Tuesday, July 7, 2009
Fun with Elliott Wave - short term
I am not an expert at this Elliott Wave (EW) stuff and it can sure get you into trouble if you use it as a stand-alone tool, but it can also give some stunningly accurate road maps at times. The labeling on EW can quickly get complex and if you're not familiar with it, don't look to me for answers. Let me repeat, I am not an expert. But when wave patterns set up smoothly and easily, like they do in many impulsive waves, it can often be worth the effort to try to figure out where you are in the wave count so that you can figure out what comes next.
To warn you of the type of gall that I possess, I currently have a different wave count than Mr. Robert Prechter on this bear market so far. As far as big picture EW, I am of the belief that the 4th "big" wave of a five wave bear market completed last month and we are now in the first intermediate-term wave down within the final big fifth leg down in this cyclical stock bear market (i.e. 1 of V).
Here's a 4 month intraday 60 minute chart of the New York Stock Exchange Composite Index ($NYSE or $NYA), detailing my current proposed wave count and what I think could happen next (I prefer $NYA or the Wilshire 5000 at times because their charts get "painted" less by da boyz):
Bottom line: I think we're in "the third of the third," aka nirvana for Elliott Wavers, on a short-term basis for the major U.S. stock indices. The next few days should be fun for the bears if this count is correct. Now, many variations are possible, they are just less likely. For example, the third wave could end up being the same size as the first, which would set us up for an extended fifth wave. Of course it's not easy and of course there are never any guarantees - now step right up and place yer bets...
On another note, head and shoulders topping patterns are everywhere and if you're a bear, it only makes sense to consider them valid. Some have already broken down. My favorite right now on a macro basis is the German stock market ($DAX):