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Wednesday, March 25, 2009

Fibonnaci Calculations for the Move Up

I have reason in EW terms to label the move the way I did in tonight's update. I could have seen this relationship yesterday but I overlooked it and missed it.

In impulse wave relationships, wave 3 is usually the strongest and usually is the wave that extends. It seems to be the case here. A healthy extended wave 3 usually expands the price of wave 1 by a Fibonacci relationship of 1.618. This chart has nice Fibonacci relationships between all the subwaves of an extended 3rd wave (which is labeled as green Minute [iii]).

So I took all the noise off my 30 minute chart and now you can see wave relationships. What works nicely is where I have black iii labeled is the highest volume of the rally so far which fits into a "third of a third" wave which is where the power kicks in. So if this labeling is correct, the bounce off of 791 is just part of a subwave 1 to a higher spot. Once again, if my labeling is correct and green [v] = length of green [i] then the upper target is 858. If green [v] is .618 times green [i] then your looking at about 832 tops.

So we'll see. But that was why I labeled the wave the way I did.

10 comments:

  1. Dan,

    Are you saying we're still in wave 1 and heading up to 832 or 858?

    Do you think wave 2 then starts down 38%, 50%, or 62%?

    Thanks.

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  2. Dan,

    For what it is worth, I think taking a look at the 60 min. chart is important. I have been religiously following the 30 min. chart of XLF and today it violated one of my rules - in which case I would have went short - luckily, I was traveling today. The 60 min. chart, however, did not. I suppose this is a consequence of having large magnitude moves. In fact, the 60 min. chart has held strong during the entire move from 666 on the SPX. I also like the fact that more weight is placed on the large pullbacks.

    On another topic, I was wondering if you had analyzed the rise in Oct. 2002 or Mar. 2003 in terms of EW theory? Perhaps there are parallels since the rise was so fast (e.g. 75 to 95 and 75 to 105).

    Thanks for your efforts.

    phild

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  3. Anon yes I am suggesting that wave structure supports that move to either 832 or higher at 858.

    Phil, I have looked at it yes and put a chart in a recent post a few posts back of the 2002 rise. It was a wave 1 move off the 2002 bottom I believe and deep retrace.

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  4. Highly unlikely, but...that last a-e was a complete 5 wave structure and hit the .38 Fib.. If I understand correctly, that could qualify as the wave 2 move (everyone's waiting to see) in itself.

    A twist like that WOULD catch a LOT of ppl out of the market.

    Almost not worth the risk of playing the downside AT ALL for awhile.

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  5. Daneric, you need to stop becoming so attached to your counts. I have been watching you since you started on stocktock and i think you have some skills with EW. However like most amateurs you rush your counts far too often. How could wave 5 be over If it has only had an ABC. The answer is it cannot be! We are now in an ending diagonal pattern and are about to begin subwave 3. It will be an abc just like 1.

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  6. Dan N, your comment is a bit unfair. If you think Danerics wavecount is wrong, could you not volunteer a different one? How can wave C still be in place when (800/805), its subwave 1 of C was broken? Your assertion is that the next leg will re-test the lows of 666 or break that level? but for that to be the case the 800 level must have held and it did not. Given that, the alternative count is that the 666 was subwave 5 of 3, and we are going to correct higher. Why would you see scope for a final subwave of C to new lows?

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  7. Actually it is not. Do yourself a favor and read up on an Ending diagonal pattern. It is a 5 wave pattern in which its impulsive waves are broken into abc patterns. I am suggesting that we are about to start 3 of 5. In other words this recent move up was a 2 wave.

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  8. Dan N Said: if you actually followed my work and read EWP, you'll know that I have wave (4) as a trinagle and triangles can produce thrust moves and that it. The move off of 875 to 666 was indeed a 5 wave move complete with an extended 5th wave ending in an ending diagonal and possibly truncated SPX as compared to the NASDAQ.

    The fact that 2 of these factors may exist at the same time (truncation and extended 5th) means the violence of the subsequent opposite move is likely to be great. It has indeed been so far.

    In addition sentiment was at an alltime extreme on many sentiment surveys which suggest the bottom was in.

    There is a slew of other stuff I could go thru but that should address your concerns of a proper "form".

    Page 51 in EWT: "Elliott used the word "thrust" in referring to this swift, short, motive wave following a triangle"

    Like I said I could go on, but it is you that may need to do some more reading and homework. I pretty much know every word in EWP by heart.

    If you don't agree with that book then I guess we'll agree to disagree.

    And if you want to argue if it was a trinagle or not then fine go ahead. The waves traced like one and behaved like trinagle waves. Sentiment shifted constantly from fear to hope.

    Finally fear won over and one final thrust feqar move was in order.

    Now that move is exhausted and Spring is here.

    Greed is kicking it.

    Don't get caught waiting for 666 to be taken out anytime soon.

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  9. Daneric, Firstly, I apologize. I started this. Secondly, thank you for your work its very good and thoughtful. You have a framework and that is key in this business. I have an occasional interest in elliot wave theory. I have followed it passively for over 12 years -- mostly by assessing the consensus 'take' among investment bank technical research.

    To summarize, where i think you differ from Dan N is where you assign 3 and 4 on the daily chart, Dan N would assign 1 and 2. I don't have the expertise to comment on who is right or not. But am always very interested in the (respectful) debate...

    For context, i have worked at a very large global macro hedge fund in NYC for 13 years. I'm a fundamental analyst. My instinct is we will see 740-760 again, and it should be bought, regardless of whether we see a new low circa 600 (Dan N's) view or we see it march sharply higher, its a medium term buy (for 1000). Quite simply stock markets don't fall this much without significant retracements as you notice, greed is boiling up.

    Thank you to you both for your thoughts. Dan N, I did look up ending triangles and can see your point to. Thank your for that reference.

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  10. My only other small comment is that the C wave of 875 to 666, seems a little short...

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