Gee, Think.

For those of us watching the elliot wave progression in the Dow, S&P, and especailly Nasdaq 100, this rally is a real fake out.  The recent rise in stock prices is part of a second wave up, during which investors believe that the market really could recover.  It’s some kind of denial psychology, or a back last from the exceeding optimism of recent years that just won’t quit.  So we get this uptick over the past couple days, but if my sources are correct, it won’t be sustainable. For more commentary on the “but” rally, read tickersense.typepad.com

My first trade based on the forecasting service offered by elliot wave
international has been a huge loss. I think this is because for my
part, I didn’t wait until the price data had passed certain price points
which would have exposed the market’s next surge. I added to a bearish
position after reading my first forecast, eventhough it specifically
stated that the near term trend would be uncertain until after having
breached particular price levels. Oi vey.
What’s the moral?
“Patience young grasshopper!”
I’m still not giving up. I’m well on my way to losing the entire
trading account, but I’m sticking with it. I’ve not replensihed the
account. I don’t want to continue to lose moeny, but instead take these
loses as reinforcement for the lessons learned.
This education in trading is expensive!

Okay, I have to admit it. I am convinced that Pretcher’s perspective
(along with the Elliot Wave International Team) on the wave theory is
right on. Today, a friend asked we why I thought that the market
couldn’t stay up after gapping up. He started talking about various
news items, and I had to say that I don’t think it has anything to do
with news. I’ve been converted to thinking that it is this robust
fractal driving the markets.

It’s only been two days that I’ve had a subscription to the Elliot Wave
Financial Forecast service and already I am sold. This could have
something to do with the fact that their forecast suggests what I need
in order to exit my option position profitably, but let’s just assume
that I’m objective for a moment.
I’ve read through Frost and Pretcher’s “Elliot Wave Principle” over the
last couple months. It was by no means a light read. It was filled,
make that jam packed, with rules, guidelines, ratios, and plenty of
chart examples. I re-read most of it and found that I absorbed much
more on the second time around.
After my second reading I decided to try and put the theory into
practice. This was a triumphant day for me. I was quite pleased. If I
remember right, my very first wave count was no correct, who would
expect it to be? I thought to myself that I would practice the
art/science of wave counting until I become proficient enough to publish
my own forecasting service.
I knew that Robert Pretcher was still actively forecasting the markets,
however, and I was quite curious to see HIS wave counts.
I have since subscribed and so far I love it.
In the half dozen issues inlcuded with my subscription, I have found
incredible detail in the elliotwave.com team’s analysis of the financial
markets. They set specific targets and also include when to asume
they’ve been wrong. Even better, they don’t forecast when the aren’t
certain what the market’s next move will be. If they cannot find a
satisfactory wave count they admit it. I think this is much better than
constantly forecasting whether or not you are sure.
It remains to be seen if I am able to correctly interpret their reports
and put them to profitable trading use consistently.
I am really impressed with the ammount of work that must go into these
reports. It looks much better than something that ibcould manage to
create on a part time basis. However I am still holding out that if I
continue to study the application of the wave theory through this
newsletter, I will one day be able to use it on my own.

Today I am met with a conflict of interest. I recently subscribed to
the financial forecast and elliot wave theorist from Robert Pretcher’s
team at elliotwave.com. These publications include a stipulation with
the download saying they if you re-transmit or even allow someone else
to view the subscription issues, you or your firm will be held
financially responsible for the extra subscription fees.
Now, I’m not going to violate this stipulation because I’m sure that the
company could and would sue me. Not to mention that it would be
unethical to repost someone else’s work without obtaining their
permission, or worse, after they explicitly prohibitted redistribution.
I think that this letter was written with the intnet that a large and
financially able trading or investment firm not purchase a single
subcription for 50 traders. It sounds pretty harsh for the individual
investor. I can’t even show the subscription to my father? Or I owe
you 60$? I understand that the expertise in the forecast is expansive
and hard to come by, but does this jibe with the rules of fair use and
copyright? I’m not sure.
Anyway, I was previously thinking of becoming an elliot wave forecaster
myself. I posted a couple entries with my own elliot wave
interpretations that I drew after reading Pretcher’s book. Granted, they
were probably not correct lablling, but I was thinking of becoming a
wave theorist someday. If I read Pretcher’s newsletters though, how can
I still come up with my own? They would all be influenced by his
previous wave counts. So maybe the wave theorist idea is out the
window for now.

.

In this chart we can see that the Qs have broken the trendline from my proposed elliot wave analysis. At this point I’m not sure what to expect. I’m not certain that my count has been correct, but if it is, I would expect the next A wave to provide a significant upswing over the next week or so. It will be interesting to see if the Qs bounc off the trendline as support today. Yesterday they bounced of it as resistance.

The remarkable aspect of the elliot wave principle is that it applies on
all scales. In Frost and Pretcher’s book, “Elliot Wave Principle” the
author’s assert that the wave formations described by Elliot appear in
timeframes as short as an hour and as large as a decade or century! In
their book they cite whole years as parts or a particular wave
formation. That is striking! Imagine knowing what the overall trend in
the market could be for the next year?
I’m aspiring to take my analysis to a larger time frame. Hopefully I
can use some of the labelled waves in their book as a guide. Of course
I still have a long way to go in terms of accuracy.

Today’s action in the Qs is an astounding +0.53 or +1.46%!

I am feeling great because in the first part of this analysis I projected the Qs to move down to 35.00 to complete the fifth wave. After completing the fifth wave, the following A wave would be a sharp rise upward, such as we are now experiencing! Now, we didn’t quite get to 35.00. It looks like we got down to 35.50 yesterday. So is this upswing a new A wave in the correction? I’m not sure yet. It could just be the 4th wave correction of the 5 wave extension. I need a bit more time to really analyze, but I may not have the time.

Looks like my guess for a dip in the Qs was dead wrong today!  I was thinking earlier… is 0.27% gain enough to satisfy my elliot based prediction for an upswing?  Apparently my answer to that question should have been NO!  But that’s information for another prediction or guess.  I’ll be interested to see how this formation plays into my elliot wave analysis from the weekend.

I missed a crucial part in the wave analysis I did over the weekend, the trendlines! One of the guidelines for the wave theory is that the waves in the impulse are contained mostly between two trend lines. The lines are drawn from the top of waves 1 and 3 and the bottoms of wave 2 and 4. These lines can be used set targets for wave 5. I would guess that they can also be used to tell you if your wave count is wrong. This is something I definitely should have added since I developed a wave count of 4 and almost 5.