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Registered User
Joined: 12/19/2004
Posts: 457
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I was looking at the SP 500 monthly again today.
Elliott wave is a unique technical tool because there are some techniques that permit estimation of not only where (price level) something should take place, but when. The only other approaches that I know of which provide price and time targets are Cycle analysis and Gann methods.
From the high in 2000, the SP lost 49% in 31 months.
Looking at the montly, the SP has retraced 61.8% of the bear market losses.
Interestingly, this rally from the Oct 2002 lows has taken 1.16 as much time as the bear market decline--36/31 = The bear market (counting from the peak in March 2000) took 31 months, from peak to trough.
Should the time relationship between the bear market decline and the ultimate end of the advance from the October 2002 low reach a Fibonnacci multiple (ie. 1.236), then the advance from the October 2002 low should be about 38 months long. As we are already 36 months along that advance, that would put a peak in December
(31 * 1.236 = 38.31 months).
Should this wave extend to a time multiple of 1.382, then the advance should be around 42 months long. (1.382 * 31) That would put a peak sometime in early April.
I do believe the latter target is more likely, but a sell off could occur at any point between those 2 months.
There is the Chinese curse: "May you live in interesting times." These sure are interesting times in the market, if you are a technician.
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Registered User
Joined: 10/7/2004
Posts: 319
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Hey rmr1976. I'm curious about the Elliott Wave Theory you touched upon. I just became aware of their web site and info. Is there any true value / accuracy in this theory and their predictions in your opinion? Thx. RWPOD
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Registered User
Joined: 12/19/2004
Posts: 457
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Some of Pretcher's older stuff is good. He had a very hot hand back in the late 70's thru 1987. His book (with A.J. Frost) the Elliott Wave Principle is considered the Elliott Wave textbook. He has also preserved the original works of R.N. Elliott, as well as Hamilton Bolton, which are very good reads, to see how Elliott was used way back when.
Richard Russell has also used Elliott Wave Theory in his market letters. His long term record as a technician and writer is excellent.
But since then, he has been all about calling the "big crash." His work for the past 10 years, market wise, has been way off.
Elliott Wave has value, in my opinion. But it isn't something that you should venture into right away. I would suggest being familiar with classical technical analysis before picking up Elliott.
You can't become too dogmatic in you conclusions when using Elliott. It has value when used with other technical tools, particularly momentum indicators.
It's greatest value is finding low risk/high profit potential trades. You can place tighter stops with Elliott than with conventional trend following techniques.
It is also important to realize that key turning points in the market occur when multiple waves/cycles are all about to change direction at roughly the same time. These points, by definition, are not very frequent.
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