Monday, September 06, 2010

Elliott Wave update

Below is a chart of Primary Wave 1 down which took place from the Fall of 2007 to the Spring of 2009.  The SPX dropped about 50% in this wave and period.  Primary Wave 2 up retraced a Fibonacci 62% of Primary Wave 1. The operative assumption is that the market has just recently entered Primary Wave 3 down.


 SPX Daily Trend Model

Note how well the trend model captured most of this decline.  That is what it is designed to do, capture big trends.  It does get fooled in choppy, sideways periods, a small price to pay for riding the big ones up and down.


SPX Weekly Trend Model

Once again, the trend model captured most of the move, this time Primary Wave 2 up.  When prices break below 1000, Primary Wave 3 down will be firmly in control.  Since Wave 1 dropped prices 50%, expect at least the same from Wave 3 and probably more.  

Below is an SPX Monthly chart going back 30 years.  No EW labels or Fibonacci analysis, just the trend model.  But more importantly, let's apply my patent pending "Two-second Stock Analysis" to this chart.  To refresh your memory, here are the rules:
(1) Look at any chart, any time frame, but for only 2 seconds (3 seconds if you are in California);
(2) While looking, answer this question: "Do you wish you already owned this stock?"
(3) If the answer is "Yes," then the stock is a Buy;
(4) If the answer is "No," then the stock is a Sell;
(5) If the answer is, "Can't decide," move to California.
In other words, use the right side of your brain, your intuition, your gut feel, to tell you what to do. The right side of your brain, 
"....is visual and processes information in an intuitive and simultaneous way, looking first at the whole picture then the details. The other (the left brain) is verbal and processes information in an analytical and sequential way, looking first at the pieces then putting them together to get the whole."

 SPX Monthly Trend Model


Time's up.  What does your right-brain analysis tell you? 


A

16 comments:

Padre3210 said...

Allan, Your TBT_15 trend model shows TBT as a buy, while your weekend Trend Model shows short, both on daily and weekly. I'm confused. Is TBT a buy, or not?

By the way, could you repeat for newbies like me that you mean by "daily reversal"?

Anonymous said...

Um, sell? Wait, give me another second.

Allan said...

Its rare to every time frame from 1 min to monthly all in agreement on direction. Intermediate trends are down, while the 15 minute, at the time of the post, was in a very short term up mode. There are always cross-currents, even in the strongest of trends.

Anonymous said...

Readers to the Allan bog
If you dont understand the greatness of trend trading, and and are not making money get out of tradinging it's so easy a child can make money.

Anonymous said...

The boat is getting rather crowded on the bear side. When CNBC starts rolling out the perma bears, I get concerned. In fact, there are a couple folks that trade off the obvious manipulation on CNBC based on the bullish or bearish guests. It worked quite well over the last 6 months.
What about the bull case where we go sideways to down and then another leg up. Put the Elliot Wave to the side for a moment and look at the price chart again. One could make the case for another rise... Mr. Market would crush the bears AND all the folks that sold out of their mutual funds in the last month (according to the WSJ). THEN, later next spring we start the leg down. Too many people are talking about the stock market going down for it to happen now (even Tony Robbins !). That would be a fun scenario....
Let's see what the PRICE action tells us....Prechter already had us at DOW 8000 by now and that hasn't happened....
On a separate note, NNVC looks like it's consolidating on low volume at this level. It's almost as if "someone" is holding it at this level. won't go through $1. look at the chart and volume......

Allan said...

When I watch CNBC its 5-1 bulls over bears, after all, it was the hey day of the 90's bull market when the network thrived. They are desperately reaching for that rah rah audience again, but its just not there.

Anonymous said...

The market is ready to zoom up, the maniuplators are telling us so. Go long for the next six months.

Allan said...

If that is the case, my trend models will catch the move, almost of all it. The beauty of trend following is that you don't really have a horse in the race, you just ride on the back of the winner.

Anonymous said...

Well then get ready, we are definitely going up. No possbile way the market goes down even with a natural disater. The manipulators wont let it!

Anonymous said...

Let's see... all the commentary outside of Allen is solidly bullish. Seems to prove your point Allen that the predominant mood is bullish. People believe there is no way this market is going down because 'They" will not let it!
-cramar

Anonymous said...

It doent matter, trend following will lead the way, either we go to 14000 or 5000 trend following will capture the move. Its perfect!

Anonymous said...

That is true! However, if a third alternative comes true—a sideways chopping market for months (no trend), a trend following system could reverse back and forth generating repeating losses.
- cramar

Anonymous said...

Cramer...spot on. I am a living example of just that in this last 6 months.Let those saying it is so easy show here exactly what they are doing - before they do it - and then I'll take notice. My bet is most people are losing money in this market...trends or not.

Anonymous said...

Anonymous, you are not supposed to tell other people that I am losing money ...

Anonymous said...

Why do the EWI newsletters predict doom and gloom when everyone's worried, and focus on International Markets when the market's up?

Anonymous said...

my 2 second view confirms that the stock market is not normal. it is not real.

it has absolutely no relation to the market of the 1980's and early 1990's.

why is that.
why did this market go hyperbolic around 1995

I say its because thats when the government took over with their supercomputers.

this market has been un real ever since.

Trend ?? there is no trend.

there is only government controlled manipulation.

good luck playing that rigged game.

can you predict when they will create the next war?
the next market crash?
the next disaster?

the next cooperative agreement with China?
the next hula hoop ?

only the shadow knows.

my 2 second vision is evolving to establish a keep it simple policy.

Own very few stock sectors.

speculate on nothing.

stay within gold, silver, and the miners
maybe a little uranium
a little oil (war insurance)
and select biotech stocks like NNVC and a few others and

thats it. the rest in cash

and watch the bizarre un real market do whatever the government wants it to do.