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Tuesday, July 21, 2009

EWI and Other Ramblings

I'd like to clear up any possible confusion when it comes to EWI. EWI is of course, Elliott Wave International, which was founded by Robert Prechter, who of course was a key co-author of the "definitive bible" on Elliott Wave theory in his published book "Elliott Wave Principle: Key to Market Behavior" (the only book you'll ever need on EW theory by the way) first published I believe in 1978 with Robert Frost.

First I'd like to say that I pay for EWI's services of "Short Term Update" which is a daily-type market waveform update posted by Steve Hochberg three times a week (Mon, Wed, Fri). I also subscribe to their monthly newsletters "Financial Forecast" and "Elliott Wave Theorist", the last of which has been written by Prechter himself for over 25 years. I have subscribed to all three only since August 2008.

The Short Term Update doesn't typically post "squiggle charts" like I do and others. I suspect he has no time as he tracks the DOW, SPX and NASDAQ along with the dollar, euro, gold, silver and bonds. So in that respect, I have an advantage in tracking just generally the SPX, yet bond traders wouldn't like my site so much because I only talk about them in general matters (debt problem). Me and Kenny sometimes get on Hochberg's case in offhand references, but regardless, I find myself always eagerly awaiting what his M,W,F updates have to bring to the EW table. This enthusiasm hasn't waned.

The other two newsletters I sometimes consider I could do without. Yet somehow every month each letter brings something new to the table and keeps it fresh. Its like going out and playing a round of golf. You may be a "weekend golfer" but you always hit that one "sweet shot" that brings you back for more. Those newsletters have that knack. And then every 2nd, 3rd or 4th one, they really rock. So regardless, I keep subscribing and cannot imagining canceling. And keep learning the theory. It has been a journey. I still await every newsletter with eagerness as my enthusiasm hasn't waned for these either.

Robert Prechter I think is an outright genius. His work in the field of EW theory and then practically founding the science of "socionomics" is truly groundbreaking and has yet to be truly appreciated. Some of you know that I have stated in the past that I feel Elliott Wave Theory has truly changed my life's outlook and I consider it one of the most profound theoretical discoveries in the history of mankind. The fact that it isn't yet taught in any school is not surprising though, at this time it would go against government groupthink and "buy and hold" strategy. Such is human nature.

This is when of course the EW long-timers say, "Well Prechter has blown it more often than not and completely misjudged the power of the Cycle Wave V and the subsequent rally from 2003-2007, so I am hardly convinced." Fair enough. I am well aware of the history even if I wasn't trading it at the time (I got into EW theory and the stock market in general only last summer 2008)

So how do I respond? Well first and foremost, I take it as a completely contrarian position in that I generally adhere to Prechter's wave forecast as being the likely true path forward over the next few years. He has, since 2007, been pretty damn good. He recommended going short at 1550 SPX in the summer of 2007 with full leverage I might add, and recommended covering at 750 in Feb 2009 for a full 800 point gain in e-mini contracts. At the time he recommended covering shorts, he added that the market was likely going to bottom in the 600's but he wasn't going to chase the last points. Classy.

So in general, my response to the "Prechter Factor" is that if you are convinced he is wrong now (5 Primary waves to a very low DOW of under 1000), then I say I will take the contrarian position and say he is right at least for the next few years to market bottom. Doesn't it make sense that someone finally "discredited" has his greatest run exactly when he is discredited the most? I think that in itself fits EW theory general principles! Robert is, after all, a permabear (as I)/ I understand his long-time positions.

So why do I have all the Elliott Wave International ads to the left? Well I am an official "affiliate" meaning they allow me to sell their services for a cut in return but only if you sign up through my links, usually as a free "Club EWI" member first. I eagerly do this because I am a true believer in EW theory, and not just trying to make a quick Fib buck on a market bounce (although there is certainly nothing wrong with that!)

EWI has a free service called "Club EWI" membership. You get some free stuff with joining through clicking on the EWI ads I run to the left. If you become a club EWI member by clicking on my ad and signing up to "Club EWI", and then join a service (even if months later), I get a small commission for luring you to their services depending on what you buy. Hey it helps pay the bills! (And believe me, me and my family got caught up in the credit-induced cycle b wave rally from 2003 -2007! - I have half of China in my basement to prove it!)

Why would I hawk EWI services when it seems I am in "competition" with EWI directly? Well for one thing I have learned there seems to be many interpretations of Elliott Wave theory going around. Some I consider downright heretical even though I rarely comment on that. I rather do my own work and let it stand or fall on its own merits. After all, you can scroll back to previous posts in the beginning of March and check my work and see how it has turned out. Spot on? Heck no, but in general, not too shabby. I have seen a lot of sites seemingly make up their own theory and I rather steer people to EWI's (Prechter's) thinking first and foremost. Its where I am aligned. Its a synergistic relationship first and foremost.

So yes, I am in "alignment" with EWI's overall count which is of course a Prechter count. I believe 2000 was the true bull Grand Supercycle Wave III top (of over 200 years which perfectly aligns with the rise of America I might add) and treating it as such I go from there. I will say I do not steal EWI"s work nor duplicate their specialty-type data that they provide and when I occasionally offhand reference something mundane that may be perceived as EWI's work (even if it was my thinking too by chance), I give them full credit. I will say that sometimes that there are coincidences in data that I produce and then EWI produces the same night or vice versa. Sometimes I wonder who is reading who! But it always makes me feel good that I have learned enough to spot the key elements on my own and translate that into something useful.

As an example sometimes EWI provides sentiment data in conjunction with certain charts. I do the same type things, yet I use different data service - i.e. - $BPSPX versus whatever similar service they use. Occasionally, when warranted, me and Kenny will reference an extreme data reference from EWI that they mention due to its significance and that we may (or may not) agree with the interpretation at the time. And we'll give credit.

EWI's specialty services provide highly specialized charts and data that I never would duplicate because it would be wrong (and against policy I might add) to do that.

Could I do well without EWI services from here on? I have no doubt I could. But I think I would feel naked nonetheless. Afterall, they bring an awful lot of resources to bear on EW theory and I am only a mind of one. I think, in general, that EW theory is a simple theory: market moves based on where we are in the overall space-time continuum! (HEHE - now I sound radical!) But I rather think EW theory is a collaborative effort. And having an EWI membership only enhances my own abilities over the long run and they always extract such unique data from fresh perspectives that I neither have the time nor resources to duplicate or contemplate. Like I said, that Prechter guy is a genius.

So it is no surprise that certainly more than a few my blog readers (and Kenny's) actually subscribe to EWI with enthusiasm, yet read our blogs with (we hope) equal enthusiasm. It suggests that there is always room for debate and interpretations and alternate counts.

Which brings me to my "novice" comments on a post a few days ago. Anyone who takes up EW theory is not a "novice" and I was silly for stating things that way. Each's effort is always appreciated. There is no ultimate judge, only time will truly tell. I almost always look at charts posted to this blog even if I don't respond to every one. I consider all possibilities yet in the end of course I have my own opinion. So I certainly didn't mean that "novice" comment in a negative way. I only meant it in the fashion that I remember going through when I first plotted "1,2,3,4,5," on a chart and called my first Elliott Wave. My enthusiasm was great and yet I got a lot of things wrong. But anyone who takes that first step in earnest to plotting his/her first wave is no longer a novice. They are merely on a journey that truly no one knows where it will head, even Elliott himself.

So in the end, EWI is my guiding light. Yet I feel I bring enough freshness to the table to make it exciting. for instance, who was it that argued a common sense stance that a third zigzag start point in a triple zigzag formation shouldn't start from a lower spot than the actual second ZZ start point? That was pure me. EWI didn't even think of that and they got the recent 869 low spot wrong (they were too bearish) as many others did also (the H&S formation). So from here on out, even if the market collapses in a heap of a mess of a P3 wave, I can smile knowing that I had some "chutzpah" in calling the 869 low a likely second (X) wave low based on sound EW principles that was original thinking!

So I may still be wrong, but yeah, market made new highs and I'd have to say I was more right than wrong no matter what happens from here. So that's why you read blogs like mine yet also love services such as EWI.

So what is the bottom line of my ramblings?
A) I never duplicate EWI's services. Sometimes we have coincidences. (and I am often first!)
B) Prechter is a genius.
C) EW theory is a "synergistic" effort. Thats whay I love Kenny's work too and anyone else I have linked. Thats why I hawk EWI's services.
D) I use EWI's services which shows deeper (or unique) data then I could ever care to translate (or am allowed to). I use this data to help shape and keep my larger waveform patterns "aligned" and support larger arguments. Like me suggesting there is low liklihood of an expanded [B] wave flat or (4) of P1 flat. Deeper EWI data supports my view (and I really cannot duplicate their data point for point although the basics of the theory is just that - basics)
E) I bring enough "uniqueness" to the table to warrant my own blog I hope! (afterall I still have a full time day job!) Particularly in my daily projections (which EWI doesn't get into squiggles too much)
F) EW theory is a journey - there are no novices. Perhaps less-trained or less experienced. After all, counting to 5 is not exactly rocket science!
G) If you thinking of using some of EWI's services, join "Club EWI" (free - and provides some free services) through one of my pimp links to the left and then once your registered, any service you decide to use, I get a small cut. (Even if you don't join thru one my links, I recommend you checking them out!)

Anyways, once you learn the basics, counting to 5 and correcting in 3 and making larger structures out of smaller ones is fairly straightforward. I hope to be doing this a long time. I hope never to get dogmatic or stubborn. Heck the market never lies.


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