JungleGirl recommended “Elliott Wave Principle: Key to Market Behavior” and I ordered a copy from Amazon, but it has not arrived yet. So, I still don’t know anything about EW, but look at this chart that I came across on www.elliottwave.com:
To my untrained eye, it looks like the 2001-2002 bear market was terminated by such an ending diagonal. Here is a weekly chart from back then where I have drawn the diagonal with red lines. Is that right? (click to enlarge):
Now here is the market in 2008 which looks almost identical to 2002, on a weekly closing basis at least:
Is that not an ending diagonal? I don’t understand the EW jargon yet, so I can’t really understand most of what the EW analysts say, but as far as I can tell, they all seem to think that this EW cycle, or whatever it is called, has not yet terminated. Is that true?
Suppose this were to be an ending diagonal. What might happen next? In 2002, the economy was recovering and it made sense for the bear market to end. But the economy is not recovering now. What would an EW analyst look for in such a scenario? Another entire five-wave move down? Sort of back-to-back bears?
i really dont like any of these charts. but thanks for another perspective matt.
\ 2
\/\ 4
1 \ /\ (2)
\/ \ /\ 2
3 \ / \/\ 4 (4)
\/ 1 \ /\ /\ 2
5 \/ \ / \ /\
(1) 3 \/ \/ \ 4
5 1 \ /\
(3) \/ \
3 \
\
5
(5)
The labels get placed at the end of the wave, not the start of it.
“Intermediate waves” are in parenthesis. Intermediate wave 1 has 5 subwaves (October 07 through March 08). Then we had intermediate wave 2 up (the March-May rally). Then we started intermediate wave 3 down, which has 5 subwaves.
The current debate is are we still on intermediate wave 3, have we moved to intermediate wave 4, or is that now over and intermediate wave 5 is underway, with its 5 subwaves. Regardless, lots more bear action is coming.
I took some liberties with the EW rules in the above diagram, trying to keep it in the small frame so I could see it. In the subwaves, 3 cannot be the shortest wave, and 4 cannot intrude into wave 1 (except in diagonals, aka triangles). The corrective waves are drawn straight here, but anyone watching this market knows they aren’t. Corrective waves have certain forms they can take, but are more difficult to map out than the actionary/motive waves down. Corrective waves also alternate, so whatever form wave 2 takes, wave 4 will be different. That’s the “Rule of Alternation” you keep reading about. The first two chapters of the book will make you a pro.
Mr. BIll: Ooohhh Nooooo—–I spent all that time laying the marks out exactly, and it prints like one of K’s Japanese Art exam questions. Darn.
Okay, here’s what’s coming:
l
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l
l
For people who want to understand EWT, Intermediate Waves 1, 3, and 5 have 5 subwaves to them, and intermediate waves 2 and 4 are corrective waves.
Thus, in a bear market, intermediate waves 1, 3, and 5 point down, and each has 5 subwaves in which 1,3 and 5 point down also.
In a bull market, it’s the opposite.
Waves 2 and 4, whether intermediate, minor, minute, whatever always go opposite the main trend, i.e. they are “corrective waves.”
Okay.. this is getting ridiculous…
http://www.nydailynews.com/money/2009/01/07/2009-01-07_porn_kings_larry_flint_and_joe_francis_g.html
i heard GM was used by them to shore up some $$$
Matt,
Try this. If it’s invisible, I give up.
Readers: this is NOT a map of our market, so just ignore the dates along the bottom. The markings are only meant to show 5 wave motives and what an overall 5 wave intermediate structure looks like. Hope it helps.
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&st=2008-01-01&id=p81027280830&a=158532389&listNum=3
junglegirl,
It’s invisible to me again. Whatever you did on the chart before this one worked though; if you can remember how you did that a few days ago.
Matt
Matt. i saw it a few moments back and it worked
still had it open so i saved it.
http://i39.tinypic.com/mlkozn.png
ok erase them guess i saved the refreshed file ugh
I messed up and accidentally deleted it. Now it’s reinstated under a different name. Try again. Sorry.
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&st=2008-01-01&id=p81027280830&a=158533352&listNum=3
junglegirl,
OK, I can see it now. So, the EW community thinks that we are on wave (4) now?
Thanks,
Matt
Many think (4) up is still in play and are looking for it to get up to 1000 or so. A number of others think it just ended. I can still come up with evidence that we haven’t yet completed (3). As you can see, the earlier we are in this thing, the further we will likely fall.
worthy of a look http://www.crashmarketstocks.com/2009/01/frightening-anticipation-of-jobless.html i got SRS so surely i did take a look
also NYC people.
http://improveverywhere.com/2008/12/29/no-pants-2k9-details-for-nyc/
Update on China’s appetite for US debt — “the monthly pace of foreign direct investment in China has fallen by more than a third since the summer.” The high October numbers may be an artifact of more direct buying, bypassing UK and Hong Kong banks. Higher borrowing costs is already starting to hurt corporations, who have to compete with a US government promising trillion-dollar deficits as far as the eye can see. The pool of savings is no match.
These developments represent structural constraints on the ability of the US to pursue a reflationary policy. Bernanke’s solution is to cannibalize the dollar, which would surely trigger an international race in currency devaluations. May you live in interesing times.
test0
test1
We don’t think we are in (4). Although after the last two days it may be a has been now, we know!
SDS daily bounced off its 200 MA Tuesday and followed through Wednesday.
The Bear market that started in 2000 lasted almost 3 years. Will this one be shorter?
How?
Only a hyperinflation from Bernanke (fooling people in the beginning) can stop this Bear from bankrupting every single bottom-caller in the world.
Larry
Fully hedged for the time being – don’t ask me why.