 1936 and would have been bearish at the peak. Figure 4 shows the subsequent “major bear collapse” of 1937-1938 and thereafter.
Elliott’s first publication confirmed that he maintained the view of the market’s position that he implied in 1934. Near the end of his 1938 book, published in August, he stated flatly, “March 31 was the bottom of wave A of the bear market,” shown as wave A in Figure 4. (This observation attends the juncture labeled “intermediate a” in Table 1.) This comment clearly indicates by the tenets of WP that he expected the rally in force at the time, wave B, to be followed by a lower low in wave C. As you can see in Figure 4, he was correct. Therefore, we may presume that his view of the five waves up/three waves down pattern beginning at the 1932 low was consistent during this period and grant that at the 1937 high he was likely to have been bearish and to have understood the degree of the turn. If you believe that this assessment assumes too much, you may mark this juncture N/A in Figure 1. One thing is for sure from his writing and his model: He would certainly not have joined the majority of investors and analysts in being bullish at the 1937 peak given that he was expecting “a major bear collapse.”
Major 2: April 1942 Bottom, R.N. Elliott (Bullish)
Elliott’s outlook in 1941 and 1942 was unequivocally bullish for decades to come, and he was correct. He issued his forecast in the midst of World War II and despite the conventional view among economists that there would be “a post-war depression.” Below are his comments from August 1941, which he reiterated in October 1942, six months after the bottom.
August 11 and 25, 1941
Ralph Nelson Elliott, recognizing the end of the wave (IV) corrective process
(later labeled wave II of (V)) and forecasting the entire wave (V) advance:
The earliest available stock record is the Axe-Houghton Index, dating from 1854. The essential “change” characteristics of the long movement from 1854 to September 1929 are shown in the accompanying graph . The wave from 1857 to 1929 may be either Supercycle wave (I), (III) or (V), depending upon the nature and extent of development of the country before 1854.13 There is reason to believe, however, that the period from 1857 to 1929 can be regarded as Supercycle wave (III). The market since 1929 has outlined the pattern of a gigantic thirteen-year triangle of such tremendous scope that these defeatist years may well be grouped as Supercycle wave (IV) of an order dating back to as early as 1776. My observation has been that orthodox triangles appear only as the fourth wave of a .14
Nature’s inexorable law of proportion accounts for the recurrent 0.618 ratio of swing-by-swing comparison, the following tabulation of important movements since April 1930:
The Cyclical Relativity of Market Trends
Wave Dates Points Change Ratio
No. From To From To
R April 1930 July 1932 296.0 40.5 255.5
S July 1932 March 1937 40.5 196.0 155.5 155.5/ 255.5 = 60.9%
T March 1937 March 1938 196.0 97.0 99.0 99.0/ 155.5 = 63.6%
U March 1938 Sept. 1939 97.0 158.0 61.0 61.0/ 99.0 = 61.6%
Avg. 62.0%
These ratios and series have been controlling and limiting the extent and duration of price trends irrespective of wars, politics, production indices, the supply of money, general purchasing power, and other generally accepted methods of determining stock values. This feature proves that current events and politics have no influence on market movements.
Since the causes of this phenomenal market behavior originate in the relativity of the component cycles compressed within the triangular area, it is distinctly encouraging to be able to point out that the rapidly approaching apex of the triangle should mark the beginning of a relatively long period of increasing activity in the stock market. Triangle wave E is well advanced, and its termination, within or without the area of the triangle, should mark the final correction of the 13-year pattern of defeatism. This termination will also mark the beginning of a new Supercycle wave (V) (composed of a series of cycles of lesser degree), comparable in many respects with the long from 1857 to 1929. Supercycle (V) is not expected to culminate until about 2012.15 (See dashed line in the graph .)16
Note: The DJIA touched its low eight months later, in April 1942, during the darkest days of World War II. It has not looked back since.
Major 3: February 1966 Top, Charles J. Collins (Bearish)
Observe from Collins’ assessment that he identified with exceptional precision the end of the third wave from 1932. So while he expected a sizable bear market carrying the DJIA into the 500s, he knew that a bigger decline, one akin to 1929-1932, would not occur until the fifth wave ended later.
First Quarter, 1966; published in April
Charles Joseph Collins, identifying the end of wave III and forecasting the extent of wave IV:
In the count of Supercycle wave (V) from 1932, I find that two Cycle waves have been completed and a third may have completed in January 1966 or, if not (see subsequent discussion), then it is in the process of completion. These Cycle waves are illustrated in .
Figure 7
Cycle wave III, beginning 1942, which is the wave of current interest, I break down as shown in . Incidentally, the upward slant of Primary wave 4 between 1956 and 1962 carries inflationary implications.
Primary wave 5 (1962-1966?) of Cycle wave III is shown in by giving the monthly swings of the Dow Industrials. Since Intermediate wave (3) of this Primary wave extended, it would appear that Intermediate wave (5), and thus Primary wave 5 as well as Cycle wave III, ended in January 1966, as the market has subsequently developed a downthrust.
The third wave of Primary wave 5 extended, and Elliott states that an extension will be retraced twice. Such being the case, this would call for the “C” wave of Cycle wave IV to carry back at least to 770-710 on the Dow, in other words, to the approximate area within which the extension of Intermediate wave (3) began (see points 1 and 2 of ). The decline could carry further, however, under Elliott’s rule that the correction of a wave should normally carry back to around the terminal point of the fourth wave of the five lesser waves that characterized the swing. The terminal point of the fourth Primary wave of Cycle wave III (see ) was established in 1962 at 524 on the Dow. Purely as a speculation, might not the “A” wave of Cycle wave IV carry to the 770-710 area, the “C” wave to around the lower 524 point, with a sizable intervening “B” wave?17
Note: This was a successful call of the Cycle degree top that had just occurred after 24 years of rise. It was also a successful forecast of the extent of the first decline into the 1966 daily closing low, which was 744.31, and also an excellent forecast of the ultimate low eight years later in 1974 at 577.60, basis daily closing figures.
Major 4: December 1974 Bottom, Richard Russell (Bullish)
Richard Russell identified the end of wave IV from 1966 to 1974, which he identified throughout as one large bear market. A bigger story than the opinion expressed below, however, is his graphic depiction of the final wave down in the bear market (his first one attends the market juncture labeled “intermediate j” in Table 1), which he updated repeatedly until the bottom.
Figure 10 shows one of his graphs, from November 9, 1973, just days after the DJIA peaked in a counter-trend rally. So he not only called the low in 1974 but forecasted it. The DJIA bottomed on December 6. Here is his commentary from 14 days later:
December 20, 1974
The extent of the damage brought in by the bear market is shown in this chart . This unweighted chart shows the disastrous story of the last number of years. There’s been only one worse collapse in Wall Street history.
The 1‑2‑3 notations should be clear to all who followed my earlier discussion of the Elliott Wave Principle. Bear markets come in major 1‑2‑3 waves. According to the chart, this major downward zigzag could be completed.18
Major 5: August 1982 Bottom, Robert Prechter (Bullish)
The bull market that began in 1974 took so long to get going that inflation pushed the constant-dollar Dow to a new multi-decade low in August 1982. Four weeks after the low, Prechter sketched out the future and called for the DJIA to quintuple from the August 1982 low in wave V. September 13, 1982
Robert R. Prechter, Jr., identifying the onset of wave V and projecting its substantial extent:
This is a thrilling juncture for a wave analyst. For the first time since 1974, some incredibly large wave patterns may have been completed, patterns that have important implications for the next five to eight years. The technical name for wave IV by this count is a “double three,” with the second “three” an ascending triangle. This wave count argues that the Cycle wave IV correction from 1966 ended last month (August 1982). The lower boundary of the trend channel from 1942 was broken briefly at the termination of this pattern. A brief break of the long term trendline, I should note, was recognized as an occasional trait of fourth waves, as shown in R.N. Elliott’s Masterworks.19
The task of wave analysis often requires stepping back and taking a look at the big picture and using the evidence of the historical patterns to judge the onset of a major change in trend. Cycle and Supercycle waves move in wide price bands and truly are the most important structures to take into account. a period of economic stability and soaring stock prices has just begun. One must conclude that a bull market beginning in August 1982 would ultimately carry out its full potential of five times its starting point, thus targeting 3885.20
Figure 12
Note: Here Prechter identified the end of a 16-year period of loss for the constant-dollar Dow a month after the DJIA’s bottom at 777 and projected a climb to what was then generally perceived as an unattainable height.
November 8, 1982
Robert Prechter, continued:
Surveying all the market’s action over the past 200 years, it is comforting to know exactly where you are in the wave count.
April 6, 1983
Robert Prechter, continued:
A normal fifth wave will carry, based on Elliott’s channeling methods, to the upper channel line, which in this case cuts through the price action in the 3500-4000 range in the latter half of the 1980s. Elliott noted that when a fourth wave breaks the trend channel , the fifth will often have a throw-over, or a brief penetration through the same trend channel on the other side.
What might we conclude about the psychological aspects of wave V? As the last hurrah, it should be characterized, at its end, by an almost unbelievable institutional mania for stocks and a public mania for stock index futures, stock options, and options on futures. In my opinion, the long term sentiment gauges will give off major trend sell signals two or three years before the final top, and the market will just keep on going. In order for the Dow to reach the heights expected by the year 1987 or 1990, and in order to set up the U.S. stock market to experience the greatest crash in its history, which, according to the Wave Principle, is due to follow wave V, investor mass psychology should reach manic proportions, with elements of 1929, 1968 and 1973 all operating together and, at the end, to an even greater extreme.21,22
Note: A financial mania is a rare event, occurring on average about once a century. As far as I am able to determine, this is the only prediction of a financial mania ever attempted. It came to pass, even to the expected extent, as in the 1990s, speculation, valuation (by dividend yields, price/earnings ratios and book values) and the breadth of stock ownership reached an “even greater extreme,” by a substantial margin, than those of 1929, 1968 and 1973. Also as anticipated, the DJIA produced a “throw-over” of the upper channel line of the Supercycle-degree advance and met its upper channel line at Cycle degree (see Figure 14). On the error side, the entire process took a decade longer and carried higher than Prechter projected. In 1982, he had projected a quintupling from 777, and after the DJIA achieved that multiple, it tripled to reach its high in 2000.
Major 6: January 2000 Top, Robert Prechter (Bearish)
Prechter published a detailed analysis and wave interpretation in December 1999, explaining the “Grand Supercycle” degree of the peak. He identified this juncture as the culmination of the entire Supercycle structure that Elliott, Bolton, Collins, Frost, Russell and he had negotiated, which was wave (V) of a larger five-wave structure dating from the late 1700s. Whether this assessment is correct remains to be revealed by the ultimate extent of the bear market.
Reducing the impact of Prechter’s analysis is the fact that he had forecasted tops at numerous times during the 1990s. (For details, see View from the Top.)
Robert Prechter in The Elliott Wave Theorist, December 1999
An Overview of the Long Term Elliott Wave Case for Stocks
Evidence at Supercycle Degree
By “Supercycle” degree, we mean the size of wave that has taken the Dow Jones Industrial Average up from its low at 41.22 in July 1932 up to the present. shows that we can certainly label the Supercycle advance as a five-wave structure.Evidence at Cycle Degree
By “Cycle” degree, we mean the size of wave that has taken the Dow Jones Industrial Average up from its low at 577.60 in December 1974 up to the present. This wave, like so many Elliott waves, has taken a classic shape. ...The trend channel for Cycle wave V shown in is constructed according to Elliott’s primary approach, which is to connect the lows of waves two and four and then draw a parallel line touching the top of wave three. The action during 1997-1999, moreover, has been quite similar to that of 1928-1929. Prices have clustered near the upper trendline, breaking through it briefly in what Elliott called a “throw-over.” As noted often in these pages, a throw-over is more likely when a market first slips below the lower trendline early in the wave’s development, as this one did in 1982.
Evidence at Grand Supercycle Degree
By “Grand Supercycle” degree, we mean the size of wave that has taken stock prices up from their low in 1784 up to the present. shows our depiction of the Grand Supercycle advance. ...While comparative statistics are hard to come by, shows one measure that supports our case for a top of no less than Grand Supercycle degree in the making. Here, stock valuation is expressed in terms of annualized dividend yield so that the lower the dividend payout, the higher stocks are priced, and vice versa. Note that the degrees of terminating Elliott waves correlate with the varying extremes in dividend yield. Cycle degree extremes have produced over- and undervaluation at about 3% and 6.5% yield respectively, while Supercycle degrees have produced more extreme figures. Now look at 1999, where the dividend yield for the DJIA is only 1.5%, the lowest in the history of the data. Since we have record of a Supercycle overvaluation on the chart (in 1929), and since this one is higher, it must reflect a developing top of higher than Supercycle degree, i.e., one of at least Grand Supercycle degree.
Note: The constant-dollar Dow fell 40 percent from its high in 2000, fulfilling the requirement for listing this peak as a Major Top. The S&P 500 Composite and the Wilshire 5000 indexes fell 49 and 50 percent respectively from 2000 to 2002, and the NASDAQ fell 78 percent. The DJIA fell 38.7 percent from 2000 to 2002; according to Prechter’s assessment based on WP, the bear market has far further to go.
An upcoming issue will present details of the intermediate turning points, excerpted from the original publications.
---------------------------------------------------------------------------------------------------------------------
ENDNOTES
1 One should be cautious of agreeing with “orthodox economists” on anything at all relating to finance.
2 See working paper “Idealized Elliott Waves and Random Walk Tests,” by Robert R. Prechter, Jr. and Deepak Goel (2004), posted at http://socionomics.org/papers/idealized_waves.aspx.
3 “Cycle” degree and above.
4 See Endnote 2.
5 Hard as we may try to quantify movements in the stock market for the purposes of statistical studies, quantitative definitions can be inadequate and misleading. A perfectly defined concoction of aluminum pipes does not define actual living trees any more than quantitative parameters define waves in the stock market. The Wave Principle is a hierarchical fractal of a specific yet variable form, which requires description and whose relationships rest on relativity, not specific values. Turns of Cycle degree such as in 1937, 1966, 1974 and 1982 have one implication, turns of Supercycle degree such as in 1932 (or in 1942 by Elliott’s assessment) have another, and turns of Grand Supercycle degree (such as Prechter believes attends 2000) have another. These turns are not equally important as implied by the term “Major” but rather are quite different in terms of expected outcome. In each case documented here, WP practitioners understood the degree, i.e., the relative size, of each turn that they identified or forecasted. This is why Elliott in 1942 correctly called for decades of rise, why Bolton, Collins, Frost, Russell and Prechter called for specifically limited market movements of designated extents and why Prechter in recent years has been calling for the largest bear market since at least 1929-1932. A statistical study of this type cannot fully express the value of WP. Expressing it properly would require a detailed discussion of wave degrees, and the reader would have to possess a detailed knowledge of WP. Perhaps one day we will have the proper tools to model WP, in all its richness, mathematically. For the time being, to the extent that one can mathematically model another robust fractal — actual trees — with equations, one should be able to model actual waves.
6 This parameter takes care of the fact that a bear market sometimes contains a slight new high in a market index. Such new highs are not where an investor wishes to change his investment position. If, for example, an index rises persistently over a 10-year period and then goes sideways for 10 years, an investor would want to exit his investment at the initial peak, not at a minor new high six years into the new sideways trend, which would result in foregoing substantial opportunity cost.
This parameter does not affect our test results. Without it, the Major Top of 1966 would become a Major Top in 1973, at which time the DJIA exceeded the 1966 high by five percent. As you can see from Table 1, the assessment at that time was also correct.
7 Constant-dollar prices are hardly relevant at the intermediate level, so I did not include the C$D in these computations.
8 In the late 1980s, the popularity of WP swelled, and a handful of other “market letter” publishers began to use WP as a primary analytical tool.
9 After Elliott’s death in January 1948, Garfield Drew, in New Methods for Profit in the Stock Market, commented on Elliott’s market outlook in 1948 as reported by stock broker John C. Sinclair, Elliott’s “collaborator” at the time of his death.
10 Russell sometimes quoted or conferred with Frost, but his call at the 1974 low appears to be his own. Having learned WP from Bolton, he had commented on it very briefly nine times from 1964 to 1970. From 1976 to 1979, he mentioned WP infrequently, and when he did so sometimes cited the opinions of others. He published a few more comments in 1980, quoting Prechter. Russell also analyzed gold in WP terms from 1973 through 1980. All his WP comments are on the record, as listed in Appendix A.
11 Prechter began publishing Elliott wave reports irregularly for Merrill Lynch in 1976 and then began publishing monthly in 1979 as The Elliott Wave Theorist.
12 If you, the reader, know of any competing stock market model that has provided a basis for a superior forecasting record judged by criteria similar to those in this report, or if you disagree with my representation of the WP track record, please contact me with such information.
13 Data prior to 1854 were unavailable at that time.
14 Elliott accomplished this forecast with very limited data, encompassing only 1857 to 1942. He could not see the entire Grand Supercycle wave structure up to that time, which began in 1784. He could see the triangular nature of the corrective process from 1929, which shows up in PPI-adjusted “constant dollar” data. Triangles, he had already observed, appear only in the fourth wave position. From his intimate knowledge of how smaller patterns had linked together, then, he knew where the market was in its larger pattern despite having only a partial recording of it. Frost and I later attained the pertinent back data and validated his conclusion in Elliott Wave Principle.
15 Elliott’s “2012” forecast was an offhand remark that meant, “it will be the same degree, and therefore about as long, as Supercycle wave (III).” 2012 is the year when the two waves’ lengths would be exactly the same. He did not actually expect that precise a match, which is why he said, “about 2012.” What he meant to convey was that he was predicting a Supercycle rise closer to seven decades rather than a Cycle degree rise closer to one decade or a Grand Supercycle closer to twenty.
16 Elliott, Ralph Nelson. (1941, August 11). “Market apathy – cause and termination.” (Educational bulletin). And (1941, August 25). “Two cycles of American history.” Interpretive Letter No. 17. Republished: (1993). R.N. Elliott’s Market Letters (1938-1946). Prechter, Jr., Robert R. (Ed.). Gainesville, GA: New Classics Library.
17 Collins, Charles J. (1966). “The Elliott Wave Principle of Stock Market Behavior.” Supplement to The Bolton-Tremblay Bank Credit Analyst. Republished (1994). The Complete Elliott Wave Writings of A. Hamilton Bolton. Prechter, Jr., Robert R. (Ed.). Gainesville, GA: New Classics Library.
18 One might say that his use of the word “could” was equivocal. I do not, given the preceding two-year context. Regardless, in early January he said that a new bull market had begun.
19 See R.N. Elliott’s Masterworks, Figure 18, p. 110.
20 Prechter, Jr., Robert R. (1982, September 13). “The long term wave pattern — nearing a resolution.” The Elliott Wave Theorist.
21 Prechter, Jr., Robert R. (1983, April 6). “A rising tide — the case for wave V in the Dow Jones Industrial Average.” The Elliott Wave Theorist.
22 Prechter’s comments from this time are reprinted in the Appendix to Elliott Wave Principle.
Additional Source Material
In addition to the sources cited in the Notes and Appendix A, the following works are referenced herein:
Frost, Alfred John and Robert R. Prechter, Jr. (1978). Elliott Wave Principle — Key to Market Behavior. Gainesville, GA: New Classics Library.
Mandelbrot, Benoit. (1999, February). “The Multifractal Walk Down Wall Street.” Scientific American.
Mandelbrot, Benoit and Richard L. Hudson. (2004). The (Mis)Behavior of Markets. New York: Basic Books.
Peters, Edgar E. (1991). Chaos and Order in the Capital Markets. New York: John Wiley & Sons, Inc.
Prechter, Jr., Robert R. (1999). The Wave Principle of Human Social Behavior and The New Science of Socionomics. Gainesville, GA: New Classics Library.
Prechter, Jr., Robert R. (2002). View from the Top. Gainesville, GA: New Classics Library.
APPENDIX A
SOURCES OF ORIGINAL MATERIAL
Major 1: Elliott, R.N. (1934, November 28). Letter to Charles J. Collins. Reproduced (1978/2005): Elliott Wave Principle. Frost and Prechter. Gainesville, GA: New Classics Library, p. 14.
Major 2: Elliott, R.N. (1941, August 25). “Two Cycles of American History.” Republished (1980/1994): R.N. Elliott’s Masterworks. Robert R. Prechter, Jr., Ed. Gainesville, GA: New Classics Library, pp. 204-210.
Major 3: Bolton, A. Hamilton. (1966). “The Elliott Wave Principle of Stock Market Behavior: 1966.” Supplement to The Bolton-Tremblay Bank Credit Analyst. Republished (1994): The Complete Elliott Wave Writings of A. Hamilton Bolton. Robert R. Prechter, Jr., Ed. New Classics Library, pp. 355-366.
Major 4: Russell, Richard. (1973-1974). Dow Theory Letters. Republished (1996): The Elliott Wave Writings of A.J. Frost and Richard Russell. Prechter, Jr., Robert R. (Ed.). Gainesville, GA: New Classics Library, pp. 211-234.
Major 5: Prechter, Robert R., Jr. (1983, April). “Long Term Forecast Update, 1982-1983.” The Elliott Wave Theorist. Republished (1995/2005): Elliott Wave Principle. Gainesville, GA: New Classics Library, p. 203.
Major 6: Prechter, Robert R., Jr. (1999, December). “An Overview of the Long Term Elliott Wave Case for Stocks.” The Elliott Wave Theorist. Republished (2002): View from the Top. Gainesville, GA: New Classics Library, pp. 75-90.
in**t a: Elliott, R.N. (1938). The Wave Principle. Republished (1980/1994): R.N. Elliott’s Masterworks. Robert R. Prechter, Jr., Ed. Gainesville, GA: New Classics Library, p. 144.
in**t b: Elliott, R.N. (1939, April 11, through 1940, April 8). Interpretive Letters and Confidential Bulletins. Republished (1993): R.N. Elliott’s Market Letters (1938-1946). Robert R. Prechter, Jr., Ed. Gainesville, GA: New Classics Library, pp. 46-66, particularly the graph on p. 64.
in**t c: Elliott, R.N. (1946). “The 1942-1945 Bull Market.” Nature’s Law. Republished (1980/1994): R.N. Elliott’s Masterworks. Robert R. Prechter, Jr., Ed., New Classics Library, pp.302-303; also R.N. Elliott, Interpretive Letters and Confidential Bulletins, April 28, 1942 through July 23, 1946. Republished (1993): R.N. Elliott’s Market Letters (1938-1946). Robert R. Prechter, Jr., Ed. Gainesville, GA: New Classics Library, pp. 132-139.
in**t d: Elliott, R.N. (1946). “The 1942-1945 Bull Market.” Nature’s Law. Republished (1980/1994): R.N. Elliott’s Masterworks. Robert R. Prechter, Jr., Ed., New Classics Library, p. 303, final sentence. Also, Drew, Garfield. (1948). “A Final Forecast by the Late R.N. Elliott.” New Methods for Profit in the Stock Market (2nd edition). Boston: Metcalf Press.
update: Bolton, A. Hamilton (1953). “Elliott’s Wave Principle: 1953” The Bolton-Tremblay Bank Credit Analyst. Republished (1994): The Complete Elliott Wave Writings of A. Hamilton Bolton. Robert R. Prechter, Jr., Ed. Gainesville, GA: New Classics Library, pp. 39-45.
in**t e: Bolton, A. Hamilton. (1961-1962). “The Elliott Wave Principle.” The Bolton-Tremblay Bank Credit Analyst. Republished (1994): The Complete Elliott Wave Writings of A. Hamilton Bolton. Robert R. Prechter, Jr., Ed. Gainesville, GA: New Classics Library, pp. 220, 228, 233.
in**t f: Frost, Alfred John. (1962, December). Unpublished paper. Published (1996): The Elliott Wave Writings of A.J. Frost and Richard Russell. Prechter, Jr., Robert R. (Ed.). Gainesville, GA: New Classics Library. pp. 67-72.
in**t g: Collins, C.J. (1966). “The Elliott Wave Principle of Stock Market Behavior.” Supplement to The Bolton-Tremblay Bank Credit Analyst. Republished (1994). The Complete Elliott Wave Writings of A. Hamilton Bolton. Prechter, Jr., Robert Rougelot. (Ed.). Gainesville, GA: New Classics Library, p. 353.
in**t h: Frost, Alfred John. (1968). “The Elliott Wave Principle of Stock Market Behavior.” Supplement to The Bolton-Tremblay Bank Credit Analyst. Republished (1996): The Elliott Wave Writings of A.J. Frost and Richard Russell. Prechter, Jr., Robert R. (Ed.). Gainesville, GA: New Classics Library, pp. 133-134.
in**t i: Frost, Alfred John. (1970). “The Elliott Wave Principle of Stock Market Behavior.” Supplement to The Bolton-Tremblay Bank Credit Analyst. Republished (1996): The Elliott Wave Writings of A.J. Frost and Richard Russell. Prechter, Jr., Robert R. (Ed.). Gainesville, GA: New Classics Library, pp. 158, 163-164.
in**t j: Russell, Richard. (1973). Dow Theory Letters. Republished (1996): The Elliott Wave Writings of A.J. Frost and Richard Russell. Prechter, Jr., Robert R. (Ed.). Gainesville, GA: New Classics Library, pp. 215-221.
in**t k: Prechter, Jr., Robert R. (1977, February). “The Elliott Wave Principle: Application to Today’s Market.” The Elliott Wave Theorist. Not available in book form; for labeling, see Fig.4-13 in Elliott Wave Principle, p. 134.
in**t l: Prechter, Jr., Robert R. (1978, March). “The Elliott Wave Principle: Update.” The Elliott Wave Theorist. Excerpted in Elliott Wave Principle, pp. 133-135.
in**t m: Prechter, Jr., Robert R. (1981, April 12). The Elliott Wave Theorist.
in**t n: Prechter, Jr., Robert R. (1987, October 5). The Elliott Wave Theorist.
in**t o: Prechter, Jr., Robert R. (1987, October-December). The Elliott Wave Theorist. Elliott Wave International
2007 Socionomics Institute
DAUERSTRESS FÜR WALL- STREET- BROKER
Börsenprofis im Psycho- Crash
Wie verkraften Broker die Achterbahnfahrt der Börsen? Nicht gut, besagen US-Studien. Ausgerechnet die Finanzprofis, die am meisten Geld bewegen, sind am häufigsten psychisch gestört. Die Folgen: Isolation, Wutausbrüche - und die regelmäßige Flucht in den Vollrausch.
Spiegel online, 20.August 2007
Socionomics is the science of history and social prediction. It is field of study encompassing the origins and effects of an endgenous human social dynamic called the Wave Principle, a specific sequence of progress and regress that regulates the complex system
of collective mood and social trends on this basis: that the character of social, political, cultural, financial and economic trends are the product of collective human psychology, which is based upon
an unconscious herding impulse deriving from pre-rational portions of the brain."The Wave Principle reveals that the human social experience follows a form that derives from the tension between the opposing dualities of progress and regress. Its ruling ratio is phi, the same number that governs nature's arbora and spirals, making it fundamental to nature's arrangements".
(S.83 The Wave Principle of Human Social Behavior, R.Prechter 1999).Understanding socionomics requires comprehending the contrast between two postulations:
(1) The standard presumption: Social mood is buffeted by economic, political and cultural trends and events. News of such events affects the social mood, which in turn affects people’s penchant for investing.
(2) The socionomic hypothesis: Social mood is a natural product of human interaction and is patterned according to the Wave Principle. Its trends and extent determine the character of social action, including economic, political and cultural trends and events.
The contrast between these two positions comes down to this: The standard presumption is that in the social setting, events govern mood; the socionomic hypothesis recognizes that mood governs events. In both cases, the stock market is seen as an efficient mechanism. In the first instance, it presumably revalues stocks continually and rationally in reaction to events; in the second, it revalues stocks continually and impulsively as the independent social mood changes. We will now investigate five presumed “outside forces” to see which of these views and their relationship to the stock market can be supported by the standard presumption and which ones are supported by the socionomic hypothesis..
False Gods
By Bill Bonner
In a remarkable interview in Barron's this week, David Richards said that he thinks the world economy is on the road to even greater heights of glory. One of the reasons given is that the "Theology of Capitalism" is sweeping the globe.
Everywhere you look, people seem to be bowing down to the holy ghosts of Smith and Keynes...and reciting the Gospel according to Markowitz. And like the other great secular theology of our time, global climate change, the faithful ask few questions. Instead, they become true believers without so much as going blind, like Paul, or winning an important battle, like Clovis. Too bad. Because there are a lot of questions that need to be asked.
What is this new god? What sacrifices does he require? What are this new religion's solemn rites? What are its feast days and holidays? Who are its sinners, its saints, its Lucifers and its prophets?
In the interest of helping Rude Awakening readers understand this new faith, here we offer a brief explanation:
We begin with the history of the cult. In the beginning, there was the word. And the word was 'money.' But what was money? Ah, there, we have our first and most important holy mystery. In the past, more or less from the beginning of time until August 15, 1971, money was rare and difficult to reproduce. The Yap islanders, for example, used large, carved stones to represent wealth. Most of the rest of the world used gold and silver.
Since 1971, however, the high priests of the new money cult produced a kind of miracle, equivalent to the virgin birth and the wedding feast at Cana combined. That is to say, they produced money with no connection to anything rare or valuable. In the words of St. John Maynard Keynes himself, they created money "out of thin air." This miracle has had the whole world agog ever since. Today, the world's entire economic and financial system operates on this faith-based money.
Thin air was never more forthcoming. No one knows where the money comes from or what it is worth; but everyone is happy to take delivery. Indeed, the multitudes worship it...and pray for it. Muslims go to mecca; Jews have their Wailing Wall; these mammon-worshipers dream of nothing more than getting a job on Wall Street and getting lucky in Las Vegas.
It is upon this miracle money that the whole faith rests. Saint Alan of Manhattan owes his reputation to it. Goldman and Merrill Lynch can trace much of their success to it. Asia's huge export boom was made possible by it. But so were the booms in leveraged buyouts...and subprime mortgage lending. If Christ had not risen from the dead, he would be just another prophet. And if Alan Greenspan had not created trillions of dollars worth of new credit from nothing, the present boom would have not reached the Hindenburg Bubble proportions it is today.
In this sense, the new creed is more like a 'cargo cult' than a sophisticated religion. After WWII, anthropologists discovered isolated groups of savages in the South Pacific who were worshipping crashed U.S. Army cargo planes. The planes had brought them food, clothing, tools, cigarettes and alcohol. The islanders saw these things as gifts from heaven, and developed religious beliefs around them. So too does the modern Theology of Capitalism look to the skies over its central banks for cash. If the money ever seems to run short, U.S. Fed chairman Ben Bernanke is on record saying he will drop it from helicopters!
This week and last, capitalism's markets shook like the Western Front in 1914. The archbishops of the new church put on their purple robes and rushed to reassure the world. Like priests in the trenches of WWI, their faith was reinforced by the bombs bursting around them. Our new gods will never abandon us they said. Why? Because now we are all believers in the Theology of Capitalism! This reminds us of Mr. Angell's popular book put out in 1910, which argued that peace in Europe was guaranteed, because all Europeans had become capitalists. Since they traded with each other for so many good things, none would ever want to go to war. Well, now that even the Russians and Chinese believe in the Theology of Capitalism what could go wrong? We will have peace, prosperity and high asset prices forever and ever, amen.
Capitalism, of course, has been with us for millennia. You can look at cuneiform inscriptions in Egypt and find evidence of capital investment, trade and speculation. Capitalism has been alternately enriching and ruining people ever since. Grinding, churning, innovating, and evolving...always unstable, capitalism is always driving forward in what Schumpeter called a process of 'creative destruction' – sometimes squeezing the rich, as though through the eye of a needle...sometimes rewarding the meek...and always punishing those who expect to get something for nothing. To the extent it is understood as the free movement of privately owned capital, capitalism is a harsh, unforgiving Old Testament kind of god. For as soon as a man gitteth, along comes a new wave of destruction to taketh it a way from him. And in a crisis, he might just as well cling to an exploding hand grenade. That is why, as soon as a fellow is flush, he wants nothing more than to put a stop to capitalism forever. He asks his legislators for protective tariffs. He implores his leaders for import duties and exchange controls. He begs his central bankers to fix interest rates at a more commodious level.
The old capitalism is dead, say converts. This is a New Testament faith; the tooth and claw jungle of capitalist evolutionary competition has been transformed into a healthy, stable and cooperative eco-system – like the Baltimore Public Zoo. Now the animals are in their cages. Lions will lie down with lambs...and suckers will all get an even break.
We're all believers now. Hallelujah.
[Joel's Note: In times of yore, sacrilege was punishable by torture and even death. Fortunately for us, today's ignoble, insolent gold worshippers have little more to suffer through than public mockery. When faced with a choice between unquestioning faith and sound reason, we gravitate toward the latter. Faith, in today's financial realm, exists in the form of paper...and derivatives of paper. Reason exists in the form of gold – shiny, tangible, valuable gold.
For an entirely new way to invest in gold, check out the following Wealth Insurance Report. You may
have to endure some mockery from those relying on paper IOU's but it will be a small price to pay.
(Source: The Rude Awakening, August 14,2007
Market-Made Shock Waves
The Daily Reckoning
London, England
Thursday, July 2007
---------------------
Shocking investors back to their senses...could the Chinese trigger
a worldwide equity sell-off?
The world is drowning in liquidity...consumers continue to pay the
price of easy credit policies...
Look up, dear reader. There, over The Daily Reckoning headquarters in
London - in the building with the golden balls on the roof - is our
Crash Alert flag...flying proudly.
Why bother? The stock market looks healthy. The problem in the housing
market is "contained" in the subprime sector. And M3 is growing at 13%
per annum - the fastest rate in 30 years. With all that new money coming
into the system, how can prices do anything other than float higher?
But the risk of loss is always at its highest on the precise moment
that most people judge it of least concern. Most likely, there will be no
crash tomorrow...nor the day after. But there are some things you are better
off preparing for, even though they may not happen for a while.
When money and credit are free and easy, people become free and easy
with them. They begin spending more than they should...and investing
recklessly. Eventually, there is a shock...a tipping point...a moment
of desperate reality, in which people feel the ground give way beneath
their feet. They look down and panic.
What kind of a shock? It could be almost anything. Sometimes it is a
war...sometimes a bankruptcy...sometimes a market shock - such as a
sudden increase in the price of oil...or the collapse of a stock market. Then
investors, as if they shared a single mind, begin to worry not about
the return ON their money; they are concerned about the return OF their
money.
What could cause a shock today? Any number of things.
1) The Chinese stock market is getting hit hard. Its CSI 300 Index is
down 17% in the last three weeks. Brokerage account openings have dropped by
two-thirds. Could global hot money...and local cold cash...turn bearish
on Chinese shares? Could Chinese officials say something particularly
stupid? Could the market fall another 20%...50%? Could this trigger a worldwide
equity sell-off? Yes to all those questions.
2) The dollar is in trouble. On Wednesday, it hit its lowest level
against the pound (GBP) in 26-years. It is now near its lowest level ever
against the euro (EUR). Trillions worth of dollars now sit in foreign vaults -
while reserve managers openly talk of diversifying away from
greenbacks.Foreigners don't have to abandon the dollar en masse to knock it
down...all they have to do is to let up on their purchases of
dollar-denominated assets - such as U.S. Treasuries. Could it happen?
Could the shock cause a crash in major financial markets?
Why...yes...again.
3) All paper currencies are dangerous. The dollar is not the only paper
currency in the world whose supply is growing rapidly. Practically
every central bank is printing up its own money in vast quantities - trying
to keep up with the U.S. brand. This is why the world has so much
"liquidity." It's why so many assets are rising in price so steeply.
But could investors suddenly become fearful of so much monetary inflation?
Could consumer prices shoot up...as asset prices already have? Could
the world's people want to get rid of their paper currencies in favor of
other stores of value - notably gold, as The Wall Street Journal warns in an
article entitled "Money Meltdown"? And could this lead to a worldwide
crash? Yes...yes...yes.
4) A Milan-based bank, Italease, has just seen its derivative portfolio
blow up. So has Bear Stearns (NYSE:BSC). Large lenders are getting
skittish of complex debt instruments...just as more deals than ever
before come to market. So far this year $1 trillion in deals have been done in
the North America - a rate of deal-making nearly 50% higher than the
year before. What happens if the wheeler-dealers don't find the credit
they're looking for? What would investors think if even one of these mega-deals
blew up badly?
Reports Bloomberg: "The world's biggest bondholders have had their fill
of leveraged buyouts...
"TIAA-CREF, which oversees $414 billion in retirement funds for
teachers and college professors, is boycotting some debt offerings used to
finance LBOs. Fidelity International, a unit of the world's largest mutual fund
company, and Lehman Brothers Asset Management LLC, the money-management
arm of the third- biggest bond underwriter, say they're avoiding debt
from buyouts.
"You cannot do fundamental analysis and believe that those are
creditworthy companies," says an analyst.
"More securities than ever have the lowest rankings, with CCC ratings
assigned to 26.5 percent of the new debt, according to New York-based
Fitch Ratings. That compares with 15 percent in 2006 for debt that
Fitch says has a 'high default risk.'
"Traders demand 3 percentage points in extra interest to own U.S. junk
bonds rather than government debt, compared with a record low of 2.41
percentage points on June 5, Merrill Lynch & Co. index data show.
Heavenly Boom - or Hellish Bust?
The Daily Reckoning
London, England
Friday, June 29, 2007
The International Herald Tribune reported the results of a group of the
biggest M&A deals over the last few years. Only three out of seven of
them had a positive effect on the companies involved. Unicredit bought
Capitalia for $30 billion this year. So far the shares are down 10%.
AstraZeneca bought Medimmune for $15 billion, another deal done this
year. So far, the result is a 9% loss.
Looking further back, it was a very big deal when Daimler bought
Chrysler in '98 for $36 billion. That has cost the combined firm $12.6 billion
of market cap since then. And after Glaxo Wellcome bought SmithKline
Beecham in 2000, shareholders lost 25%. Or, how about this...thanks to the
dealmakers in 2001, Allianz bought Dresdner Bank. You'd have to be
pretty thick to miss making money in the financial industry over the last six
years, during the biggest financial bubble in the history of the world,
but when the magicians have worked their wonders on the combined firm,
it had lost 40% of its value.
In the first five months of 2007, the hustlers earned $25 billion doing
deals of this sort. But when Boston Consulting Group looked at the
results of similar transactions - 3,200 of them - it found that nearly 60% of
them actually reduced shareholder returns.
Takeover activity rose 38% in the first half of this year, compared to
the same period a year ago. A breathtaking $2.5 trillion is changing hands
as a result. How much of it will really "add value"? Not much.
A FLOOD IN THE WORLD MARKETS
by Dr. Hans Sennholz
Central banks live by a simple financial principle: Whenever economic activity stagnates or declines, they quickly lower their interest rates and expand their credits. But when business seems to improve, they hesitate and vacillate in removing the rate cuts. The consequence is a permanent addition to liquidity. According to calculations of the German central bank, between the end of 1997 and September 2006 the stock of world money nearly doubled, but nominal economic production rose only by some 60 percent. Such an imbalance is bound to either cause consumer prices to rise or create price bubbles in stock, loan, or real estate markets. When they finally burst they are likely to inflict many personallosses and force businesses to repair and readjust.
Every week we may hear and read about new corporate mergers and acquisitions. Flush with cash, private equity firms are ever ready for more deal making, bidding for and acquiring another company. The merger and acquisition boom is buoying stock prices across the board, which is benefiting most investors. Moreover, as some corporations are being taken private and others are engaged in stock buybacks, thereby reducing the overall supply of corporate shares, the stock market is enjoying an extraordinary boom, which many investors hope will never end.
Some economists are scofing at such optimism; they like to point at the bursting of the bubble in 1929, which led to the Great Depression of the1930s. They also remember the bursting of the Japanese bubble in the early1990s, which kept the Japanese economy depressed for nearly a decade. And they cannot forget War II and postwar monetary policies which, by the beginning of the 1970s, had flooded the world with U.S. dollars. Some countries finally removed their currency ties to the dollar, and the oil-exporting countries cut their supplies of oil, which caused raw-material prices to soar. In the early 1980s, it took major Federal Reserve restraint to restore some measure of stability and several yearsfor business to repair some damage and allow the American economy to expand again.
At the present, government planners and central bankers are making the same mistakes all over again. They all seem to like low interest rates, thereby rendering capital less expensive. When real interest rates are depressed, as has been the case all over Europe and in the United States early in the present decade, the economy loses a sense of direction, which may allow even unproductive producers to remain in business. In the longrun, without the guidance of true market rates of interest, economies lose efficiency and productivity.
In a free economy, interest rates play a role similar to those played by prices and wages. They all spring from the people’s choices and value judgments, giving rise to “demand and supply” and guiding producers in their decisions. The market rate of interest is a gross rate usually consisting of three distinctive components: the pure rate, the depreciation rate, and the debtor’s risk premium. The pure rate is the very core stemming from man’s very nature which forces him to view economic phenomena in the passage of time. He ascribes a lower value to
future goods and conditions than to present provisions; the difference is the pure rate. The depreciation component appears whenever government orits central bank inflates, thereby depreciating the currency; the rate of currency depreciation determines the size of the component. The debtor’s risk premium, finally, reflects the reliability and trustworthiness of
the debtor.
Central bankers rarely pay attention to the market rate. Their policies are guided by popular doctrines calling for stimulation of national employment and income. They seem to be unaware that all rates other than market rates give false signals to producers and consumers alike; they cause maladjustments. Rates that are lower than market rates promptly increase the demand for credit. With all recent rates below the market rate it cannot be surprising that total American debt has surged by several trillion dollars. Last year, household debt alone rose by more than one trillion dollars. The federal government itself has been adding more than two billion every day. The Federal Reserve System, together with some 7,900 commercial banks, provided the funds; and foreign central banks and commercial banks invested their dollar earnings in nearly one-half of the federal government’s debt.
Such credit expansion, unsupported by genuine savings and capital formation, generates illusionary gains making people believe that they are more prosperous than they actually are. Stock and real estate prices soar, tempting people to spend their gains, improve their homes and build mansions. Actually, they all - businessmen and stockbrokers, executives and workers - may consume their material substance. But no matter how low the Federal Reserve may set its rate, the boom is bound to come to an end as soon as the maladjustments inflict losses on business. As more and more businesses face difficulties or even fail, the readjustment begins,
forcing them to respond to the actual conditions of the market.
Today, the Federal Reserve is doggedly ignoring the market rate of interest. It continues to direct the credit expansion, which not only has turned housing into a large bubble and rekindled the stock market but also has given rise to a voluminous foreign trade imbalance. Both domestic andf oreign maladjustments are inflicting growing pains on commerce and industry.
Some economists are convinced that central banks may have a ready escape from the dilemma: they may gradually return to higher rates of inflation which forces all fixed-income receivers and bond holders to bear the most losses. Optimists even like to point to the impact of globalization, which seems to limit the inflationary effects to real estate and the booming mergers-and-acquisitions market. But most economists are fearful of arecession which is a normal part of a business cycle. Fear may take hold of the minds of businessmen, production may be curtailed, and unemploymentmay rise. Government is bound to embark upon employment programs and assume increased public welfare responsibilities. It may even reduce some taxes, increase its budget, and force its central bank to lower interest rates another notch. The rate of inflation is bound to soar.
A few pessimistic economists are convinced that a devastating economic cataclysm lies ahead. They usually point to three threats that may have aserious impact on the American economy. There is the burgeoning tower of public and private debt resting on a foundation of greed and overindulgence. There are a multimillion dollar list of promises to a retirement system and a vast building of government guarantees and promises that are bound to be unkept. There even is a world of complex derivatives, the value of which depends on something else, such as stocks, bonds, futures, options, loans, and even promises. They all, according to these economists, will be the victims of the coming cataclysm.
This economist, who has observed central bank policies since the 1950s, is in basic accord and feels sympathy for these pessimists. They seem to have a clear view of the principles of money markets and the policies conductedby governments ever since they discarded the natural money order, that is, the gold and silver standards. But these pessimists tend to ignore the countless ruses, devices, and strategems used by government officials and central bankers to hide the consequences of their policies. Long before there will be a financial Armageddon, there will be a myriad of government regulations, controls, edicts, and rulings that hide the consequences of monetary policies. Policies will be readjusted frequently to cover the
actual effects. Given the public confusion and unfamiliarity with monetary policies and their consequences, a large majority of the public is likely to accept official explanations and welcome the regulators and controllers.
After a short period of price and wage controls, the voices of reason, which at the present are barely audible, may be heard again. They may even be allowed to get the American economy moving again, by abolishing the myriad of price and wage controls and allowing wages and prices to readjust to market forces. They may even have to conduct a currency reform, that is, issue new money at various ratios to the old. Most countries all over the globe have suffered currency reforms in recent decades; it would be a new experience for Americans.
This trend of policy and its harmful effects is contravened by the worldwide movement toward globalization. As trade doors open all over the globe and business capital is free to move to friendly countries enjoying rapidly rising levels of productivity and living, it will be difficult for American political controllers and regulators to hold on to their powers and move toward a command system. They cannot douse the light of economic freedom shining in so many places.
Regards,
Dr. Hans Sennholz
for The Daily Reckoning
P.S. We cannot tell what the future will bring, but we must always
prepare for it. This economist is bracing for a gradual increase of political
controls over economic life, leading to countless maladjustments,
distortions, and stagnations.
Editor’s Note: We couldn’t agree more with Dr. Sennholz - you never
know what’s around the corner. Hope for the best and plan for the
worst...especially where your retirement is concerned.
THE SECOND SKYSCRAPER BOOM
by Christopher Hancock
On the corner of Fifth and 34th Street rests the epitome of American
progress.
Considered by some as the Eighth Wonder of the World, the Empire State
Building was erected at the height of the Great Depression...pieced
together with Indiana limestone and adorned with aluminum and
chrome-nickel steel.
At the time, it stood as the tallest building in the world, at over
1,400 feet. Construction consumed 60,000 tons of steel...10 million
bricks...1,172 miles of elevator cable...6,400 windows...60 miles of
waterpipe and over 3,500 miles of telephone and telegraph wire.
Even with all that, the building took only 14 months to complete,
costingless than half of its original $50 million budget.
But the world's tallest skyscraper is much more than the world's
top-quality office space. It symbolized the progress of a nation
rebuilding - a beacon of economic growth.
The strength of its image became universal.
One could argue the construction of the Empire State Building was a
turning point for the U.S. economy and morale during the heart of the
Great Depression, ushering in the world's first skyscraper boom.
Soon, skyscrapers began popping up throughout the American landscape:
In Atlanta, Dallas, Houston, Charlotte...the World Trade Center in
'72...theSears Tower in '73. Every U.S. skyline you see today grew in a span of
about 40 years.
These buildings required miles and miles of steel beams...hundreds of
thousands of tons of cement...The IDS center in Minneapolis required
enough reflective glass to provide two pairs of sunglasses for each
resident of Minnesota and one pair for each resident of North and South
Dakota.
The Sears Tower, the nation's tallest building, contains 2 million
cubicfeet of concrete and 76,000 tons of steel. And its foundation spans two
entire city blocks.
Few people ever stop to think about the massive amounts of steel and
cement that go into these structures. But those who did - especially in
the early 1900s - could have made a fortune, especially those invested
insteel.
Between 1904-1930, shares of U.S. Steel rose an average of 66% a year!
Ofall the components used in skyscrapers, steel grasps my interest the
most.
Steel products are used in everything from the construction of
buildings, bridges, railway rolling stocks, industrial pipes and tanks to numerous
automobile parts and Campbell's Soup cans. So when a major macro-event
like a building boom increases demand, supply becomes even tighter as
other industries involved in general infrastructure and development
compete for the same fundamental resource.
Right now, the world's "second skyscraper boom" is currently under way,
and to no one's surprise, it's happening in the newest region of
massiveeconomic growth...Asia.
If steel production per person in China were to climb to U.S. levels,
itwould mean that China's aggregate steel use would double by 2031, to a
level equal to the current consumption of the entire Western world. And
when you add in developing countries like India, Malaysia, Indonesia
andVietnam, the numbers become staggering. We'll get to the specific
figuresin a minute.
Unlike the general use we see here in the U.S., high-rise buildings in
Asia will provide much more than Grade A office space...These buildings
will be the bedrock for the region's rapidly emerging middle-class
housing.
Roughly 50% of the world's population lives in the region of the world
experiencing the most dynamic growth. Last year alone, these economies
accounted for more than half the world GDP. They now churn out 43% of
Tue world's exports and hold 70% of the world's foreign exchange reserves.
And while real wages in the developed West are either flat or falling,
wages among the up-and-coming nations of Southeast Asia continue
growing.
So the world's latest member of the "middle class" will begin demanding
spacious, convenient living in the immediate future.
Buying commercial real estate in Asia today is a lot like investing in
American real estate at the end of World War II.
You may remember the Levittowns that shot up across the United States
over50 years ago. These carefully planned neighborhoods provided affordable
housing for the thousands of young soldiers returning home from the
war.But more importantly, these planned neighborhoods served as the new
modelfor America's booming middle-class suburban lifestyle.
The emerging markets of Southeast Asia are currently experiencing a
similar transformation. Except they're not peppering the landscape with
tree-lined streets and 2.5-bedroom, 1.5-story ranch houses. High-rise
apartment complexes are the new Levittowns of Asia.
You could easily move into one of these buildings and never find a need
toleave. These buildings include everything from grocery stores and
retailoutlets to fitness centers with swimming pools.
Asian developers are utilizing this high-rise housing model for one
specific reason: Land is scarce. Most Asian economies lack the
expansiveterra firma we in the West find so readily abundant.
Take Singapore, for example...It's roughly 3.5 times the size of
Washington, D.C., with an economy greater than New Zealand's and a
growthrate double that of the United States'.
Hong Kong is another example: It's only six times the size of our
nation'scapital, with an annual GDP on par with Argentina and Portugal.
The point is...land is, and always will, be the most valuable asset in
places like Hong Kong, Shanghai, Tokyo, Taipei and Singapore. These
Asiancities lack the land for urban sprawl we in the U.S. see in places like
Chicago, Washington, Houston, Los Angeles, Charlotte and Atlanta.
So when you can't build out, you build up. And that's exactly how these
Asian economies are making their magnificent growth possible.
I travel back and forth to Asia a couple of times each year. Whether
I'm in Hong Kong, Bangkok, Shenzhen or Shanghai, the landscape is
Constantly changing.
It's dynamic...exciting...like nothing the world has ever seen. You
Feel like you're watching a flipbook in real time as thousands of cranes
blanket the landscape lifting I-beam after I-beam to new heights. One
ambitious plan calls for a 200-story high-rise on the edge of Hong
Kong's Victoria Harbor. That's twice the size of the Empire State Building.
In Hong Kong, for example, prime locations in the coveted Central
District are running so thin that the government has commissioned even more land
reclamation, stretching the island even further into the blue waters of
Victoria Harbor.
The need to build up instead of out also explains why seven of the
world's 10 tallest buildings are now found in Asia. And there is plenty of room
and desire to build more.
DAX & Social Mood(c) ELLIOTT today, 14.Dez 2006
Artkel einer großen deutschen Tageszeitung, erschienen am 14.Dezember 2006
mit dem Titel: "Aufschwung 2007"unddie
"Die Aussichten sind günstig" heisst es, "Wirtschaftsinstitute und Wirtschaft überschlagen sich mit guten Nachrichten: RWI und Ifo-Institut erhöhen ihre Prognosen für 2007, der Deutsche Industrie- und Handelskammertag rechnet mit 200.000 neuen Jobs."Und weiter heißt es:
"Der kräftige Konjunkturaufschwung in Deutschland, sind sich die Wirtschaftsforschungsinstitute einig, wird im kommenden Jahr nicht abreißen." Wegen günstiger Investitionsbedingungen und des positiven internationalen Umfelds werde die Wirtschaft um 1,9 Prozent wachsen, teilte das Rheinisch-Westfälische Institut für Wirtschaftsforschung (RWI) heute mit. Bislang waren die Forscher von 1,7 Prozent ausgegangen. Für das laufende Jahr gehen sie von 2,5 Prozent aus. Auch das Münchner Ifo-Institut sagt für 2007 ein Plus von 1,9 Prozent voraus, das Kieler IfW sogar eines von 2,1 Prozent. Auch der Bankenverband erhöhte seine Prognose von einem auf bis zu 1,5 Prozent.Nach Angaben des Ifo-Instituts ist die Auslandsnachfrage die treibende Kraft des Booms in Deutschland. Diese habe trotz der diesjährigen kräftigen Aufwertung des Euro gegenüber dem Dollar aufgrund der schwungvollen Weltkonjunktur erneut sehr kräftig zugelegt. Anders als im Vorjahr sei aber auch die Binnenkonjunktur in Schwung gekommen.
open chart DAX, Dec 1,2006
http://www.elliott-today.com/images/dax.ht9_small.gif
Chart: futuresource.comFull story >>> DAX & Crude Oil"Crude at $60, trade concerns pummel stocks."
"Oil slides, but so do stocks"
"Lower rates, falling crude push Dow up"
"Stocks slip on falling energy prices"
Socionomics explains:The Uselessness of News Even to the Clairvoyant
Champions of news causality truly have a fundamental problem, which is that no investor really knows the implication of any piece of news. This fact is hidden by the ease with which financial news writers can retrospectively pull out from the plethora of news on any given day a story that appears to justify whatever market movement occurred. The reverse order of things is not so accommodating. If you could construct a time-machine mailbox that would generate The New York Times a full day early but with news about the stock market omitted, you would be just as unable to forecast the next day's market action as if you had nothing at all to read. Riots, peace pacts, summits, earthquakes, destructive hurricanes, price changes in commodities, assassinations, triumphs of statesmanship and political scandals - nothing of this sort has more than a momentary effect on the stock market, much less any predictive value. This week, an economics writer for the Atlanta Journal-Constitution said quite accurately, "If history is any guide, the stock market could go either way today in the wake of the U.S. air strike against Afghanistan and Sudan." (Walker, T. (1998, August 6) "Identifying sell-off trigger difficult." The Atlanta Journal-Constitution, p.F3)
Correct! Kudos for an economic writer who bothered to look at the record before opining. In August, the Atlanta Journal-Constitution ran an article that reviewed a 42-year history of surprise news and the stock market entitled, "Identifying Sell-Off Trigger Difficult." That is to say, it is difficult even in retrospect to make any connection between dramatic surprise events and what the market does. The biggest decline in the period studied was the 1987 crash, about which the article quite accurately says, "Scholars still debate the reasons why." Imagine scholars endlessly debating about things that history proves have no valitidity! That is what so many scholars do because their ideas of financial market causality, rationality and efficiency are all wrong, yet they see no alternative. Once you understand that news is not causal, that even if you got it in advance, you could not forecast the stock market, then you realize that there is no satisfactory news-related explanation for the market's behavior on Black Monday, last Tuesday or next Thursday, either, or on any market day at all, or any week, month, year, decade or century. It does not take a dedicated market student long to observe the acausality of news to the stock market. A socionomist observes, and more important, understands, the reverse causality. As R.N. Elliott said: "At best, news is the tardy recognition of forces that have already been at work for some time and is startling only to those unaware of the trend."
(Elliott R.N., (1946). Nature's Law). (The Wave Principle of Human Social Behavior, 1999 by Robert R. Prechter)DAX >>>
Validating the Wave Principle
by its Own Operation
As L.F. Richardson pointed out, the length of a seacost is dependent upon your method of measuring and your scale. A ruler placed on a globe will give one answer, the same ruler applied to every indentation as one traverses the coast itself will give a vastly different one. Similarly, when people ask me where the stock market is going or even what its trend has been, I have to ask, "What degree are you talking about?" There can be multiple answers, as in, "The Minor trend is down within a sideways Intermediate trend within a rising Primary trend."One important test of scientific hypothesis is its ability to predict outcomes. Although the Wave Principle hypothesis is difficult to quantify on the basis of predictability because it forecasts only probabilistically, there is nevertheless substantial evidence of its unique value. While reviewing the following excerpts, it is important that you honestly consider the utter uncertainty that exists in real-time forecasting. Psychological experiments show that most people who review events in retrospect consider them to have been obviously implied at the time. As Lee Simpson once said, "Any event, once it has occurred, can be made to appear inevitable by a competent historian." That goes for all of us. "Fine," I always reply to protestations that previous trends were easy to predict, "then how do you forecast the next ten years?" Usually I do not get much of an answer. I think that after you read these statements and consider them in the proper light, you will agree that the authors' accuracy in describing the future is due to their knowing something useful.
Special Report ...When Time Meets Price S&P 500 Index (SPX)
© ELLIOTT today, June 9, 2007
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Last week I presented a Special Report on the Dow Jones Industrial Average entitled
"A Confluence of Fives". The report was posted online Saturday, June 2, 2007. The following Monday, June 4, 2007, the SPX hit high at 1540.53. On June 1,2007 the SPX hit 1540.56. Sunday afternoon I presented a chart of the SPX on my website SPTD-07 with that headline: "Fasten Your Seatbelt". What's going on? The daily chart of the S&P 500 Index presented a classic five-wave advance according to the Wave Principle with a special pattern in wave (v) called an expanding diagonal triangle. Those familiar with the Wave Principle will note the overlapping within wave (v) of waves 4 and 1 and the expanding upper and lower boundary lines. As the chart reveals we see a completed textbook formation from beginnung to end. It is a five-wave pattern. Wave (iv) holds above the price territory
of wave (i). Wave (iii) is the extended wave, as is most commonly the case. Wave (iv) traced out a zigzag alternating with the double zigzag in wave (ii). A parallel trend channel drawn according to guidelines in Elliott Wave Principle touches the peak of wave (iii) but not of wave (v). However, the meeting of the upper resistance line at Intermediate degree coincides precisely with the meeting of the upper resistance, in fact, the fifth wave produced what Elliott called a "throw over". The even finer feature of this wave , however, is its mathematics. Starting in October 2002, the printing low in the SPX was 769. 769 x 0.618 = 475.24 and when added to 769 the result is 1244.24, a hairsbreath from the August 3,2005 high of 1245.86. The overlapping wave structures in 2004 and 2005, I think, cannot be labeled as a series of first and second waves, as some Elliotter do, since especially the second wave up (wave 3 of the diagonal) clearly counts as a three-wave structure in real time. Although, wave (b) is extremely short relative to the preceding wave (a) but a classic example existed in 1990-1991 when a similar formation lead to the great upwave of the 1990s. In 2002- 2005 however, the length of wave (a) nevertheless is
in classic proportion to wave (c), as the length of wave (c) is 0.786 times the length of wave (a). The length of wave (c) is 374 points which is equal of the advance from March 2003 to March 2004, 789-1163. The most striking feature however is the equality of time and price of the advance from July 18,2006 to June 4,2007. Gann, in his work said, "You can look for top on the 90th to 99th day".
(Source: Gann Made Easy, William McLaren).That's exactly what happened: The former high occurred on February 22,2007, which is exactly 99 days to June 1,2007, the first high print at 1540. Interestingly, the high of March 2004 (1163) divides the entire advance from March 2003 at 789 in half: 789-1163 = +374 points. 1163-1540=377 (Fibonacci-points).
Validating The Wave Principle
by its Own Operation
Live Exampel #1:
S&P 500 Index (SPX)SPX daily, Aug 2,2007
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Chart #2
... from the Weekly Update, July 13,2007 "1555"
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Chart #1
ELLIOTT today, July 13,2007 Weekly Update:
Special Report-S&P 500 Index Friday, July 13,2007 the S&P 500 Index finally reached the high of March 2000. It is interesting to observe that Intermediate wave (c) at 1555 equals the length of Intermediate wave (a). Based on this wave structure, the S&P 500 should have achieved its top. As you can see on the chart, Intermediate wave (b) traced out a contracting triangle ending at 1224. The entire structure since then formed a classic five-wave advance travelling within a parallel trendchannel. The red-dotted line marks the mid-channel though it is not a original Median line, according to Dr.Andrews, but it shows very clear, that the recent high touched that line exactly. A break of 1484 in the S&P will eliminate almost all remaining near-term bullish potential. It may be interesting that in real (gold) terms, both the S&P and the DJIA remain down by well more than half from their July 1999 peaks. With regard of the EW labeling shown on the chart, the Cycle wave B interpretation remains valid. As far as I know, my interpretation of a leading diagonal triangle for wave 1 or A is the only interpretation among various Elliott wave analysts. Too much company is what I don't like. Though it remains to be seen, if this interpretation proofs right. Despite the bullish alternate version, a much bigger correction even under that scenario is due, since Intermediate wave (4) will be in force, shaking market partcipants even higher up and down.
Live Exampel #2:
NASDAQ Composite IndexNASDAQ Comp., Aug 2,2007
ELLtoday, July 24,2007: "A drop to 2500 or even 2300 is a conservative statement."
KHL, ELLtoday, July 24,2007
Here is the latest chart of the NASDAQ Composite Index
Aug 2,2007
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Chart #3
On August 1,2007 the NASD Comp hit the ML registering a print low of 2515.81
5 Waves UP & Elliott Channel
© ELLIOTT today, July 24, 2007
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Chart #2
A picture tells more than a thousand words............. Related articles: Elliott Wave Principle >>> The Value of Forecasting with The Wave Principle With the caveat of immense specific variability within the known aspects of the Wave Principle, it is still the case that the practical value of all we know about it is immense. The first fantastic value that the Wave Principle provides is an amazing perspective. The second value is an occasionally remarkable accuracy, as you can see in Chapter 6. The third great value is that it provides a basis for assessing the past and analyzing the present in a consistent context, to which all the predictive literature on the subject attests. Finally, the Wave Principle indicates in advance the relative magnitude of the next period of social progress or regress. With all these gifts, we have a basis for informed, truly rational decision-making with regard to anticipating the tenor of future events. Its very nature forces us to look at the big picture, elevating our perceptions above the cacophony of daily news and providing the opportunity to make sense of great social trend changes and the dramatic events that accompany them. As a result, the Wave Principle provides a basis for achieving a great sense of calm about the future, which no longer appears as a black cloud of unknowable chaos (sometimes just a grey cloud of partly knowable chaos). The general results of social mood, i.e., economic trends, political trends, peace and war, etc., are fairly easy to predict, as they follow what has already occurred in social mood. Predicting social mood trends themselves, and their immediate reflectors such as stock index trends, fashion and entertainment trends, etc, is more difficult, but the Wave Principle at least provides a basis for doing so. With knowledge of how the pattern unfold, to the extent of our ability, effort and emotional detachment, we can enjoy success even at that daunting task. Because the Wave Principle describes patterns of collective behavior, the accuracy of any resulting forecast depends upon (1) the reliability of the investing’s crowd behavioral patterns and (2) the ability of an analyst to identify the relevant ones properly.
NASDAQ Composite Index
© ELLIOTT today, July 21, 2007
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Chart #1
Missed Opportunity??
Excerpt from my Weekly Update, ELLtoday, July 21,2007:
NASDAQ Composite Index:
High 2724.74 on 7/19/07. Why this date may be very important? Get back one year, on July 18,2006 the NASD hit a new low at 2012,78 and since then only interrupted by a 23-day correction the index rose 34.89%. For example the DJIA rose in the same period 31.25%. From this year's lows the DJIA rose 17.4% but the NASD lagged since it rose 15.9%. This is not a huge divergence but a look at the RSI of both, the DJIA and the NASDAQ clearly bring to light that despite the media's optimism the internal strength of these two markets show really huge divergences between the price advance and the strength of these advance. The RSI shows that from a historical point of view the market will break down. How much is another question. I will discuss highly likely scenarios of a bigger decline when the time, i.e., the Elliott wave structures tell us the time is here. Last week I said, "Here we have a clear five-wave structure and prices traveling within an Elliott parallel trend channel. Wave (iv) slightly penetrated the lower uptrend line, which is allowed under the rules and guidelines of EWP. Wave (v) itself formed a five-wave structure and should be near completion. Wave (i) and (v) are spot equality in length. Wave (i) lasted 8 trading days and wave (v) so far lasted 12 trading days. Monday is trading no.13! Last gasp rally?" Indeed, the NASD has reached the upper parallel of an Elliott trend channel. What's exciting, anyway, readers of my SP-Trading DESK know, how many successful calls were based on the technique of Dr.Andrews. The chart displays the NASD from September 2005 to the present. There is little doubt that forecasts based on the Median Line technique has an overwhelming success, rather than listen to the daily financial commentaries made by the media. The three arrows on the chart show, that even when the index overshoot either the ML or the channel lines, it turned to the opposite. Along with five-waves up the index hit the upper parallel of the ML and produced a slight throw-over. It may hold up another two to three weeks in the upper 2600s only to loose more momentum. Even though, the ML channel clearly shows the risk situation. A drop to 2500 or even 2300 is a conservative statement. The difficult part of this analysis the factor time. I'll check that with a highly likely scenario based on the ML technique next week. Stay tuned. Have a great weekend.
KHL, ELLtoday, July 24,2007
ALCOA from the Weekly Update, April 8,2007
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From the Weekly Update, April 8,2007: Over the course of the last four years AA has formed a classic contracting triangle
of Primary degree, labeled a-b-c-d-e. Please note, wave e of the triangle stopped exactly at the Fibonacci 0.618 retracement of wave c which itself retraced 0.786
of the preceding wave b. Arguments still favor an outbreak to higher prices.
I'll go long with a stop at wave e (trendline).
ALCOA Outcome as of May 11,2007
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The concept of a six-and-a-half year contracting triangle in ALCOA was the correct interpretation of the wave structure. From the end of the triangle wave e, the stock moved up strongly displaying an impulse pattern which is probably in wave 3 of (5).
ALCOA Outcome as of July 24, 2007
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A picture says more than a thousond words.........
SPX daily(c) ELLIOTT today, 02/10/2007
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This is a graphic representation of what some analysts referred to as
"the psychology of the market." Elliott wave labels are not just random numbers
on the chart – they describe the patterns in which traders' psychology moves from
optimist to pessimism and back again. Each wave on a chart represents the
predominant psychology of the market players.
SPX, daily, 02/22/2007
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ML-1 "catched" the high
On February 20, 2007, the DJIA reached 12,795, another new alltime-high. With the index's latest push above the upper line of a wedge-shaped pattern the completion of that pattern is perfect. The DJIA turned on a dime and lost -167 points in three trading days. The breakdown of momentum is still visible in the structure of the RSI as shown on the bottom of the chart. Now that wave 5 is mature, we can raise the conservative "bear market resumption signal" to the area of the lows of January 2007. In contrast to the bullish-divergence in June-July 2006 the market's internal "strength" as revealed by the 14-day RSI is still worsening. Weekly Update, February 25,2007(c) ELLIOTT today, 02/25/2007Pattern & Outcome on mouse over see the outcome...
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S&P 500 Index (SPX), 02/27/2007 http://www.elliott-today.com/images/charto12_small.gifClassic Crash-Pattern (see Elliott Structures>>>) Dow February 28, 2007http://www.elliott-today.com/images/charto11_small.gifDJIA, December 2006 - February 2007 The pattern is called a "diagonal triangle" (See Elliott Wave Principle>>>) Figures 1 + 2 Figure 3 Please see analysis & forecast>>>
Robert Schiller polled individual and institutional investors about why they sold stocks on October 19,1987. Most of them admitted candidly that "they sold because others were selling" ,i.e. they were herding. It is welcome to have research telling us that the crash of 1987 was a "psychological event". However, no one ever thinks to poll investors about why they had bought stocks relentlessly throughout the preceding year. If any pollster did ask, the truth would be exactly the same, but he would find little honesty about the fact because in rising markets , people have plenty of time to let their neocortexes formulate all kinds of rationalisations for herding action. Panic is a faster-acting emotion than hope, and the neocortex is often stumped in coming up with an explanation for it. If social mood is patterned, it cannot be the result of random social events, and there is no basis upon which to suggest that it is somehow the result of social events that are themselves perfectly patterned according to the Wave Principle, which would require utter event determinism. Yet chapter 16 shows an intimate connection between social events and mood. Therefore, the only possible direction of causality is the opposite of that popularly assumed. Events do not shape social mood; social mood shapes events. (The Wave Principle Of Human Social Behavior,1999, by Robert R. Prechter)
As market analyst Paul Macrae Montgomery explains, "to the limbic system, the phrase 'net present value of future cash flows' is meaningless because its only sense of time is now and only value is pleasure or relief from stress. "Throughout the herding process, whether the markets are real or simulated, and whether the participants are novices or professionals, the conviction of the rightness of stock valuations at each price level is powerful, emotional and impervious to argument. Gustave Le Bon, a pioneer in the study of crowd psychology, said a century ago, "It were as wise to opposecyclones with discussion as beliefs of crowds...Time alone can act upon them."(The Wave Principle of Human Social Behavior, 1999 by Robert R. Prechter)
Related Studies: The Wave Principle>>> Elliott Fractals Fractals EURO TracRecord
Special-Report, January 24, 2004Fractals and Their Relationships
to the Wave PrincipleEUR/USD
(c) ELLIOTT today
A fractal is an irregularly shaped object that is nonrandom in the sense that its discontinuities (i.e. fluctuations)
at all scales are similarly irregular. For example, if someone were to show you a line representing the indentations
of land along a coastline, you would not be able to say, without other evidence, whether the coastal section was 1
mile long, 10 miles long, 100 miles long or 1000 miles long. A fractal displays the property of self-similarity (or self-affinity), depending on its form) at different scales. The jaggedness of a coastline is self-similarly irregular at different scales. So it is with the price graphs of financial markets. As R.N. Elliott pointed out in 1938, the patterns of the Wave Principle take a similarly jagged shape whether the viewed on an hourly, daily, weekly, monthly or yearly graph.
In 1689, Jakob and Johan Bernoulli were able to “discern the minute in infinity” in a mathematical progression that foreshadowed the discovery of the fractal geometry of nature. Perhaps the first person specifically to advance the idea of self-similarity at different scales in natural forms was the German poet and naturalist, Johann Wolfgang von Goethe, who in 1790 described the self-similarity of parts to the whole of plants. A century later, from 1874 to 1897, mathematician Georg Cantor studied self-similar sets as mathematical phenomena.
In 1919, Felix Hausdorff invented the idea of fractional dimensions to describe the plane- or space-filling property fractals. A fractional dimension (called a Hausdorff dimension prior to the 1980s) describes objects that share proportions of two sets of dimensions. For example, if a sheet of paper is considered as a two-dimensional plane, is a partially compressed ball of paper two-dimensional or three-dimensional? It is still a plane, but it has been folded so as to appear to fill space , giving it three-dimensional properties. Its dimension can be measured as a fraction between 2 and 3. In the same way, plots of financal market prices can be considered as a one-dimensional line or as taking up space on a two-dimensional plane.
In the 1930s, R.N. Elliott independently rediscovered the idea of self-similarity at different scales. More important, he was unquestionable the first to describe self-affinity as a fundamental property of social phenomena and to recognize its implication for social causality.
The Essential Design
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Basic Tenets
In his 1938 book, The Wave Principle, and again in a series of articles published in 1939 by Financial World magazine, Elliott pointed out that stock market unfolded according to a basic rhythm or pattern of five waves up and thee waves down to form a complete cycle of eight waves.
The three waves down are referred to as a “correction” of the preceding five waves up. The basic concept of five waves in the direction of the main trend followed by three corrective waves is shown in Figure 1.
Waves 1, 3 and 5 are termed impulse waves and waves 2 and 4 corrective waves. Wave 1 is corrected by wave 2, wave 3 is corrected by wave 4, and the entire sequence 1,2,3,4,5 is corrected by the sequence a,b,c. One complete cycle consisting of eight waves, then, is made up of two distinct phases, the numbered phase, sometimes referred to as a “five”, and the lettered phase, sometimes referred to as a “three.”
Elliott Wave Principle – Key to Market Behavior breaks it down for us:
“Impulsive waves subdivide into five waves with certain characteristics and always move in the same direction as the trend of one larger degree… Wave 2 never retraces more than 100% of wave 1, wave 4 never retraces more than 100% of wave 3… and does not enter the territory of wave 1 (except in the case of triangles), and wave 3 always travels beyond the end of wave 1, is often the longest, and never the shortest among wave 1,3, and 5.”
In the 1930s, Ralph Nelson Elliott discovered that aggregate stock market prices trend and reverse in recogniziable patterns. That patterns he discerned are repetitive in form, but not necessarily in time or amplitude. Elliott isolated
and defined thirteen pattern, or “waves,” that recur in market price data. He named and illustrated the patterns.
He then described how they link together to form larger versions of themselves, how they in turn link to form the
same pattern at the next larger size, and so on, producing a structured progression. He called the phenomenon
The Wave Principle. [The Wave Principle Of Human Social Behavior And The New Science Of Socionomics,
Robert R. Prechter,1999]
EUR/USDIntermediate Wave (3)
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Extensive research in connection with what may be termed 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 recurning serials of waves or impulses of definite number and pattern. It is likewise indicated that in their intensity , these waves or impulses bear a consistent relation to one another and to the passage of time.
Currency´s Weakness Baffles Experts
Wall Street Journal , 21.November 1999 Old Reasons don´t apply to EURO´s Fall
If you look at growth rates, interest differentials and any
of the other conventinal measures, you simply can´t explain the euro´s weakness," says xxxx, senior economist at Lehman Brothers in London. xxxx, European economist at Credit Lyonnais Securities in London agrees:
„Anyone who can say , hand on heart, that they
truly understand why the Euro is falling..."
The expression “human acitivties” includes such items as stock prices, bond prices, patents, the price of gold, goverments expenditures, production, life insurance (purchases) , electric power produced, gasoline consumption, fire losses, price of seats on the stock exchange, epidemics, and real estate (prices). ¹ )
It is particulary evident in those free markets where public participation in price movements is extensive. Those who have attempted to deal with the market’s movement have failed to recognize the extent to which the market is a psychological phenomen. They have not grasped the fact that there is regularity underlying fluctuations of the market, or, stated otherwise, that price movements in stocks are subject to rhythmus, or an ordered sequence. The wild, senseless and apparently uncontrollable changes in prices from year to year, from month to month, or from day to day, link themselves inta law-abiding rhythmic pattern of waves. The same rules apply to the price of stocks, bonds, grains, cotton, coffee, and all the other activities previously mentioned.
The student should recognize, that there are cycles within cycles Major waves subdivide into intermediate waves (which) subdivide into minor waves. One cycle becomes but the starting point of another, or larger, movement that itself is a part of, and subject to the same law as, the lesser movement. This fundamental law cannot be subverted or set aside by statues or restrictions.
Current news and political developments are of only incidental importance, soon forgotten, their presumed influence on market trends is not as weighty as is commonly believed. Underlying this progession, in whatever field, is a fixed and controlling principle, or the master rule under which nature works.² )
¹ ) R.N.Elliott’s Masterworks (1980/1998) by Frost & Prechter, which includes all of Elliott’s original books, articles and major essays, as well as a biography.
² ) Elliott Wave Principle – Key To Stock Market Behavior (1978/1998) by Frost & Prechter, a concise summary of Elliott’s work.
Minor Waves
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Describing in What Ways Waves Are Identical and in What Ways They Are Variable
The concept of a robust fractal is difficult to depict visually because a single illustration cannot convey
both those aspects of an Elliott wave that are invariant and those that are variable, i.e., what its manifestations have in common and what they need not. We can draw the essence of an Elliott wave but not state the precise path that any manifestation of it will actually take. Elliott waves in reality always conform to a few simple rules of patterning, but vary considerably within that format.
Elliott described five elementary patterns in the stock market, which he called impulse, diagonal triangle, zigzag, flat and triangle. The first two occur in motive mode (i.e. when prices are moving in the direction of the trend of one larger degree, effecting the larger wave’s progress), while the latter three occur in corrective mode (i.e. when prices are moving opposite the direction of the trend of one larger degree, punctuating its progress). In corrections, sometimes two of the patterns will occur side by side, interrupted by an intervening zigzag, aas noted under the heading , “Double Three.”
Each of the five elementary patterns has its own description as well as a short catalog of variations that are similarly delineated by differences in form . For instance, sometimes both boundary lines of a triangle slope toward each other , and sometimes either the top or bottom line is horizontal. As another example, somtetimes wave B of a flat ends at the level of the start of wave A , and sometimes it ends beyond it. Elliott attached a name to each of these differences in form so that with his terms, we know immediately what form and variation we are talking about.
If Elliott was anything, he was menticulous. His description of waves, their postiion within larger waves , and their relative frequency of occurrence have stood the test of sixtiy years’ intensive application by some very dedicated practitioners, with only minor modifications. (The Wave Principle of Human Social Behavior and the New Science of Socionomics, Robert R.Prechter, 1999. S.57-60.)
Minute Waves [(i),(ii),(iii) und (iv)]
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The Essential Design Now observe that within the corrective pattern illustrated as wave (2) , waves a and c, which point downward, are each composed of five waves: 1,2,3,4 and 5. Similarly, wave b , which points upward is composed of three waves: a,b and c. This construction discloses a crucial point:
Motive waves do not always point upward, and corrective waves do not always point downward.
The mode of a wave is determined not by its absolute direction but primarily by its relative direction. Aside from four specific exceptions , which are disscussed in the literature, a wave divides in motive mode (five waves) when trending in the same direction as the waves of one larger degree of which it is a part, and in corrective mode (three waves or a variation) when trending in the opposite direction. Waves a and c are motive, trending in the same direction as wave (2). Wave b is corrective because it corrects wave a and
is countertrend to wave (2).
In summary, the essential underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves, while reaction against the one larger trend develops in three waves, at all degree of trend. (The Wave Principle of Human Social Behavior and the New Science of Socionomics, Robert R.Prechter, 1999. S.26-27.)
Minuette Waves i,ii,iii,iv und v& Subminuette Waves i,ii,iii,iv,v
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http://www.elliott-today.com/images/econom10.jpg DJIA Archive
ELLIOTT today.com :
DJIA Forecast of August 4, 2007
The Bear Is On !
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Dow Jones Industrial Average
Cycle Wave V1974-2007
© ELLIOTT today, January 2008
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DJIA - Outlook 2006
© ELLIOTT today, December 3, 2005
As the long term chart of the DJIA reveals, a decline of much larger proportion is imminent. The 1x1 Gann line, one of the most important tools the famous market technicians W.D. Gann offers, points to below 10.000, most likely much further down, depending on the timeframe, one is likely to use.Fact is, the 4-year cycle low is due in the year 2006, most likely in the third quarter of that year and in 2007/2008 the famous 5 ½ year Kitchen Cycle, too. The 1x2 Gannline drawn from the low of 2002 points to below 9.000 and the low of October 2002 was 7197. These numbers count for a decline of roundabout 3.800 points in the Dow, a whopping 34.5 %, measured from 11.000.C-waves are third waves, though the decline may be greater since the market trades in a Super Cycle degree environment. Most important to you and me as individuals is that the Wave Principle indicates in advance the relative magnitude of the next period of social progress or regress. Living in harmony with those trends can make the difference between a happy, successful life and onein which time is spent fighting the underlying tide. Failing to prepare for the next major trend, in fact, can be ruinous, and not only financially.As the Easternes say, “Follow the Way.” As the Westerners say, “Don’t fight the tape.” In order to heed these nuggets of advice, however, it is necessary to know what is the Way, and which way the tape. There is no better method for answering that question than the Wave Principle. The outlook for the S&P 500 and the Nasdaq Composite remains the same as outlined last week: Both indexes are close to complete an ending diagonal triangle!
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Figure 1
The 2x1 Gannline points to higher prices most likely in the low 11.000s. Since the fourth wave of the preceeding decline has been taken out to the upside the Intermediate wave (2) high dating back to September 2000 may be a possible stopping point. The largest distance within the contracting triangle measures 1276 points and when added to the end of the triangle at 10.156 a reasonable target will be 11.432. That is just less than 500 points below the all-time high in theDow and from an Elliott point of view, that is what B-waves are all about. B-Waves are phonies. They are sucker plays, bull traps, speculators paradise, orgies of odd-lotter mentality or expressions of dumb institutional complacency. (* Contracting Triangle, EWP, p. 41, Frost & Prechter, 1990). The worst case scenario is still that from October 2002 Primary wave (2) in the Dow and S&P 500 (SPX) is underway. The Dow topped on May 10, 2006 at 11,670 after the completion of an expanding wedge pattern for wave 5 of (c) of . Like textbook fashion the market fell sharply into the area of the previous fourth wave and found natural support at 10,698 and 10,683. At first glance, the decline seemed to trace out only a "three-wave" structure, which is corrective in character and not the start of a more pronounced decline. However, the possibility of a "five-wave" decline from the top cannot ruled out and as I said shortly after the top has been reached, the structure of the ensuing (correction)wave form will tell us what to expect for the next 3 to 6 months. The easterners say, "a picture is worth a thousand words" and the picture, i.e., wave form since May 2006 has an uncanny copy of the wave form the Dow traced out from August to September 1987. At that time the second wave retraced almost exactly 0.618 of the first decline indicating the probability the recovery high has been reached. This time the Dow retraced 89% using the extreme readings and the length of wave (c) of the expanded flat (same form as 1987) is 1.618 times the length of wave (a) in percentage terms, a common wave relationship. Wave v of (c) formed what looks like an expanded diagonal triangle (wedge) which is the most bearish pattern the EWP has to offer. As you can see on the chart this pattern is the same pattern as the one from January to May 2006 on a much smaller degree. There is another aspect of sentiment worth discussing. There was a sudden widespread acceptance lately that the Dow would not "slump into the 4-year cycle low", due in 2006 because it did not so in 1986. Second, there was another "rationalization" for further rising prices ("this time is different") with the argument, the 4-year-cycle low has already occurred and is now behind us.
DJIA Weekly Update (Example) © ELLIOTT today, May 20, 2006
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Figure 2 The forecast of May 12, 2006 (DJIA below) came to pass like pinpoint accuracy. Because the stock market is patterned according to the Wave Principle, the forecast wasn't a one day wonder.It's a pattern you can understand and learn how to recognize, which in turn allows you to anticipate a range of probabilities for what's ahead. As the position of the ML-2 reveals, the market so far held above that ML-2 and highly likely will bounce upward Monday.
A Look at the Dow !! Weekly update, DJIA
© ELLIOTT today, , May 12,2006
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Figure 3 This is the chart of the Dow taking from my weekly update. On May 4, 2006, I said, "With respect to the wave count, the preferred count is a five-wave advance from the low of 2002, whether the Dow will reach a new all-time high remains to be seen." On April 28, 2006, I said, "The Elliott Wave structure displays an expanding wedge (expanding diagonal triangle with wave v an ending diagonal triangle. The Dow also reached the ML-1 (red dotted-line)." As you can see on the updated chart, the market respected the upper boundary line drawn from wave i of the expanding wedge. Together with the 1x1 FiboFan-line, the market reached that point exactly.
Special Report: Dow Jones Industrial Average
© ELLIOTT today, May 10, 2006 DOW - Gigantic Double Top !!
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Figure 4 The description of a "thrust out of the triangle", as Elliott put it, supports the idea of that labeling. The thrust so far brought the Dow near its high of March 2005 and as I see it, the probability is high that this former high will be taken out, soon. (ELLtoday, January 6, 2006)
Dow Jones "Triangle Count"
The "triangle count" has been posted here about months ago and many Elliotter took it over, especially in the S&P namely as a running triangle. Internal subdivisions fit the requirements for a triangle, but I personally don't like it, because of the steep decline in wave c, which can be counted as a five, either. A triangle IS possible and the relatively strong advance after the triangle fits the description of a "thrust out of the triangle", which in this case counts as wave (c) or (v) of 5. Five waves up can be counted as complete, waves one and four sport alternation, but the slight overlapping of waves i and iv in wave 5 raises some questions. Nevertheless, the market failed to reach the ML-1 drawn from the low of October 2004 and dropped below 11,200 on Thursday. On the other hand, the advance since October 2002 CAN be counted as a five-wave structure, with probably only wave 1 complete at the recent high and wave 2 now in progress. A correction of (say) 38.2% would point to 10,885, right into the area of the previous fourth wave of one lesser degree. With the market now only 4.5% close to the all-time high, many analysts claim that a new high is only a matter of time. Under the bullish count, wave 5 at 11906 (all-time high on January 14, 2000 was 11908) would be in Fibonacci proportion to the length of waves 1 through 3: 7197-10,754 = +3,557. Multiplied by 0.618 the result is 2,198.22 and when added to the low of October 2004 at 9708, gives 11,906.
Weekly update, DJIA, May 6, 2006 © ELLIOTT today
Revisiting the ALL-Time High
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Figure 5
ELLIOTT today, April 28, 2006: "The Dow registered a high for the year 2006 on January 11, 2006. The high of March 21, 2006 would be in perfect Fibonacci relationship on May 4, 2006: 70 days x 0.618 = 43." The Elliott Wave structure displays an expanding wedge (expanding diagonal triangle with wave v an ending diagonal triangle. The Dow also reached the ML-1 (red dotted-line). ELLIOTT today, May 6, 2006: With respect to the wave count, the preferred count is a five-wave advance from the low of 2002, whether the Dow will reach a new all-time high remains to be seen. Interestingly enough, the length of wave (1)and wave (5) are about the same, as wave (1) gained +1857 points and wave (5), measured from the low of 9,708 traveled 1,878 points. Taken the first advance from 7,197 to 10,754 (+3,557 points) and multiply the advance with 0.618 the result is 2,198 and when addedto the 9,708 gives 11,906 matching the high of January 14, 2000 by 2points! Elliott channel lines, Median Line and the 1x1 GL all point to that high.
Weekly Update DJIA© ELLIOTT today, April 14, 2006
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Figure 5 Despite the fact, the swings in the DJIA since the high of March 2004 seems random rather than orderly (in view of the uninformed), the DJIA travels within a parallel channel. A parallel trend line connecting the lows of April and October 2005 set on the high of February 2006 touches the recent high of March 21, 2006 quite exactly. The primary degree count displays the bigger picture: an a-b-c x a-b-c ultimately labeled (w)-(x)-(y), a double three correction. Alternation is satisfied since the first a-b-c traced out an upward zigzag for wave (w) and the second a-b-c formed what is best counted as a 3-3-5 flat. Internal wave relationship strongly suggest, that the market reached an important top. In percentage terms, wave w of (y) equals wave y of (y), a common relationship.A decline to at least the lower trend line is expected in the coming months, but a target depends on the time frame the market uses to do so. "Taking into account, Zoran's count of a "Iraqi War" triangle is correct, the advance counted from the end of that triangle at 8285 on April 2, 2003 fits a perfect Fibo relationship at the recent high. Multiplying the length from the top of 2000 at 11,723 (closing price) to the end of the triangle at 8,285 (-3438 points) with 0.885 (Sierpinski Gasket Number, Scientific American, August 1999) gives 3,042.63 and when added to 8,285 the result is 11,327.63, a mere 10 points from the recent high. Additionally, the two upswings 2003-2004 and 2004-2006 are in classic Fibonacci proportion, since the first upmove gained +2,469 points (8285-10754) and the second gained +1,626.80 points (9,708-11,334.80)." ELLtoday, March 25, 2006. Actually, the closing high on March 21, 2006was 11,325.80 a hairs breath from 11,327.63 (+/-1.83 pts)."
TOP! Special Report, March 10, 2006
updated April 13, 2006 Weekly update, SPX © ELLIOTT today, April 9, 2006,
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Figure 6
The Fourth of the Third Wave
Within most five-wave declines, there is one point that repeatedly provides, in the ensuing upward correction, both a magnet for rising prices and a ceiling of resistance for further advance. That point is the (usually small) fourth-wave rally within the third wave down. The level of the "fourth of the third" wave is a reliable target for a rally when wave four peaks lower than wave four of three and when the third wave is fairly long relative to the first wave. This is actually the most common development, so the target is often applicable. This target is less often valid when wave five is extended , in which case the ensuing rally generally tops between peak levels of wave two of five and wave four. This target is almost never valid when the first wave is extended because by the rules of wave construction, wave three is then shorter than wave one, and wave five is even shorter than wave
three. In these cases, the ensuing rally typically carries to around the peak of the preceding wave two or even wave four of one. (The Elliott Wave Theorist, July 2002)
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Figure 7 The internal wave count is acceptable, as you can see on the chart. Moreover, Fibonacci calculation has been satisfied. Page 57 of the Elliott Wave Principle explains, that when third waves are extended, the first and fifth are usually equal in length or related by the Fibonacci ratio. The "top" was "catched" in real-time: "ML-2 points to about 1314-1315 while the lower ML-2 channel line provides support at 1307."
The Louder They Come, The Harder They Fall
Zoran Gayer first introduced the idea of an "Iraqi War Triangle", meaning the up and down zigzaging of the Dow and the S&P 500 between July 2002 and March 2003. The Elliott Wave Principle (Frost & Prechter, 1990) states with respect to triangles, "triangles as a general rule occur only in positions prior to the final movement in the direction of the larger trend, i.e., as wave four or B." (EWP, p.42). Triangles are drawn by connecting the termination points of wave a and c, and b and d. Wave e can undershoot or overshoot the triangle boundary…" With respect to form, EWP states, "triangles are overlapping five-wave affairs which in turn subdivide 3-3-3-3-3." They appear to reflect a balance of forces which results in a sideways movement that is usually associated with decreasing volume and volatility. As you will notice, most of the subwaves in a triangle are zigzags, but sometimes one of the subwaves (usually wave c) is more complex than the others, and can take the shape of a regular or expanded flat. In the case of the S&P 500 (cash) wave c within the triangle is best counted as a double zigzag labelled a-b-c x a-b-c.
The most important is the wave pattern. The biggest signal that the bear market is underway, was the five wave decline in the S&P500 and the NASDAQ index from March 2000 to September 2001. Those patterns are unmistakable. They say in no uncertain terms that the major trend is now down. Labeling the low of September 22, 2001 as Primary 1 of the new bear market, the upward correction to March 2002 counts as Intermediate wave (a). The single most important rule that can be gleaned from a study of the various corrective patterns is that corrections can never be fives. Only impulse waves can be fives. In other words, an initial five-wave movement against the larger trend is never the end of a correction, only part of it.
Following the top of March 2002, the S&P 500 declined relentlessly for nearly two months and smashing through the neckline of its head-and shoulders pattern, violating its neckline. The low of July 2002 marks wave W on the chart above, which itself is part of an a-b-c decline. Since a flat correction (expanded flat) differs from a zigzag in that the subwave sequence is a 3-3-5 affair, the first two of such a sequence had been established. The strong up move into the last week of August 2002 formed a clear-cut three-wave advance labelled wave X on the chart. Now we know, a single "three" is any zigzag or flat. A double three or triple three is a less common type of corrective pattern which is essentially a combination of simpler types of corrections, including zigzags, flats and triangles. Their occurrence appears to be a flat correction's way of extending sideways action. A double three is composed
of seven legs and a triple three of eleven (except when one of the "threes" takes the shape of a triangle, which adds two waves).
Combinations of threes were labeled differently by Elliott at different times, although the illustrative pattern always took the shape of two or three juxtaposed flats, to reflect their usual character. Within a double or triple three formation, the waves in the direction of the previous trend, being "B" or "X" waves, always subdivide into threes
(or triangles), while those in the direction of the corrective wave can subdivide into threes or fives, depending upon what simpler types of corrective patterns are forming within the structure.
More commonly, however, the component patterns alternate in form. For example, a flat followed by a triangle is
a more typical type of double three. The formation from the high of March 2002 can be counted as an a-b-cX triangle, a double three correction, as outlined before. If so, the strong upward move since March/April 2003 must be counted as a five-wave structure, which in case, completes the 3-3-5 structure, required for an expanded flat (EWP, p. 37-38.)
Flats can be what we call "expanded", and contain a price extreme beyond that of the preceding impulse wave. Elliott called this variation an "irregular flat", although the word is inappropriate as they are actually more common than "regular" flats. The preceding formation of the crash of 1987 was an "expanded flat", though on a lesser degree. The formation in the DJIA from August to November 1973 was an expanded flat correction of this type in
a bear market. The DJIA lost roundabout 20% of its value following the completion of the expanded flat.
No market approach other than Elliott gives as satisfactory an answer to the question, "How far down can a bear market expected to go?" As in the case of a bear market correction: How high can a bear market correction go? The guideline is that corrections tend to register their maximum retracement within the span of travel of the previous fourth wave correction of one lesser degree, most commonly near the level of its terminus. As you can clearly see on the chart, that level is situated at about 1320 in the S&P 500. Now consider the following Fibonacci relationships: Primary wave 1 down declined -608 points (itself a Fibonacci number) and the ensuing Intermediate wave (a) gained +231 points. (231 = 0.382 of 608). A 0.618 retracement of the decline of -608 points gives 375.74 points and when added to 945 a reasonable target is 1320 (945+375). The length of Intermediate wave (c) then would have travelled +481 points (839 - wave e of the triangle) to 1320) which means, wave (c) would retrace exactly 0.6135, which is phi of the whole decline from 1553 to 769 (extremes), which is -784 points. (481/784= 0.61352= phi). EWP describes, "after a triangle is complete, the final impulse wave is generally swift and travels approximately the distance of the widest part of the triangle." Adding a 2.618 multiple of +185 (the widest part of the triangle) a reasonable target would be 1323 (839+484), since 185x 2.618 = 484.
Alan Newman shows charts of Dollar Trading Volume vs. GDP on a historic scale. And he writes further, "judging by other sentiment measures, such as the Investors Intelligence survey of newsletter writers, the mutual fund cash-to-assets ratio, and the Rydex fund ratios, there is every reason to believe that participants are caught up in a frenzy - again. But since prices still remain far below their all-time highs, the common wisdom is that the bull market has a lot of room on the upside. Furthermore, three years of higher prices uncompanied by any substantial price correction are sufficient to convine participants that no price correction will be forthcoming. The circumstances have again enabled rampant speculation, albeit certainly not on the same scale as fateful manic peak.Nevertheless, current valuations have only been exceeded four times in market history; 1929, 1973, 1987 and 2000. Each of those occasions were followed by rapid and momentous declines in stock prices. Exactly how much additional evidence do we need to claim that investors are in a similar position of risk, as they were at the four prior peaks? Recommendation: Frenzy & Churn! The Greatest Stock Market Mania of all Time, a special report by Alan M. Newman, www.crosscurrents
The radical thesis of The Wave Principle of Human Social Behavior and the New Science of Socionomics (New Classics Library, 1999) was unmistakable manifest in the raucous social comedy of the 1990s, and now it is playing out in the first act of a developing worldwide social tragedy that will last years. The primary thesis of this book is that changes in social mood cause and therefore precede changes in the character of social events. In contrast to this idea, most people erroneously try to divine the implications of events in attempts to forecast financial markets and people's collective feelings. Their approach cannot work because markets are driven by natural trends in mass psychology, and events resulting from those psychological trends come afterward. It is the changes in such trends, as indicated by turns in the stock market, that signal a coming change in the tenorof social events.
Socionomics explained why global atrocities followed the 1929-1932 crash and continued during most of the rest of the bear marrket pattern, which ended in 1949. (Inflation adjusted DJIA). It also explained why the worldwide peace initiatives and unprecedented acts of reconciliation of the 1990s followed nearly half a century of social mood uptrend. The dramatic, historic pictures shown in Socionomics to convey the power of these moods were not placed there simply for academic purposes. this is real life we're talking about. (The Elliott Wave Theorist, September 11, 2001.)
Weekly Update, Dow Jones Industrial Average
© ELLIOTT today, July 8,2005
One day after London was attacked from a series of terrorist attacks the question arrives:
"Do dramatic events (like terrorism) throw Elliott wave pattern off?"
The premise of the Wave Principle in brief:
Mass social mood unfolds in clear and predictable wave patterns. The stock market is the primary measure of trend changes in social mood. The character of social events can be anticipated by tracking these patterns (13 in all) as they unfold in the price charts of major financial markets. Shifts in mass social mood are not random, but unfold in recognizable patterns. These patterns also appear in the price trends of major stock markets, and coincidentally with trends in popular culture. When mass psychology is trending “up,” there is a collective increase in concord, inclusion, and optimism -- to name a few. When mood is trending “down,” discord, exclusion and pessimism throughout society will follow.
The London attack occurred exactly on day number 987 (Fibonacci number) from the low of October 10,2002 in the Dow, that date itself was day number 986 (987) from the all timehigh of January 14, 2000.
Coincidence? Yesterday, the S&P 500 slumped to a low of 1183.55 and that is only 1 point off a 50% division of the entire decline from 1229 to 1136.
Elltoday said on June 30,2005: “The recent low in the Dow occurred exactly at a 0.618 Fibonacci mark: 10.000 to 10.656 = +656. 656 x 0.618 = 405. 10.656-405= 10.251 (+/-2).
A break of that level suggest much lower prices ahead probably into the 10.150 area where the lower channel line of ML-1 comes in.”
Yesterday, July 7,2005 the Dow registered an intra day low of 10175, which marked the bottom of the day and the market reversed upward. As you can see on the chart, it was the second time the Dow touched and slightly penetrated the down sloping 1x1 Gann line (45°) and each time the market quickly turned around and surged in the opposite direction. From an Elliott wave point of view, the recent low can be counted as wave b of an irregular flat (expanded flat) with wave c of ii now in progress. A reasonable target is 10472 (0.618 of 10656-10175.) and the upper channel line of ML-1 (red) points to that target, too. The 1x2 Gann line from the top provides major resistance for the count to be valid. Given my long standing possibility count of
a massive diagonal triangle to be in force (even in the Dow) the recent low should not be violated to the downside. The next 90 day-cycle low will be due July 29, 2005, though we'll watch the path of the market closely.