Custom Search

Tuesday, August 9, 2016

Elliott Wave Update 9 August 2016

Its an exciting time to be an Elliott Wave technician. Since 2009 I have argued the market is in an expanded flat correction consisting of 3 waves that allows a rise above the previous 2007 all-time high. The evidence still exists for certain world markets including the Global Dow and many other countries as a whole which have not taken out its 2007 highs. This is quite a negative divergence considering the modern nature of a globalist economy. Its a sign of a multi-decade topping process as Robert Prechter of Elliott Wave International has insisted on for years.

Consider Japan peaked in the 1980's which started the worldwide topping process that has lasted for several decades. A simple look at the DOW/GOLD ratio reveals the DOW in real money terms peaked 17 years ago and is vastly lower today. I could go on and on but I rather refer you to Prechter's brilliant EW Theorist collection available by clicking on my links to the left. (I then get a small commission if you sign up to be a FREE EWI club Member via my links and subsequently subscribe to any of their monthly newsletters or services)

<--------------------------------------------------- p="">
We primarily count the Wilshire 5000 index (less than 4000 stocks at this moment) as this represents the "total" American market as best it can and does indeed, in my opinion, provide the best wave counts and trendlines and channels we can use. Therefore it accordingly overall captures social mood moves probably the best in the American markets.  The Wilshire has formed a fairly solid 5 wave move since the 2009 low and we must adapt accordingly.

The ironic thing about Elliot wave counting is that if you predict a three wave move - no matter how large or at what degree - and it turns out to be wrong (becomes a 5 wave move), you will lose a vast amount of credibility and you will be discredited at the very point in which clarity to the wave structure becomes most apparent! Such is the nature of social mood! We abandon things at the end of wave structures. My only response is to check the current wave counting. We may have been wrong about a 3 wave move in American markets since 2009, but the fact that 5 waves is unfolding presents a great opportunity to sharpen the focus and hence nail the end.

Thus I have always envisioned the popularity of this blog will be lowest at the peak of a 5 wave move. It is according to natures laws. I am after all a long term bear and the followers of this blog generally reflect that. If the bear market returns this blog's fortunes will rise again. That's simply a social mood prediction not a wish or bias. I am not necessarily looking forward to the end of the current financial system and the "top". True market chaos may be more than we ever wished for.

However, check this chart out below.  Things are starting to clarify.

The symmetry between fib lines and wave point endings are lovely. The possible symmetry between relationships of wave (1) versus (5) is inviting. The "virgin" wave space (the one gap up higher that is not interrupted in price at any other point in the entire wave structure either before or after represents the "third of a third") is astonishing.  The 50% Fib lines up at the potential virgin space is thrilling.

The fact that time ratios between corrective waves (2) and (4) and impulse (1), (3), and (5) are more than sufficient. The varying form of corrective waves (2) and (4) are different (upward flat versus zigzag) matches EW theory that corrective waves almost always alternate in structure.  Check out that typical 5 wave RSI profile.

Wave (3) is by far the longest, another norm in EW theory as it is usually the strongest wave in a five wave sequence. This suggests a "maximum" wave (5) = (1) or less. The odds of (5) extending above wave (5) = (1) are low.  In short, it has blossomed into a beautiful wave structure. And the fact that I had not had this structure as my primary count for all this time does not discredit its actual form as it stands today. Wave counters that get a 3 wave structure wrong must adapt to a 5 wave structure. This is not the time to abandon the count, it is indeed time to sharpen the focus and pay attention. 

Will wave 3 of (5) be shorter than 1 of (5)? If yes, 5 of (5) will be the shortest of (5) of [5] by rule.

If the above chart is correct in the larger moves, we must move on to a smaller chart to predict the smaller moves. Main question is did we form the top of Minor wave 3 of (5)? Wave threes are usually the strongest and longest of any five wave substructure so we just don't know yet. Note the top alternate which suggest a much higher price overall to the "top". The substructure counts very well at the moment so we'll go with it.
One way to look at things is that the market has formed or nearly formed the top of Minor 3 of (5) of [5] of V. This is based on comparison of the Global DOW count which I consider the next best wave counting index on the planet. If the American markets are to extend much, much higher (say DOW 20000 as example where wave (5) = (1) in the Wilshire) than the Global Dow would probably also make a new high versus its 2014/2015 peaks which would muddle its current count.  

The Global Dow has already violated an EW rule in that the early 2016 price low marked as (1) down at 2033.03 has already overlapped any potential wave (1) UP formed at wave marked [A] in 2010. Therefore it already qualifies as a "three-wave" structure and by rule cannot morph into a 5 wave structure such as what happened in the American markets since the 2009 low. Yes, of course it can make a higher high than 2014 or 2015 but we could not count it the same way as the Wilshire since 2009, so therefore the primary count in the GDOW is what it is and why.

So the primary count is that the GDOW will NOT incur a higher high than what occurred as marked at "b" in 2015 at 2643 or what occurred in 2014 at 2646 (I think the actual numbers are slightly different on a smaller scale chart as the numbers don't register absolute perfect peak price on the GDOW in Sharpcharts as does the American markets)
I hope that explains the current thinking of the primary counts of this blog. Basically the Wilshire points to an expiring 5 wave structure since the 2009 low. The GDOW points to an already expired 3 wave structure since the 2009 low. So the major divergence between the 2 and the honing of the daily squiggles should lead us into an exciting finish.

Stay tuned and be sure to click my Elliott Wave International links to the left and sign up to be a FREE (free means free no bullshit either) CLUB EWI member.

blog comments powered by Disqus