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Not necessarily, no - though it is compelling when price does cross that 200 SMA (reference back to 2007). Bear market births and deaths aren't as simple as a MA cross - I wish that were the case though.
Think of the psychology behind that - which is what Elliott Wave is trying capture - crossing above the 200 would trigger a flood of buying and confidence and - if price was to head lower - price would be pushed lower in part by people being suckered back into the market only to have it collapse when they though the bull was back.
The Elliott Structure (bear market) would be negated only if we got a close above 1,250 which would mean that we could no longer be in Wave 4 and would be forced to turn to the "Most Bullish" count as listed above. Thus, 1,250 is the line in the sand for any bearish Elliott Count as I see it.
Who knows - the 'most bullish' count might be the dominant one after all but I'm skeptical with the information I have at the moment.
http://www.ritholtz.com/blog/2009/04/great-depr...
Can you give an example of a bear market rally crossing 200dma and falling to the new lows ?
Wave 2 is usually a sharp correction retracing more than 50% (.618, .75, .786)...this Wave 2 retraced just a hair over 50%
Waves 2 and 4 should alternate, so if Wave 2 is a sideways correction (and again it's usually a sharp correction), then Wave 4 should be a sharp correction. Wave 2 in this count is sideways and covers more price area than Wave 4.
Wave 2 took sixteen days to complete and Wave 4 consumed just two. Again it is usually the opposite; Wave 2 is short and sharp, and Wave 4 takes at least as long as Wave 2, but usually longer. Sixteen days vs two...just doesn't look right.
At least with this count there is clearly a clean impulse (although we think A, rather than 1 of 5). I went back and looked at the daily of the drop in 1998 and that is just fugly. Lemme guess, the GA, if-it-goes-down-its-an-impulse, boys? No offense to any Georgians here.
As you say jury is still out, and I'll add will render the verdict on its own schedule. What's nice though, is that all the counts appear to have some upside yet.
Thanks! I am too - much improved over the prior comments. I'm still trying to figure everything out about Disqus!
I'm with you. I thought I should play 'devil's advocate' for that as a possibility. It doesn't 'feel' right but there are some who have this count so it's an alternate view.
To an extent, these markets should have identical if not near identical counts. Perhaps the wave structure would be a bit clearer, or there would be an early signal on the NASDAQ which tends to lead, but the count would not be radically different in my opinion.
I'm with you 100% - it's (Bullish Count) not right - I just didn't verbalize it well enough.
Thank you for sharing - very good insights.
Good point! I tend to work far more with the technicals than the fundamentals or news projections so I can't comment about the longer term economic projections.
I will go on record as saying it would surprise me if the S&P dropped beneath 500 or less anytime soon, or even into 2010. I'm more in line with the moderate viewpoint.
You all have been expecting it for quite sometime.
I know of very few forms of analysis that have been correct for this whole move up.
Basic statistics in terms of reversion to the mean has even been wrong! Overbought oscillators, confluence Fibonacci, volume, breadth, and momentum divergences.
Price - supply/demand imbalance - ultimately rules the market, not sophisticated analysis. All we can do is manage risk no matter if we're biased to fundamentals, techncials, or quant.
Great effort Corey.
We miss your Indian Nifty analysis.
I'll try to continue doing weekend posts for you all! The Nifty has been so strong over the last few weeks - it's been an amazing move!
FWIW, I think the third scenario - certainly on a weekly close line chart, stripping out all the noise, May 2008 to March 2009 looks like one big wave 3.
On a separate note consider also that this rally looks strikingly similar in pattern thus far to the March 2003- October 2007 recovery rally, albeit a smaller fractal. We would seem to be at a comparable point as March 2007 was to that rally, with the pattern potntially topping circa 980 ish. Take a look.
Jim Hatton
Excellent comment. If so, then it's been a horrific Wave 3. But that's what wave 3's are supposed to be - you have continuity of thought and a run-away market.
Excellent comparison as well - I'll have to look more into the 2007 rally.
Would using a different metric narrow down the 3 choices? You can see this looks pretty different.
I've seen other charts comparing the Dow in terms of Gold (looks horrible).
These charts are powerful 'behind the scenes' indicators that we definitely should be seeing.
Many thanks for yet another thought provoking article! There are clearly some intersting movements developing and forces/perceptions at work in the market at the moment. I like to trade / look at longer timescales than yourself and for what its worth I personally think the aruguement for the time being has been won in the bulls favour. I may be proven wrong but I just see that there is too much stimulous around at the moment: government spending, low interest rates, low energy prices and quantatitive easing.... so much so, infact, that I think we may have over cooked it. The big danger I see to economic recovery is energy prices taking off which coupled with the debt burden recently incurred (in getting us out of the current mess) pushing the economy into a double dip ression around mid 2010. I am therefore currently bullish about the market and by implication energy and in particular natural gas.
I have some other interesting ideas / market corollations about energy, which afterall ultimately drives the economy, but I've been rambling on a bit and will save this for another day!
Chris
There are consequences to governmental intervention - it's not perfect. Unless the Fed can remove the liquidity (they say they can but do we believe them?) then one of the consequences will be inflation. By how much is yet to be determined but a government most likely cannot print money and not have some ramifications.
I think when we were in the massively oversold condition, the "big boys" (aka big hedge funds) realized there is not much money to be made with bets on the downside (not many big sellers left), so they covered all the downside bets and went long simultaneously. now they are just sitting there squeezing/limiting supply. (Naive example: Imagine if 5 people owned 95% of google shares and they had no sell orders at any price. You could bid the price to infinity and it still wouldn't matter)
So, the "little guys" (aka mutual fund managers, retail investors, automatic 401k contributions) are paying about 40% more than two months ago and that premium is going up everyday! I am not convinced that there is any panic buying yet although I think there is a little bit of that going on. Once there is massive panic buying by the "little guys", I expect the "big boys" to start covering bets on the upside.
If you are thinking why I don't even mention the disastrous state of the economy, its because I am convinced more and more everyday that the stock market is just a first-in-first-out scam. But hey, as long as I am making money off it, I don't give a damn =). It is true what they say, the market is a casino and the feds (puppets of goldman and the rest of the banking crew) own the casino.
Everyone tries to correlate the stock market and the economy. I thinks its all BS. Frankly, I thought the economy was in the gutter when we were at 1500+ on the SP500. Apparently people didn't realize that until the media started bombarding the public with "oh god, the stock market dropped 50%, the world is gonna end" rhetoric.
I agree with all you say but you don't need to run the casino to win, infact if you're nimble you'll beat the owners and go home with a profit....I'm a bit cynical about the powers that be but I have to hand it to them that overall the system works and the small guys can win if they think ahead.
Chris
An additonal question: the 'big boys'.....do you think they always win or is this all part of the physcology? I love this stuff because as far as I'm conernened this kidology, confusion and uncertainty equals profits!
I don't believe the 'big boys' exist which, on reflection, is probably why I tend to do okay. It is a game you're right, but its a game with a past and therefore a record, which, for me at least allows me to seperate the emotion out of the trades I make. I guess its not that simple because I've put in huge amounts of effort over a long period of time to feel this confident at this point in the cycle but even so I have to say that I get perplexed by the confusion that seasoned traders manage to get themseleves into. Maybe I'm lucky to have a day job to help regulate/deflect my thoughts this but it goes to show that if you can control your emotions you will suceed.
Chris
it is kind of a monopoly/duopoly/oligopoly which is illegal in the business world but ignored for the most part in the stock market due to vested interests at the top of the food chain and incompetence of the parties that are supposed to be the guardians. aka, the SEC. but i also think it is almost impossible to enforce.
like you, i have zero emotion in the market. no investing (i realized it was a scam quiet early in my life). only quick trades that last a few days at most. for the most part, i look for stocks with huge upward momentum and jump in for a quick ride up with a tight stop-loss and a sell trigger to take profits. then move on to the next bet. i do make some buy-low-sell-high moves in accounts where i cant setup quick trades, like in my company 401k.
i like this site precisely because it is purely based on technical analysis. i don't have time to day-trade due to a full time job but i find this site very interesting probably because i am a math guy and i don't believe a single word coming out of the mouth of politicians, CEOs, feds, etc. who all have a stake in the game and at the same time are writing the rule book.
I got into the market believing that fundamentals (P/E ratios, EPS, etc) and technical analysis drove the market, and that if I studied them thoroughly I could make money. I bought into the bullcrap. I thought those things meant something and that investing was a world away from the blackjack table, when in reality they both seem to require the same set of skills and traits in order to be successful. I'm still not sure how I feel about that. I've never been a gambler.
I think it's possible to become profitable as a retail investor, I just haven't figured out a way to do it yet. When looking at a chart it's easy to find indicators or patterns that "fit" and make the market's activity seem predictable. But on closer inspection I'm often able to find just as many, if not more, that failed. There are many entry signals and candle patterns that I've read about, whose virtues are extolled by experienced professionals, but when I put them to the test their odds are invariably no better than chance. My testing thusfar has not been encouraging and as a result I've quit real money trading altogether.
I do enjoy this, frustrating as it may be at times (need to work on emotional control), and want to learn more about it. My problem is that this industry is littered with snake-oil salesmen selling worthless advice and worthless trading systems, so I'm very skeptical about paying anyone to teach me how to learn it. I don't know who's reputable and who isn't. For now I'll continue testing different ideas, who knows maybe one day I'll stumble onto something good.
Don't worry - Elliott Wave is just one form of market analysis and I believe trend structure and basic price principles are far more important. It's just like Fibonacci, Gann, Cycles, Oscillators, etc but I believe studying Elliott Wave can give insights as to price projections and developing structure, adding one more piece to the analytical puzzle.
Since everyone else has already thrown in their .02 about where the markets are headed from a technical standpoint, I thought I'd do something different.
Today I wrote a post on Sector Rotation in which the leading sectors in the market indicate where the economy lies in its current cycle.
From what I can tell, we've already put in the market bottom, and are starting (according to sector rotation, this is NOT my opinion, nor is it backed by any tchnical analysis that I've done) to see economic recovery. I saw this because Consumer Cyclicals and Technology are leading the markets right now. If we continue to see tech lead the way, and start to see the Industrial / Energy sectors leading the markets within the next 6 to 12 months, it should be pretty clear we are in a new bull market.
my feelings is that this is just Primary 2 rally of cycle C. Here on this blog we had amazing similarities with great depression few month ago. Volume tend to be higher on the new bull market at the beginning, so bullish scenario is with much less probability I would say.
But, for example, Prechter is counting the current fall as the end of Primary wave 1 and we are now heading higher into Primary wave 2 of C. So why is this count not even a possible count interpretation for you? Is there any rule broken with such a count?
I think that we`re seeing a very huge C wave drop, back to the previous fourth wave in 1974.
No, there's not a rule broken, and I know it's difficult to stand against the analysis of one as respected as Mr. Prechter, but I know of traders who lost tens of thousands of dollars following his proclamations for a market crash that he has been predicting since 1986 that has failed to materialize, costing those who follow such counts many opportunities to make money. I'm afraid a bearish bias is driving the wave count, and counting waves is very subjective.
My philosophy is that IF end-of-the-world doom and gloom is going to happen, it will happen but there's no point in preparing yourself and not living your life to the fullest in the meantime until it happens (if it happens).
There's a lot more to it than that, but I have no interest in "the sky is falling" predictions and do not entertain them in my analysis.
(Yes, I have read his projections, I am aware of his analysis, yes I have taken his 10-DVD course on the Elliott Wave Principle, and yes, I have great respect for Mr. Prechter. But as much as he is respected, he is not the final word on all matters regarding Elliott Wave and no, I do not accept his bearish analysis of Dow Jones 400).
Does your Wave (5) of 3 ended at Novermber low in your first two charts, have 5 micro waves? It's fourth micro wave reached 911 while the bottom of the first micro wave was only 904. I tried to post my drawing or send it to you but don't know how.
Further, the monthly chart seems more consistant to your bearish chart. My drawing is different from all your charts, but reaches the same conclusion that the wave 4 starts fron the March low.
Best regards, Henry
It
looks like initial resistance has been found at January’s high on the SPX and the 200-day moving
average on the Dow and SPX. Still, it doesn’t look like weakness will be sustained, given the
incomplete nature of the up leg off recent lows. The move still sports a very apparent three-wave
form, and unless we’re in the final move of an ending diagonal (which we’re not), a three-wave move
cannot complete a trend. In this respect, the same analysis that applies to action leading into March’s
lows applies here.
Meanwhile, the recent sell signal issued on the Bullish Percent Index (BPI) has been reversed, moving
this indicator right back towards all-time highs. During the course of this 12.5-week advance, price has
had no problem continuing higher through a slew of different technical readings that suggested a
change in market direction was pending. These included some historic readings, such as the lowest
Put/Call Ratio we have seen in about a decade, the highest reading ever recorded on the
Advance/Decline Ratio, and the most extended period of time ever recorded on daily Stochastics. We
have to wonder if the test of all-time highs on the BPI will be different. This indicator displays the
percentage of stocks on the NYSE that have buy signals on their respective point-and-figure charts.
It’s not as confusing as it sounds – essentially, it just means stocks that are in an established up trend.
In terms of the current reading, that means that 70 to 75% of the NYSE stock universe has been
trending upward since at least early May. Since 1987, this indicator has reached 70% only eight times.
Needless to say, it is very difficult to maintain such a high reading, and history bares that out.
HHHHHHEEEEEELLLLLLPPPPPPPPPPPPP.IS this covered in the premium site?
SP500 Elliott Wave Update: Competing Interpretations
Will the USD rally when DOW bear market rally ends ?
VIX index also continues to give bullish warnings (bearish for stocks)
I warned of an impending stockmarket crash back in early *2007*
http://twitter.com/GrandSupercycle
Wow Elliot Wave is tricky stuff; even after watching / reading your analysis it seems like voodoo to me.
My question is, after reading this article I wonder how often you acutally use Elliot Wave in your trading. I mean, is it all just fun to make pretty charts or do you actually use the predictive capacities of E.W.?