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Dow Jones Industrial Average - Elliott Wave update for week ending 10/31/2014
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2014 Nov 2, 12:14am 1,938 views 9 comments
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marcus
2014 Nov 2, 3:00am
And of course if it rallys enough, and continues, then at some point they'll decide that the entire rally from spring of 09 until now (or the next major high (in hind sight)) is the 'A' leg.
I can't see how one is supposed to make decisions from this.
Although that lowest percentage of bears, if true, is interesting.
darlag
2014 Nov 2, 3:45am
And of course if it rallys enough, and continues, then at some point they'll decide that the entire rally from spring of 09 until now (or the next major high (in hind sight)) is the 'A' leg.
Elliott Wave theory tracks wave counts, it doesn't predict them. Those of us that track them try to anticipate what's coming based on the evolving pattern. You are correct, sort of, in that one must always anticipate an alternative count, one that will keep you honest (and solvent) in case your primary count goes wrong.
To your point, in this instance, last weeks action made it obvious that wave (3) was an extended wave in EWT parlance. The vast majority of the time, the waves after an extended wave are muted. And it is incredibly rare (1000:1 or more) that an impulse wave contains two extended waves. But it happens. So while I am anticipating a short, muted wave (5), I can't completely rule out an extended wave (5) which would carry the markets even higher. In that case, a whole lot of markers would change, including the assumption that the year 2000 was the orthodox top of the markets.
Obviously, markets are free to do whatever they want. Right now, from an EWT perspective, it appears they want to decline. We'll see. The one thing that Keynes was absolutely right about, “The market can stay irrational longer than you can stay solvent.â€
tatupu70
2014 Nov 2, 3:58am
The one thing that Keynes was absolutely right about, “The market can stay irrational longer than you can stay solvent.â€
Are you trying to imply that Elliot Wave makes a statement on market rationality?
darlag
2014 Nov 2, 5:04am
Are you trying to imply that Elliot Wave makes a statement on market rationality?
Not at all. It will track a rational market and an irrational market in precisely the same way. Of course, the judgement of rationality is subjective. Perhaps even 'eye of the beholder' stuff.
I personally think the markets are completely confused and irrational. But I am in the minority judging by the sentiment data above.
Strategist
2014 Nov 2, 10:36am
Elliott Wave theory tracks wave counts, it doesn't predict them. Those of us that track them try to anticipate what's coming based on the evolving pattern.
So Elliott Wave is a tool, somewhat like a calculator. The question is, is it a reliable tool?
hanera
2014 Nov 2, 12:11pm
Why are the three up waves from 2009 interprets as a zigzag, [A], [B] and [C] and not as wave [1], [2], [3] of an impulse?
darlag
2014 Nov 2, 10:23pm
The question is, is it a reliable tool?
It is only as reliable as the person interpreting it.
darlag
2014 Nov 2, 10:32pm
Why are the three up waves from 2009 interprets as a zigzag, [A], [B] and [C] and not as wave [1], [2], [3] of an impulse?
There are a multitude of factors but here is the simplest explanation.
If the current wave was a third wave, it should be setting volume records, the economy should be humming like a well-oiled engine, and it would have no problem pushing through the trendline shown.
B waves are imposters that fool people into buying the soon-to-be-worthless assets from the smart money which is headed for the sidelines (or short).
Here is an explanation of the typical Elliott wave behaviors:
I have cautioned in the last two weekly updates that there was still the possibility of new highs in the Dow Jones Industrials. I didn’t put as much weight in the probability of a new high as I did in the likelihood that the Dow had already peaked in September. None-the-less, the Dow managed a new high this week. And while the S&P 500 failed to confirm the Dow’s new pinnacle this week, it appears poised to do so in the coming week. However, any new market highs will be muted and short-lived and destined to shortly join the rest of the global markets already in decline.
The recent high in September was accompanied by the lowest percentage of bears in 27 years as recorded by the Investors Intelligence Advisors’ Survey (IIAS). There is hardly a bear to be found these days. Not since 1987, just before a 22.61% plunge in the Dow in a single day, has this survey reported so few bears. Just 13.3% bears at the Intermediate wave (3) peak. I can’t over stress how important this data is. You can see from the IIAS data below the Dow chart, that extremes in bearishness are quickly followed by market reversals. The 2007 market collapse that drove the Dow under 6500 points intraday, recorded only 18% bears before reversing downward. It may not result in a 22% crash in one day, but the next major wave down will be greater in magnitude and more destructive than either the 1987 or the 2007 crash.
http://www.globaldeflationnews.com/dow-jones-industrial-averageelliott-wave-update-for-week-ending-10312014/