Friday, October 03, 2008

And now for something completely different


Above pattern is a traditional Elliott Wave pattern. Elliott Waves are fractals, so that this pattern is constant whether on a daily, weekly, 60-minute or 1-minute chart. Assume for the purposes of this example that the above is a general sketch of a weekly DJIA chart, starting in the lower left corner with a Wave 1 that commenced at the bottom of the last bear market, circa 2002. My suggestion is that we are currently just past the "B" which was the High made in the Fall of 2007. Today's market is about 1/4 of the way from B to C.


This is basically the same chart as above, only the waves 3 and 4 on the left and waves A and B on the right are subdivided. This chart is important to point out that even if the bigger wave is moving in one direction, the sub-divisions of that bigger wave include contra-trend moves. So for example, even though the movement from A to B on the right is in the UP direction, there was a smaller wave, a to b that was down.



This is my crude hand made DJIA weekly chart showing a completed 5 waves up from the lows on the lower left hand corner of the chart to the multi-year Top in the Fall of 2007, i.e. Wave 5 of 5 of 5. From that Top I've labeled Waves A (down) and B (up) and the beginning of Wave C (down, down, down) via a series of waves 1 and 2. Thus my current analysis is that the market is a Wave 3 down. (Wave 3 of 3 of 3, referenced in a previous blog, refers to the internal subdivision within Wave 3). I have no idea if my count is an accurate portrayal of orthodox Elliott, but it does coincide with both my view of the markets and the upper two charts of orthodox Elliott Waves.

This DJIA chart shows the beginning of the drop of wave "C" portrayed in the top two charts. I estimate that the market is about 1/4 of the way from B to C. This also implies that the most powerful part of the drop from B to C still lays ahead of us. C-Wave analysis projects a series of precipitous downward moves in the DJIA, interrupted by sharp but short rallies against the major trend, all of which are followed by steep drops to new lows.

At the end of Wave C, expect one hell of a rally.

A

14 comments:

Mike said...

Hi Allan,

Can you interject on why or why not the $700 billion bailout plan, (when passed), will still not keep the Dow from dragging downward as you've been showing here?

Thoughts?

Thanks,
-Mike

Allan said...

Mike, the short answer, which is all that I have time for right now, is that gov't is impotent, and has always been impotent, to effect market trends.

Anonymous said...

Allan:

The FIRST chart looks a lot like the lat EKG reading I had at my annual physical exam last month ;)

Could there be a correlation between my heart motion and the markets.. Think about it.

John K. in DC

Wayne said...

I was watching C-SPAN as it became obvious that the bill was going to pass, and I found it interesting that the streaming DJIA quote was cut in half within seconds, from the 200's to the 100's. Probably an immediate "sell on the news" reaction. It's still down in the 100's. There may be a late day rally, but I have a feeling the free-fall will begin very soon.

Regards,
Wayne ("long" QID)

Anonymous said...

GOLD GOLD GOLD

The Original Gold Bug- Wall Street,NY

Allan said...

I've been bullish on gold, but lately have become less so as the possibility of a deflationary depression is edging toward probability. If this next leg down in the equity markets doesn't light a fire under gold, then its time to face reality, et tu goud?

Anonymous said...

At the end of Wave C, expect one hell of a rally.

Allan, u mean at the end of wave c
the bullish trend begins?

Allan said...

What goes around, comes around, and so shall it be, he who was first, will come to be last, and there is nothing new under the sun.

A

Anonymous said...

NNVC Uplisted!!!

Steve said...

Allan,
Interesting that David Gordon is calling for a big move up while you are seeing a big move down.
Steve

Anonymous said...

what do you mean by NNVC uplisted? Is it good or bad?
thanks.

Anonymous said...

interesting...question is where is point C...mid 2009 or end 2011??

Anonymous said...

Allan, what is yr estimate of where are we now out of todays plunge of dow interms of the distance from B to c?
last time u said 1/4

Allan said...

1/2 way to C