Thread: Elliott Wave Trading Discussion

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Originally Posted by Picolo

In light of the weakening pound, here's a possible view on what could happen to the GBPJPY cross IF it just doesn't go collapsing from current levels (but seeing the other yen cross resilience don't feel it's gonna happen just yet). I think there is a possibility it could play out quite sideways - choppy with some strong moves in both directions. Or it could impulse up from the end of today's possible correction which was a great possibility today to trade the "c" wave after a zig-zag "b" (for those in the european time-zone though). It depends on whether wave B ended as a triangle today or allready earlier in a flat.

If it was the triangle then we could see it choppy at these levels while the pound is heavy in the other pairs (GBPUSD, EURGBP) and then spike higher sharp to complete the "C" wave in an impulse.

Or if the "B" was flat, we could face a diagonal triangle - something indecisive - cause the pound might be weak in the other pairs, but the general yen weakness while in a correction might drag the GBPJPY slightly higher in a choppy manner to complete a "C" wave.

So... quite a lot of possibilites... another one is the one italm here must take as his number one count - let me guess... my a-b-c today is actually a 1-2-i-ii decline and we are about to enter a iii of 3 massive decline... And I'm not ruling that out. The only reason I feel we might see a bit more of the upside are the daily charts and studies - I would like them to completely offset the big sell-off and then plunge lower without obstacles. So that we can all enjoy a year 1992 or year 1998 repeated and completely short the GBPJPY. Kidding.

I like your count Picolo, most markets seem to be showing they need another leg up to complete corrections (and test the shorts I guess), and that would take us into OCTOBER WOUAHAHAHAHA

Excellent, zeev!

I totally like your point as well... it's really great philosophical and psychological approach... These exact thoughts have been in the back of my mind for long... And the equity guy I talk about the markets at the bank I work for - he's as bearish as u get... but the pension funds (just for an example) who get the money from people just keep on buying... they simply have to buy to place the cash... ad so it's been going higher... and now this plunge lower....and the people keep buying anyway...

God, this one is an excellent post zeev. It's really striking how even when I do analyse a chart technically, and I feel that's the end of the trend... it collapses, but then pushes out another high slowly but convincingly... I have even become paranoid with this - I will always see how a chart acts at the level where I thought a 4 of 5 is in place - and so often it hovers there... and gets going in the direction of the trend again... want an example of this?!?! just look at a EURUSD weekly chart since the bottom in 2000 - how it trended up to a high at 1,3680 in 2004 - it's a 5 wave move i thought! and then the nice 5 wave move lower.... great - 5 waves - that's the direction of the new trend! Where it stopped?? at the low of the 4th wave of a previous degree! and been confusing our minds since then - between people who liked the 5 waves lower and those who are.... well... JUST BUYING!!!

Once again - great post, zeev

P.S. As to Prechter - a colleague of mine was so influenced by my EW approach to things, that he decided to subscribe for the stock-updates, which I sometimes read to see what they think of the Dollar index. He's sticking to his point so desperatelly, and he is so good at the fundamental thinking - my colleague is of the same oppinion, but I told him the exact thing u said - he's correct, but constantly wrong timing - this time again maybe...

We shall see

Originally Posted by zeev

Hey everyone,

I would like to take a step back and put into historical perspective what is going on in the markets currently and to see what we can expect in the future. To do this, I will have to take you back to the 1920's. As you all probably know, the 20's was a decade of a credit-fueled market rally which started in 1922 and ended of course in 1929. What is so strikingly similar with the current rally that started in 2002 is that up to 1927, by and large, it was a professional's game; the public did not participate. It was the similar type of rally as today, steady mark-ups, healthy corrections, etc. By 1927, the pros on Wall Street were very worried about a credit bubble (although they didn't call it that at the time), just like today's pro's worried for much of this year. As the market continued to rally this year, the pro's became more and more worried (we had a 450 point drop on Feb. 27, then we had this 1500 point correction dubbed "credit melt-down"). Similarly, with all the worry in 1927, equities finally started to sell-off. And just about everyone on the Street understood this sell-off to be correct. And then something started to happen. One after the other, equities began flying, sometimes 20-30 points in a single day. What happened was, and this caught the pros by surprise, was the fed interfered... (the fed gave a "shot of whiskey" to the markets, as one fed official said (forgot the name, sorry) ).

This is of course a little synopsis but what I'm trying to paint here is that we're not in a 1929 credit melt-down (I do believe, however, that we will be in a few years). We are in a 1927-type correction carried out by pro's. (I believe this correction has ended on August 16.) We still have a few years (maybe it'll be a perfect symmetry - 2002-2009, just like 1922-1929) for the credit problem to really become exacerbated that when the sell-off does come, it'll be unbelievably brutal, perhaps much more so than 1929. (This is what Prechter keeps talking about since 1992. I think he's spot on except his timing is off by about a pair of decades.)

In the meantime, markets will continue to unprecedented new highs, assets in general will see record highs as well, and the victim will continue to be the USD.

Zeev,

I think by bringing up Prechter you've highlighted the difficulty in applying longer term predictions to trading. Being 20 years off for a call of a thousand (!!!) year top may still go down in history as spectacular, if he's right of course, but in terms of speculation, it's life changing, and not in a good way...

For this reason, while keeping theses kinds of analyses in the back of my mind, I personally prefer to look at the shorter term for trading, and see where price leads me. This is where I'm coming from when I suggest we may need another leg lower before we head higher.

I'm NOT calling for "the big one" (though I'm not ruling it out), I'm just looking at smart people's counts that have been posted here which I agree with, and market psychology which seems to have:

• for many people, not accepted the credit story as logical ("subprime is a small part of the housing market" type of talk, ignoring the effect empty houses normally have on the price of other houses), and

• gone back to cheerleading as usual despite the fact that these stories are not over

In other words though you may be right about this being a smaller top/recession of social mood, that doesn't mean it's finished.

This being said, I certainly don't rule out the possibility you may be right.

Spin

"gone back to cheerleading", Spin

I must say I truly like our discussion here today.

Spin,

here's my view about the credit crunch (post #365):

Originally Posted by zeev

I should've been more clear about the credit crunch being over so I will try to explain here.

The ripples in the markets that the credit crunch has caused is over, in my opinion. I have carefully analyzed world equity markets and I do not see at this stage a beginning of a bear market. So I see this credit crunch in its early stages appearing only as a liquidity issue for the time being, which has only caused a correction in a bull market that started in 2002. I do not see this as a start of a bear market. The fed and other central banks have pumped a lot of money into the financial system, investment banks have bailed out several key players (countrywide, bear stearns hedge funds, and others). So for the time being this issue has been quieted. *HOWEVER, the problem has NOT been solved.* The only solution to this problem is to let markets go their course and readjust (and the readjustment has to be massive thanks to the fiat system of pumping money and creating inflation and causing malinvestments). But the day of reckoning has not yet arrived. You may remember February 27, 2007 as a big day, what many considered the start of the collapse of the credit-induced rally, collapse of the yen carry trade, etc. The fed's pumping of money into the financial markets has currently worked to calm the markets but will exacerbate the problem in the future. Currently the uptrend I believe has resumed. And the key thing to keep in mind is that we are in a globalized economy where emerging countries are being rapidly industrialized, so the rally is both fundamentals-driven and credit-driven.

So, to make my point:

- I believe the credit crunch issue has subsided currently.

- I believe it will reinforce itself much harder later on (according to my analysis, in a few years, I think 2010-2012) when equities will be grossly overvalued, in which no amount of pumping or easing of rates will help.

- A liquidity issue does not start a new bear market when economic fundamentals are sound (equities are not overvalued at these levels).

Yeah, I must agree... the fed and cen-bank bailing out point from 1927 and today is definitely a thing to keep in the back (or in the front) of our heads. This again is just a fundamental case of the "4th wave syndrome" - when we would logically think THAT'S IT!!! (and I mean - what the F are people thinking just borrowing, and borrowing, and borrowing these days), that's a sign u are about to see a bottom before the exhaustion push... and the exhaustion push is usually unbelieveable for those who understand what's behind and do actually think...

I will again refer to my colleague who is a stock broker - he says - "from 1998 until 2000 I couldnt understand what's driving the market, I was waiting for a turn in the markets". And then I pointed out - "You were right in the end... And the market only rallied 50-60% during the two years u saw as nonsense...". My colleague has been living with the same bad gutfeeling approximatelly since the beginning of year 2006... And every push to new highs he just goes ".... sick"...

So, yes, Zeev, u may be right. And we shall see. I know when I'll be wrong with my counts - and nobody pays me for my analysis like all the Prechter's subscriber's pay him... so I don't need to BE RIGHT and stick to my oppinions and stretch my wave-counts whatever the market does to look good when I finally make a super-cycle thousand-year top in place. (this sounded sick) When my analysis will be proven wrong, I will have no problem going with the madness of the market... can't beat it. And I will say - "good call" to you! But until then - we are in an interesting juncture, aren't we?! It's fun... I love markets.

Guys I'd just like to reiterate that I'm not calling for an armageddon type top here, all I'm saying is the wave structure seems to point to a c of B up followed by a C wave down (or C-D-E sideways) in many markets before the near term downturn is over. The "clearest" pattern, in my humble opinion, seems to be the in the yen pairs...

In essence I'm saying I agree with your fundamental opinion zeev regarding "the big one", just that the immediate wave structure may not be complete to the downside/flatside, and psychology is a clue. I fully admit I may be wrong, and it won't make much difference to me because I'm not betting the farm on that particular outcome anyways.

One thing is for sure though guys, I appreciate this discussion and your opinions. Nice to find a forum where people can discuss intelligently without going wacko on each other

Have a nice w/e

Spin

Hey guys.

Since we picked up the DOW and Crude oil this week, here's what I received in my mailbox - an announcement there's a freeweek going on until mid-week in elliott wave international's Futures Junctures column. Not sure if I was allowed to advertise it here? But this is not an encouragment to sign up for something. I don't use their services. Nor do I advertise them. Anyway, that was at a good time I received that mail, because since Jamie posted his crude oil count here, which I have been labeling quite the same way, I spent a good time looking at the crude once again... simply cause it correlates with canadian dollar quite well. And something felt wrong with that count.... all the overlaping, unimpulsive, "zig-zaggy" structures... which I couldnt quite match in any appealing way.... So, now I must admit - what Jeffery Kennedy has labeled there, actually looks a count I could believe more than what I was labeling. The near term implications are quite the same though... Go see for yourselves. In short, he labels the advance the from the 50 buck January low as a B wave in a larger wave 4 correction... and there's a C coming down soon. A pullback now to above 70 bucks, then the last push higher he suggests... and that's it for the upside.

And as for canadian - it's great for my longer term outlook on USDCAD! In the chart below - I am looking for the canadian to bottom out and believe it would do so quite soon. I'd say I now favour a push lower for the buck next week after some consolidation (in wave 4 now, then EURUSD above 1.40 in 5th wave), which will be lower for USDCAD, but then - that migh as well be it for quite a while. Look at the chart below. There are good fibonacci relationships as well for this structure. So, I think canadian dollar is about to get heavy soon. If the buck continues to be heavy like for example zeev sees it, it will be wise to play the CAD weakness in say EURCAD, where on the weekly charts we are bottoming in a wave 2 of a third wave or a C wave. I think it might be a really great opportunity. But you see for yourself if u find this interesting.

Good luck.

Pic

I might be crazy... But this is certainly possible below 160,46.

And NZDUSD is reluctant to follow up higher showing a possible head and shoulders top after a five wave rally... on the 30 min charts.

Interesting.

I drank too much black tea and my eyes opened for a lot of ideas....

PIC

Originally Posted by Picolo

I might be crazy... But this is certainly possible below 160,46.

And NZDUSD is reluctant to follow up higher showing a possible head and shoulders top after a five wave rally... on the 30 min charts.

Interesting.

I drank too much black tea and my eyes opened for a lot of ideas....

PIC

Hey Picolo,
This has been my count since Thursday evening when the plunge happened. This may be the ABC of wave 2 of larger wave 3 down Ive been calling for for weeks. I'm seeing all markets dropping from Sundays open. This could be the bearest week yet cause this time, the Yen declines will not be alone. I see the Euro falling, as well as the Cad and GBP, as well as oil, Gold, the markets. This week could be bad for the bulls and its only the beginning if my count is correct. So short answer, I don't think your nuts, but th rest of the world does so thats a good sign.

Originally Posted by Picolo

Zeev,
I just returned to the post of GBPUSd u showed and to my quick reply after that... Was in a hurry previously and failed to read your longer-term outlook on the pound, and said that I completely agree with your interpretation. What I completely agree upon is the count of the diagonal in the chart u have posted. For now I am under the oppinion as everyone here on GBP heading lower... And the thrust out of the fiagonal shoul retrace at least the diagonal - so at least to the ~1,996 4th wave low.

As for the longer term outlook, I would really appreciate seeing how u label a Weekly graph cause I have been scratching my head hard over that one...

Good luck all.

Problem with my charts is solved so here is the eur/usd weekly. Same count applies to the gbp/usd.

Originally Posted by zeev

Hey guys,

Heads up on usd/chf.

I believe we are in the final stages of wave ii of 3 that should top around 1.1980. This pair, and I believe the other major usd pairs, are completing their wave ii corrections for a beautiful setup for Sept 18... (Third of a third may start before the meeting).

This third of a third should take us to new all-time lows for usd/chf. We're looking at a move of at least 1000 pips, but more likely 1500-2000 pips.

We should complete wave c of 2 before the fed meeting on Tuesday the 18th (I'm expecting it to complete probably on Monday). Looking at 1.1980-1.20 area as the top for c of 2. 1.20 area is a logical zone as support has been broken over the course of 2 months since beginning of July, and should now be resistance. It is also a 50% retracement of the smaller wave 1, and the zone where the trendline of the irregular wave 2 falls into. Also, in that 1.20 area, the smaller wave 2 will enter the price territory of larger wave 1 and will confirm a 1-2, 1-2 count, and a third of a third will follow.

Hey guys,
Just like to start off by saying you guys had an interesting discussion going on Friday. Sorry I missed it. I typically don't like to trade Fridays. Actually, most of my trades are placed in the evening when the markets are less volatile. I prefer let the markets do what their going to do and analyze in the evening after everything has transpired. That way, I have more time to see whats going on without all the noise.

Zeev has an interesting perspective of the markets. His comparison of what happened in the 20s and this being compared to 1927 is certainly food for thought. It may transpire as he says it will, then again, it may not. I think he wrong here and would only like to add to what Spin had to say also in his response.
Dont underestimate the over leveraged individual thinking about how much the draw down is affecting his bottom line as well as the empty houses on his block, the empty parking lot at his local Walmart or Home depot, or job lay offs hes beginning to see everywhere, and believe it or not, Halloween being number one at the box office...all this is having a major effect and creating a shift in his psychology. That my friend is why the markets are crashing not the fundamentals you speak of. You could try to rationalize everything thats going on and how the Feds will save the day by lowering interest rates to zero (alot of good that did for the Japanese!). The feds could bring interest rates down and print as much cash as the want, if the shift in human psychology has shifted from bull to bear, ain't noone going to borrow more money to buy anything, which will lead to a slower economy, company bankruptsys, which leads to job losses, which leads to homelessness...I'm sure you get the point. Also like Spin said, the story is not over.
yet. Its all about psychology, not what happened in the 20s or the news of today and how the Feds will save the day. It may be way too late for that.

Also, regarding Mr. Pretcher, yes his timing has been wrong at times but this is a man who knows his stuff. Hes done enough is life so that if hes says something, you better at least take notice. He predicted so many tops, just not "the" top yet. But I assure you, if he hasn't already done so yet, he will and thats a guarantee. If this is not it, the next time he predicts a top may be it. I myself subscribe to his newsletter but I don't trade any of the markets he speaks of. My trading decisions are all me and are done independently. The only reason I subscribe to his newsletter (and his alone...I don't subscribe to any specialty markets timing newsletters also offered by his sight) is the depths he goes into about psychology. The research he puts into every newsletter is unparalleled. He doesn't just show charts and say were here and this is whats going to happen next. His personal newsletter is all about psychology and thats usually the missing link most ellioticials over look. Best 20 bucks a month I will ever spend!

Market is driven by psychology - AGREED. I do not argue that; if I did, I wouldn't be a practitioner of EW. What I do argue is a much subtler point, yet it's quite a simple one. That point is - PERSPECTIVE. Negative psychology may exist, however, it is not necessarily at the degree in which a new bear market is ready to begin. Prechter recognizes the negative psychology among people, in the music, in the news, etc. However, he does not provide us with a degree of the negativity. Negative psychology may exist, but positive psychology exists too, and the positive may outweigh the negative, or the reverse. And then the question arises - to what extent does the negative outweigh the positive psychology? Although a lot of people are quite negative today, there is quite a lot of optimism too because of the quite unprecedented global economy that we have now. My comparison of current conditions to 1927 is only a historical example ... you may call it a visualization tool.

Prechter knows his stuff very well. Heck, we were all initiated into EW through him. So obviously he deserves his respect. However, he is so blindly biased because he is so anxiously awaiting this huge turn that he lets his bias affect his analysis. He focuses ONLY on the negative psychology, negative counts, etc., that each move up is a disconcerting "surprise" to him. I agree with you italm, I believe he will catch the big one, but by the time he does he'll be like the boy who cried wolf. By that time the market will go up so much that I think he will have huge defections .... just at the wrong time of course, unfortunately.

Currently, the markets are not overvalued at all. Psychology, overall, is healthy so far. Investors are looking for an excuse to resume buying. That is why I believe the fed will play a crucial role in "propping" up markets. Of course it won't be a propping, it will just serve as an excuse for investors to resume doing what they want to do in the first place anyway. The smartest people are long the markets ... Buffett, Icahn, and many other billionaires. Keep in mind that these guys are value investors.

Zeev, as to the 1-2-3-4-5 higher in EURO on the weekly - I agree... And i also agree the 2005 top was a "b", followed by c lower. BUT what I do not like too much about this count, is that you ignore the move from july 2001 to october 2001. personally I have it labeled a bigger degree "1", then the undoubtful 5- wave impulse ("1 or A" for you, "3" for me), then the a-b-c expanded correction, which ends the "4" in my count and is "2 or B" for you. And then the rally we are well into right now - which is a diagonal on both - your and my charts... except this time I might be thinking it's a finishing pattern instead of a starting five. What are your comments? And what are the reasons for you ignoring the 2001 as the bottom from where the upmove started? Or maybe it does fit into your analysis and I just miss how...

Anyway, next week shall be interesting - afterall, this is BY FAR the most important FED rate decision in a very long time, I think...

Italm, as to my EURJPY count - that was a bit experimental, nontheless - possible, but taking it easily, I would expect the market to push a bit higher prior to reversing to test lower again... It's the most interesting juncture in all the markets I have witnessed while trading - and I am ready for whichever outcome it may bring.

By the way - zeev, that's a very rational approach as to your comment on the value investors. And I take it as a good thought. But if a bear market would start at some point (now or in the future - doesn't matter) - IMHO financially it would be nothing more than an "evening out of the wealth" - the value investors would be the people loosing big time when the abrupt end would come. Or do you think that they are the people who stand not to lose, would "jump out first" AND carry the market with them when the top would come?

Sincerely,
Pic