Thursday, March 12, 2009

Message from Allan

Actually, all these blogs are messages from me, so what's so special about this one?

I've been receiving a lot of questions these past few days about what to do and specifically, has some sort of low been set and is a new bull market in the making. Feedback has also made the point that these charts, Blue Wave and Elliott are nice to look at but they don't know what it all means, i.e. is the market going up or down?

Maybe this will help explain what I am trying to do here. First, the Elliott Wave charts are pattern recognition puzzles, where by labeling the past I am trying to forecast the future. This is possible because the Elliott Wave Principle is a set of rules and guidelines. By plugging in the patterns of the immediate past and then applying those rules and guidelines, we can sometimes make high probability forecasts for the immediate future.

Not every high probability forecast pans out, but enough of them do to make the exercise very much worthwhile, especially when the forecast can be confirmed with other, independent technical analysis techniques.

The Blue Wave charts are one of those other technical analysis techniques. Unlike Elliott Wave, Blue Wave's forte is identifying tradable trends early enough to ride the trend to a profitable resolution. The time frames, Weekly, Daily, 120 minute, 60 minute and so on are all independent systems that allow the user to trade as often or as infrequently as is comfortable. The incredible overriding characteristic of each and every trend, long or short, is that they all work. I try to show different time lengths in my blogs on Blue Wave as a way of illustrating how well the basic underlying algorithm works.

As with Blue Wave, the Trade Triangles are also a rule based trend following system, simply trading in the direction of a, "three period high or low." Yes, you can simulate this without joining Market Club, but my suggestion is that by paying for it you will be more likely to use it. There is nothing like an up or down arrow (or triangle in this case) to motivate a trader.

Each one of these trading systems has costs associated with using them, both in time and in money. My time is worth a lot to me, so I don't mind spending money to help me trade without working 18 hours a day figuring all this stuff out. As an example, being short earlier this week paid for Blue Wave, as did being long today. Same with Triangles and Elliott, if they generate profitable trading, what difference does it make how much it costs?

Finally, a word about what's coming next. Both EW and Weekly Blue Wave are steadfast that much lower prices are coming. As I said recently, the market has up to about a 100 point rally in it before those forecasts may be threatened. My own opinion is that the rally is more then half over, maybe a lot more then half over. When the longer term BW bars (120 minutes are higher) flip back to red-Sells, I suspect a decline to new lows will be at hand. If I am right, then the profits that can be made from that decline will drarf any gains being missed by not being long during this rally.

I hope this adds some perspective on what I have been posting recently. The links and advertisements for Market Club (Trade Triangles), Blue Wave Trading and Elliott Wave International are for your convenience, if any of you want to give these products a spin. If you have the time, you could possibly figure much of this out by devising your own rule based trading system without buying any of these systems or services. But will you? To each his or her own, but rest assured, these services wouldn't be on my blog if they didn't work.

As for the rest of 2009, the best is yet to come.

A

15 comments:

Martin said...

Thanks Allan, for another excellent update.

I recall you said you are running Blue Wave on your Mac. Are you also running Advanced GET on your Mac? (I assume your BlueWave is partnered with your eSignal.)

How would I do this on my Mac since eSignal is PC-only? Are you using Parallels to pull this off?

Thanks for any advice.

Anonymous said...

Allan, thanks again for your wonderful blog ...

Anonymous said...

Allan:

I am using real time charts from www.prophet.net
I like the fact that you can customize the time interval, like 35 minutes instead of 30 minutes
however sometimes the data are not very consistent

is there any real time charting package you would recommend ?

Anonymous said...

Allan,
Can you explain why you are now expecting new lows based on EW when last week you put up a chart clearly showing 5 waves down from last summer. It appeared you were more comfortable with that charts interpretation.

Thank you,
Seymour

Anonymous said...

When the market is turning, it always gets difficult and your alternative count deserves almost as much weight as your primary count.

Clearly we've had a 5 wave advance off the low. This means one of two things:

a) Primary 1 ended at 6469 and Primary 2 has started and it should be a signficant rally, like 3 to 4,000 points. Wave 2 usually retraces wave 1 deeply.

b) We are in 4 of 5 of Primary 1 and this 4th wave is shaping up to be a 5-3-5 zig-zag. (This is my primary count.)

I suspect the correct count is the latter, with resistance at 7174, which is the 38.2% of wave 3 of 5, and also in the 7104 to 7405 area which was the 4th wave of a lesser degree.

If the market gets above 7845, which was the bottom of 1 of 5, then this can't be a 4th wave of the 5th of Primary 1, and that would blow away my primary count.

Alex

Anonymous said...

so is the market going to make new lows after this rally ?

Anonymous said...

I think so.

That's my primary count.

I think we are nearing the end of a 5 wave advance off the low. If this is a correction or 4th wave of wave 5 of Primary 1 wave down, then this correction should be a zig-zag or 5-3-5.

I have that as the primary count, because I only see 3 waves down since the early Feb high or the end of intermediate 4.

Plus momentum was strong going into the 6489 low.

Plus my time cycle isn't expected to bottom until late March or early April.

I could be wrong, though. The market is near the bottom.

What to others say?

I think the computer generated wave counts are saying Primary 1 has ended, but I don't know that for sure, because I don't use them.

Alex

Anonymous said...

thanks, Alex ...

Allan said...

Martin: I am running everything on my MacBook Pro, all Windows apps, including eSignal, are run flawlessly through Parallels.


Re: EW structure. We are still early in a multi-year bear market

Re: Real time charts- I use eSignal, but also get real time charts through two brokers, Interactive Brokers and Schwab.

Anonymous said...

Allan,
Have had very profitable short term success using Neowave and MarketClub information by trading inverse ETF's. However, the current fee for Blue wave forecasts are prohibitive for those of us who cannot trade 8 hours a day.
Hope they adjust the fee schedule for weekly trend analysis.

Allan said...

Re: Costs

I hear you. You're combination of NeoWave and Market Club should provide all you need to be successful. Blue Wave is an expensive program, but, compared to the size of my trades, it's cost is not really a factor. I understand that my readers represent a broad spectrum of pockets, from deep to not-so-deep. Also from active day-traders to end-of-day to even week-end warriors. The tools I discuss and recommend cover a wide spectrum of sophistication and costs. The choices are there because one size does not fit all.

Anonymous said...

Allan,

Thanks for posting all the great charts and market analysis. Your blog is an excellent resource of information.

Thanks to Alex and all the others who contribute their market insights. I find it all very valuable.

LB

Anonymous said...

Hi Alex,
Regarding your analysis I think no one knows if the recent lows in the market was wave 5 or wave 3. As you can see the get software that Allan uses also showed different wave counts in a matter of days. One thing for sure is that the wave we are in is an even wave. At this point its safe to play for Fibonacci's .
My 2 cents.
Inq

minling said...

Thank you for your effort indeed.

jen said...

I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


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