Thread: Elliott Wave Trading Discussion

Originally Posted by zeev

ok, good, so this comes back to my original question - how does the 'buy gold, sell stocks' trade make sense?

zeev, When investors are "running for cover" they run from what is seen as risky (stocks) and they run to what appears to be defensive (gold).

That's why the ratio on that chart is going up again. That process is starting once again, even now.

Gold is viewed as a "safe haven" when investors fear a stock market decline.

That's why the trade works, as seen by the consistent trends on that spread trade chart of gold/stocks.

When investors are risk adverse, they run away from stocks and into gold, silver, the dollar, yen, treasuries, etc.

Good question, glad you asked.

Originally Posted by mildredthecat

I'm not sure I understand that...

May I ask what USD is based against?

In this instance they are directly compared/paired to one another.

When USD is charted on a chart alone, it's usually the U.S. Dollar Index that is being charted which is really the USD vs. a basket of about 6 foreign currencies.

But on that chart, you're seeing how gold and the dollar are relative to each other on the spread trade chart.

Originally Posted by zeev

" Because if the market is running to "all things defensive" then it can go into the dollar, gold, silver, JPY and U.S. Treasuries all at the same time. "

Simply not true... when market tanked last year, gold and silver went down, dollar went up...

zeev, I just showed you a chart where there were times when the dollar and gold went up at the same time. Charts don't lie. They are simply historical accounts of factual trades.

Originally Posted by apipintime

You're giving the rules for an "ending diagonal", but it is an "expanding diagonal" that is being discussed. Two completely different formations.

Originally Posted by Ilovepippin

And an expanding diagonal is not an ending diagonal?

The terms "leading" and "ending" refer to where a diagonal is found within the EW structure:

-Leading diagonals occur as wave (1) of impulses, and wave (A) of zig/zags.
-Ending diagonals occur as wave (5) of impulses, and wave (C) of zig/zags and flats.

The terms "contracting" and "expanding" refer to the types of diagonals. A leading or an ending diagonal can take the form of either contracting or expanding.

Originally Posted by Sean Hyman

In this instance they are directly compared/paired to one another.

When USD is charted on a chart alone, it's usually the U.S. Dollar Index that is being charted which is really the USD vs. a basket of about 6 foreign currencies.

But on that chart, you're seeing how gold and the dollar are relative to each other on the spread trade chart.

Ok, so like I have gold in my left hand and a fist full of dollars in my right..

Usually, one hand rises and t'other falls, but sometimes, both can rise, or, both can fall.

I get it.

Thats the problem with rigid ideas, no scope for the unusual I guess.

Thank You

David

Originally Posted by mildredthecat

Ok, so like I have gold in my left hand and a fist full of dollars in my right..

Usually, one hand rises and t'other falls, but sometimes, both can rise, or, both can fall.

I get it.

Thats the problem with rigid ideas, no scope for the unusual I guess.

Thank You

David

Exactly. There have been periods in time where both rose or fell together for days, weeks, even months.

BUT as a general truth, it does hold true that over long periods of time, the two do head in opposing directions overall.

Also, if stocks and gold didn't head in opposing directions...then that spread chart would never chage trend directions either.

So it's a myth that they trade opposite "tick for tick" or even day by day. However, looking at the big picture...they do travel opposite one another over time.

So you've got it. Correct.

I think this is the one justy means, as one diagonal again, some also calls this as expection wave - have to confess I never remember to saw it (well, once I do remember I saw it with harmony gold co. chart), but that´s propably because never had been so much after expanding triangles.

Justy correct if anything wrong in this. 2 of the waves need to retrace either other by x1.618

Originally Posted by Sean Hyman

zeev, I just showed you a chart where there were times when the dollar and gold went up at the same time. Charts don't lie. They are simply historical accounts of factual trades.

You cheated with area 1, highlighted different timeframes and called them the same, when in fact gold and dollar went opposite during that period. In area 2 you can argue that gold and dollar went in the same direction for a month and a half. The general relationship is dollar UP, gold DOWN; dollar DOWN, gold UP. You are right, charts don't lie. They are simply historical accounts of factual trades. You just need to focus more on the charts to see what it says...

Originally Posted by zeev

You cheated with area 1, highlighted different timeframes and called them the same, when in fact gold and dollar went opposite during that period. In area 2 you can argue that gold and dollar went in the same direction for a month and a half. The general relationship is dollar UP, gold DOWN; dollar DOWN, gold UP. You are right, charts don't lie. They are simply historical accounts of factual trades. You just need to focus more on the charts to see what it says...

Don't want to argue about it. Just trying to teach you something from watching all of these dynamics for 16 years. If you believe they always go opposite each other, then trade that way. There's nothing wrong with that at all.

My point was just to show that there are times when both stocks and the dollar diverge and trade opposite of gold.

That's why my trade is going so well so far. It will likely get far better if stocks pull back as they historically do in Sept/Oct. We'll see. I've got a good shot at it though.

Originally Posted by Sean Hyman

Exactly. There have been periods in time where both rose or fell together for days, weeks, even months.

BUT as a general truth, it does hold true that over long periods of time, the two do head in opposing directions overall.

Also, if stocks and gold didn't head in opposing directions...then that spread chart would never chage trend directions either.

So it's a myth that they trade opposite "tick for tick" or even day by day. However, looking at the big picture...they do travel opposite one another over time.

So you've got it. Correct.

To even complicate things more.....

When gold is rising WITH the USDX it means Gold is rising against ALL currencies. Where as if gold trading tick for tick inverse of USDX it means just the USD is loosing value.

Typically I've found only geo-political events make gold rise with the USDX. It is definetely not normal and with no "major" news hitting the wires (except for maybe china telling US banks to goto hell with all fraudulent contacts called derivatives) one can only speculate as to what in the world is happening right now.

Originally Posted by qsx

you know that i am in the very opposite camp.. but.. sometimes i wonder - is something IMPOSSIBLE, because mr. Prechter says so? are markets dynamic? do they change? do they have to fit into a simple framework of three rules?

thats is in fact the reason why my strict elliot waving has drifted into free tapereading.. because i started to see and believe that everything is possible.

you quite often emphasized that trading is thinking outside the box - so why are you locking yourself into this frame of reality that is in your head? (or the books for that matter; the same books that tell you buy when MA9 crosses MA21)

i think the trades & success of marketwavez2 are a living example of freeform counting, and justy, you have had alot of discussions with him regarding his counting, havent you

i know you wont take this comment personal, and you even dont have to answer to it, it is just food for thought.
we are all different, so what works for you is what you should ultimately use (not what you read in a forum)... good luck

A couple of questions for you:

-What do you think is the purpose of the rules and guidelines of the EW principle?

-What does the phrase "markets are dynamic" mean to you?

-Why do you use the Elliott Wave principle, or in your case neowave, in your trading?

Originally Posted by speculator84

To even complicate things more.....

When gold is rising WITH the USDX it means Gold is rising against ALL currencies. Where as if gold trading tick for tick inverse of USDX it means just the USD is loosing value.

Typically I've found only geo-political events make gold rise with the USDX. It is definetely not normal and with no "major" news hitting the wires (except for maybe china telling US banks to goto hell with all fraudulent contacts called derivatives) one can only speculate as to what in the world is happening right now.

Apparently they are going to increase the price of chicken flied lice on 5th Avenue to 3x the price difference between gold and USD, excet for when they are moving the same way and then it shall be "off the menu".

N'nite, God Bless

Originally Posted by Sean Hyman

Over time, gold and the dollar diverge. Sometimes in the near term they do not. Why? Because if the market is running to "all things defensive" then it can go into the dollar, gold, silver, JPY and U.S. Treasuries all at the same time.

Now when traders run to gold as an "inflation hedge", then gold and the dollar definitely go in opposite directions.

Right now, technically our numbers are still deflationary (negative CPI/inflation reading) on a year over year basis, so that's why I'm inclined to go with the former scenario.

Actually if we lived in the pre-clinton area inflation is still raging with todays events!

There is no negative inflation!

According to shadowstats.com

Originally Posted by Sean Hyman

Don't want to argue about it. Just trying to teach you something from watching all of these dynamics for 16 years. If you believe they always go opposite each other, then trade that way. There's nothing wrong with that at all.

My point was just to show that there are times when both stocks and the dollar diverge and trade opposite of gold.

That's why my trade is going so well so far. It will likely get far better if stocks pull back as they historically do in Sept/Oct. We'll see. I've got a good shot at it though.

i congratulate you on your trade but your reasoning is faulty ...

regarding your trade and the chart of gold/russell2000, it is a RELATIVE trade and the dynamics as well as analysis is completely different than for a directional trade on a single security ... that relative trade may work even when BOTH gold and stocks are going UP as well as when BOTH go DOWN ...

so you need to explain why you think that gold will RELATIVELY outperform stocks, and NOT that stocks will go down and gold will go up (charts do not support this relationship)

just a quick chart observation..

justy, i will answer tommorow, as it is late here. good night.