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Archive through July 17, 2010

Chart Forum » Hilarius' Hall Of Fame » Elliott Wave Watching » Archive through July 17, 2010

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rdumas
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Friday, July 09, 2010 - 02:06 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Folks,

As mentioned in my postings on the Our Daily Bread thread I am starting this particular thread for those who are genuinely interested in learning the Elliott Wave methodology to enhance their study of the markets. Like all methodologies, EW analysis has it's own strengths and weaknesses. I hope that through this thread you will get some idea of what these strengths and weakness are and get a practical view of how to use the methodology in your every day trading.

Perhaps it might be a good idea to just mention a few of these strengths and weaknesses (as I see them) at the outset. Naturally enough anything that I say about EW analysis on this thread are my thoughts alone and not necessarily those shared by other EW analysts.

Strengths

Elliott Wave analysis is built around the concept that there are a number of patterns that continually re-occur in the market cycle at every level of observation. These same patterns are formed on every thing from intraday charts to multi-decade charts. These patterns define every part of the market cycle. In other words, every price action occurring on any chart should be definable in EW terms. That is to say that the EW patterns define every move on a chart and not just individual patterns that may appear on a specific chart as is the case in traditional TA patterns.

Of all of the methodologies that I have studied it has probably the most complete set of recognisable patterns available to the technical analyst.

Traditional TA has it's own set of recognisable patterns. Examples of these would be Head and Shoulders, Cup and Handle, Pennants, Flags, Double/Triple tops and bottoms, etc. Anyone studying TA methodologies understand that these patterns don't always work to perfection (sometimes they don't work out at all) but they do allow us to see a particular market action in some context and gives us potential target levels for any future price action. Note however that traditional TA patterns occur in isolation on particular charts and only define one particular part of the price action on the charts.

EW patterns on the other hand always work in terms of their 'general pattern' however attempting to identify the 'specific' pattern of the current pattern being analysed is not so simple. What I mean by this is that even a simple 5 wave impulse wave obeys a number of general rules that relate to an impulse wave but there can be hundreds of individual 5 wave impulse patterns that are all different in spite of obeying all of the rules. For example each wave length may have totally individual ranges and the corrective waves associated with waves 2 and 4 may be entirely different.

These EW patterns are similar to say a specific type of tree. A pine tree for example has a particular shape and distinctive features but every pine tree is different. Just like humans all have similar features that differentiate them from say a horse however everyone of these humans (though identifiable as belonging to the human species) is different.

There is also the complication of a number of patterns that start out the same way in their pattern formation but end up with a completely different final pattern. An example would be a Zigzag wave and the first 3 waves of an impulse wave. When taken in isolation and not in the context of the preceding pattern, there is no way of differentiating these two patterns.

Of What Benefit is Pattern Recognition?

Whilst there are times when patterns can be quite complex, there are many times when the patterns shine through clear as a bell. This can happen even with part patterns. For example, if an EW analyst sees an impulse wave followed by a corrective wave then they can be very confident that the next wave will be another impulsive move. Depending on where that part pattern is within the context of the preceding pattern, the analyst can determine if he is seeing the signs of an impulse wave. If so he can be assured with a high degree of certainty that the next wave will be highly tradable and he will already have some idea of the likely target range for that move. This greatly enhances his ability to trade successfully.

Another example would be in a strong trend which has the look of an impulse wave pattern, the EW analyst can have some idea of where the current pattern is within the overall pattern. This can alert him/her if a turning point in the trend is close at hand (such as in the 5th wave of an impulse wave).

Weaknesses

The two biggest weaknesses that I have discovered in the EW methodology revolve around corrective waves and what I call level confusion.

In EW analysis there are two types of waves.....impulsive and corrective waves. Impulsive waves are those waves that push the market in the direction of a trending market. Corrective waves move in the opposite direction to a trending market.

As you can imagine, when going against the trend, the market has to struggle against the 'flow' of the market. The act of doing this causes corrective waves to be much more complicated than impulsive waves that flow with the market.

For this reason, there are far more corrective wave patterns than impulsive wave patterns. In fact the corrective waves can often become very complex. At times they can be so complex that attempting to define them becomes an act in futility and often in these cases the final pattern cannot be determined until they are almost complete At times like this it is best to stand aside and not trade the market. This in itself is useful knowledge to have because often these sort of patterns not only have a great deal of risk but they don't provide good ranges to trade anyway.

Apart from complex corrective waves the other problem area in EW analysis is what I call level confusion. On any chart (regardless of the time frame) it is common to see at least 2 and sometimes 3 different levels of pattern.

For example a chart may show the following pattern.





When correctly labeled we may find that we are seeing two levels of labeling. the lower level is labeled 12345ABC where as the higher level waves (1) and (2) also can be seen.






A slightly more complex pattern may show 3 levels as per the chart below. Without labeling the different levels accurately the EW analyst would end up with a dogs breakfast in terms of labels. Note how I have clearly identified the 3 different levels of labeling below.






Correct labeling is probably one of the single most important aspects of EW analysis. Unfortunately it is also probably one of the most boring aspects of EW analysis. If you don't get it right, you'll never be able to get very far with EW analysis. For that reason I'll spend a bit of time on it in the next post.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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gdd3
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Friday, July 09, 2010 - 02:53 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Well done Rudy!

As my introductory contribution to this thread maybe readers might like to refer to these two following links...

1).... http://www.tradersedgeindia.com/elliott_wave_theory.htm
I especially like the little tables enboxed that indicate the more likely/common wave projections ratios.

2).... http://www.elliottwave.net/educational/basictenets/
a marvellous 'condensed course' on the basics of EW Principle and again a great section...'The Fibonacci Sequence and its Application'...for EW projections and ratios.

Cheers
Dolphin

(Message edited by gdd3 on July 09, 2010)







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rdumas
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Friday, July 09, 2010 - 03:07 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks Dolphin,

Those links are the 'ants pants'. Thanks for adding them. I'll have a think about your question posted on the ODB thread now.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Friday, July 09, 2010 - 04:42 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Dolphin,

As I want to slowly bring our readers into this stuff at an understandable pace I'll start at the higher level in part answering your post on the ODB thread and then work my way down into the rest of your question.

As you can understand it takes time to put the charts together that I post so I ask that you have patience in waiting for my full response.

Okay, so starting from the top.



I'll go through the process of explaining it to those readers who are only just on the start of their EW journey. In truth the explanation that I will give in fact will require that the reader already has a basic understanding of the EW principles but I'll keep the explanation as simple as possible.

At the highest level on the chart we have the Cycle Level. What I have assumed is that the market has been in a long term bull market and we completed the Cycle wave III in November 2007. All of the market action since then has been the corrective wave that will end up defining Cycle wave IV which is in fact the entire Bear Market from beginning to end. Note that this wave IV (and bear market) is far from over. It will most likely last several years yet.

I have labeled the dramatic decline from November 2007 to March 2009 as Primary Level wave Circle A. This is the first point at which I differ dramatically from Prechter as Prechter labels it Primary Level wave Circle 1. He labels it a wave 1 because he sees a 5 wave impulsive move down. I label it a wave A because even though it could be seen as a 5 wave impulsive pattern down it is possible to also see it as either a 3 or 5 wave corrective pattern. Based on my reading of the lower level waves I consider it to be a corrective wave pattern. This is one of those cases where either case can be argued for.

The reason that Prechter is so bearish is that his impulse for primary wave 1 means that primary waves 3 and 5 will take the market down to depths not seen for decades.

In Prechter's scenario he believed that Primary wave Circle 2 completed on 15 April 2010. I believe that we have still not completed the March 2009 rally and will experience another leg up before completing that rally. In keeping with the rest of my labeling at the Primary level I am labeling the completion of the March 2009 rally as Primary wave Circle B. It is then and only then that I believe our market will enter into the last phase of the bear market cycle. How far that final leg Primary wave Circle C falls will depend entirely on the patterns that evolve between now and then.

I should note that in September 2009 when the S&P500 reached 1080 Prechter also believed that marked the end of the March 2009 rally whilst in my market wrap document I refuted that claim. Once again we are at odds.

Dolphin I believe that I have answered that question of yours that related to what I labeled the market top. I assumed you meant the November 2007 market top but in any case I have labeled all of the other interim tops as well. I'll get to your other questions in another post when I have some time.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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elisabeth
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Friday, July 09, 2010 - 05:10 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy, fantastic that you're putting your EW charts in a separate thread! Thank you for all the knowledge you bring to the forum from this perspective - we are very lucky

Elisabeth


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rdumas
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Friday, July 09, 2010 - 05:15 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks Elisabeth,

I won't get it right all of the time but it won't be through lack of trying. The thing to remember too is that the EW methodology is one where we follow a number of likely scenarios and eliminate those that get invalidated as the pattern emerges.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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gdd3
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Friday, July 09, 2010 - 08:12 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Way to go, Rudy....now we are talkin'...great posting! I'm sure you and Mr Elliott will get some more followers. And, yes I do appreciate that its does take a lot of time(longer for me with my computer skills) to put together such charts that you share here....but I am patient so don't worry.

As for answering my question(s)in the ODB posting, yes you have covered the primary question but I had remembered your view of a "Primary Circle A" corrective preference over, say Prechter's impulsive "Circle 1", and also have stated I agreed with your view(seeing this wave a Zig-Zag 3 wave down)but thought other readers would benefit also.

Of real interest to 'investors' will be if this higher degree count turns out to be a Flat, Zig-Zag or a more complex correction(ABCDE for example)...all providing different projections for your "Circle C". But, of course, as you and I both know its far too early to ascertain this as yet.

Personally, I was particularly interested in your revised detailed count of the move from the April high{wave(A)} and the subsequent ABC for (B) and describing this as a possible EW-FLAT PATTERN since B(of the ABC) has yet to get beyond 52%. Fair enough that your revised count(AB within (B)) in this degree is viewed as a panning out a possible FLAT but again if that is so B shouldn't get much further than 4600 and that would favour your C for (B) taking out the recent 4176 low(wave A) I would have thought.

Have a great weekend...and see that you get some time away from your computer.

Cheers
Dolphin


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rdumas
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Saturday, July 10, 2010 - 02:06 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Dolphin,

I think that I may have answered more parts of your questions in this week end's market wrap document. For those who don't get the market wrap I'll discuss a some of the relevant charts in the wrap.

Firstly I discussed the part of the long term chart encircled in the chart below with the dashed red line (effectively Intermediate wave (B)).





Based on the evolving price action on the XJO I believe that there are two possible patterns that could be formed to complete Minor level wave B which is the second leg of Intermediate wave (B)). The first is a Flat pattern and the second is a Triangle pattern.

The two patterns are shown below. First is the Flat pattern scenario.




The comes the Triangle pattern scenario.



I think that you will now see that when I was speaking about the Flat pattern, I was speaking of the pattern for the Minor level B wave, not the Intermediate (A)(B)(C) wave pattern. As you mentioned elsewhere Minor level wave B would possibly end up being a Double Zigzag with the labels Circle wxy.

Hence you are correct is stating that the current rally should not go far beyond the 4600 level. You are also correct in saying that once Minor level wave B was complete the Minor level wave C (also the termination of Intermediate level wave Intermediate (B)) would take out the previous low of 4175.7.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Saturday, July 10, 2010 - 02:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Labeling of Elliott Wave Patterns

In my first post I indicated that one of the most important facets of EW analysis was the correct labeling of the wave patterns. The correct labeling of wave patterns reduces the chances of the 'level confusion' problem that I mentioned in that post.

An analyst can adopt virtually any labeling convention however it is important that once a convention is used then it should be rigidly adhered to. Robert Prechter in the book Elliott Wave Principles (Frost and Prechter) adopted the following convention. You will find that on most occasions I use this convention.

Note that impulsive wave are labeled using numerals whereas corrective waves are labeled using alphas.








As an example in the standard 8 leg Elliott Wave pattern below we can see that the lower level waves (12345ABC) are at the Minor level whereas the higher level waves {(1)(2)} are at the Intermediate level.





I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Saturday, July 10, 2010 - 02:24 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Elliott Wave Pattern Cheat Sheet

The attached EW pattern cheat sheet is one that I use on a daily basis in determining the correct identification of the various EW patterns. I find the sheet so important that early in my EW studies I actually had it laminated and it is a constant companion whenever I am analysing a chart.


application/pdf
cheat_sheet[1].pdf (115.7 k)



I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Saturday, July 10, 2010 - 03:29 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Elliott Wave Methodology

As analysts new to the Elliott Wave methodology delve into the various known patterns it quickly becomes apparent that many of the patterns start off with the same sort of sub patterns. Remember that in its simplest form, the standard EW pattern comprises a 5 wave pattern for impulsive moves and a 3 wave pattern for a corrective move. For this reason many patterns have similar structures.

I would like to just talk a little about pattern structure and the short hand methods of describing them.

It should always be remembered that EW patterns occur at every observable level. Hence when purely observing the standard 8 leg Elliott Wave it will look like the following.






If we now drilled down into that simple structure so that we could also see the next level down of wave pattern we would see the next structure.



So what we would see then is the make up of each higher level leg. We can see then that in the diagram displayed we have a typical impulse wave pattern for the impulsive leg and a typical 3 wave corrective pattern for the corrective leg.

Note that in the impulse pattern legs 1, 3 and 5 have a 5 leg subwave pattern and legs 2 and 4 have a 3 leg subwave pattern. We would therefore describe this pattern structurally as having a 5-3-5-3-5 format.

Similarly the corrective phase pattern wold have a 3-3-5 format.

Please note that all impulsive patterns have a 5 wave structure but they may not necessarily have a 5-3-5-3-5 format because the corrective waves (legs 2 and 4) could also be triangles (5 wave pattern) or other complex corrective patterns rather than a simple 3 wave pattern.

Okay, now that I have briefly covered the basic EW pattern structure I can repeat again that many different patterns may start off with the same patterns for the early part of their structure. For example the format of a Zigzag corrective wave is 5-3-5. This also happens to be the structure of the first 3 waves of a simple Impulse wave.

For that reason the EW analysis methodology involves monitoring the early part of a forming wave and coming up with the possible scenarios that are most likely to occur based on that early pattern. Then, as the price action (and therefore the pattern) continues to evolve, we can eliminate the invalid patterns until such time as we only have one valid pattern left. It is at this time that we are truly in a position to predict the future market action.

(Message edited by rdumas on July 10, 2010)


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Sunday, July 11, 2010 - 03:44 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



SOME EW COUNTS BEING CONSIDERED FOR THE XJO

There are a number of EW counts being considered in the market place for the XJO. I will briefly discuss a few of them.

Large Impulse Wave To Hell

Probably one of the most favoured EW counts in the market place is the one subscribed to by Elliott Wave International (EWI). There a a lot of EW analysts who have variations of this theme. The EW count looks something like the following.



We can see from the above chart that this scenario has the market plunge from November 2007 to March 2009 as a Primary wave 1 and the following rally as Primary wave 2. In this scenario we are in the early stages of Primary wave 3. In fact we are in such an early stage that we are only in Minor wave 3 of this scenario. Once 5 Minor waves are complete it will only have completed Intermediate wave 1.

It is clear that this scenario is extremely bearish and if true would drop the market down to very low levels.

Forming Cycle wave IV with a completed Primary wave B

In the second scenario the entire bear market will be defined by a completed Cycle wave IV. The preceeding bull market ending in November 2007 was the 5th wave of Cycle wave III. The market plunge from November 2007 to March 2009 this time is considered to be Primary wave A and the rally from March 2009 to April 2010 is considered to be Primary wave B.






The price action currently underway is forming Primary wave C. This scenario whilst still quite severe, is still not as severe as scenario 1 as there would only be 3 waves down rather than 3 as per scenario 1.

It should also be noted that since Primary wave B only retraces about 50% of A it is still possible that Primary wave C could turn out to be the third wave of a Triangle pattern for Cycle wave IV which would be the most optimistic scenario for the bear market.


Forming Cycle wave IV with an incomplete Primary wave B

This third scenario is a variation of the second scenario. The main difference in this scenario is that the Primary wave B has not yet completed and has another rally leg left after the current correction has completed to fully complete the March 2009 rally. The eventual pattern to complete Cycle wave IV would be similar to that which was discussed in the previous scenario.


This scenario is the one that I favour at this point in time purely based on the cycles analysis work done by Musketeer Andrew.





How Will We Know Which Scenario is Correct?

Scenario's 1 and 2 would be invalidated if the 4th Intermediate wave rallied above the termination level of Intermediate wave 1 (ie, 4175.7).

Scenario 3 would be invalidated if the a 4th Intermediate wave formed that did not go above 4175.7 and then formed a 5th Intermediate wave which went further down than the termination level of the third Intermediate wave (ie Minor wave C).


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Monday, July 12, 2010 - 11:44 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



THE SIMPLE IMPULSE WAVE

We can see from the standard EW pattern that it comprises a 5 wave impulse wave and a 3 wave corrective wave. We now look at the first part of the pattern, namely the 5 wave impulse wave.

We will see from the diagram below that even though it is called an impulse wave, it actually is also made up of a mixture of impulsive patterns and corrective patterns. Note that the diagram is drawn showing one level of pattern only.



Note that there are 3 legs with an impulsive pattern and 2 legs with a corrective pattern. There are two modes of wave development, namely motive and corrective. The motive waves cause the direction of trend whereas the corrective waves provide retracements (pullbacks) or rest periods in that trend.

Rules for Impulse Waves

There are 3 main rules relating to pure impulse waves. These are:

1) Wave 2 cannot fall below the starting point of wave 1
2) Wave 3 is not the shortest wave by price movement when compared to waves 1 and 5.
3) Wave 4 cannot fall into the price range of wave 1.

Note that the above rules are written in the context of a rising market.

It should be emphasised that whilst wave 3 cannot be the shortest of waves 1, 3 and 5 that does not mean that it must be the longest. More often than not it is the longest but it does not have to be. In commodities for example wave 5 is quite often the longest of the motive waves.

Impulse Waves with Extensions

Whilst the simple impulse wave always has a total of 5 waves there are many occasions when more than one level of wave pattern can be seen on a chart. This causes the illusion that an impulse wave has more than 5 waves. The most common cases are that impulse waves will appear to have either 5, 9 or 13 waves in its pattern. The following diagram show what happens.

\b

Leading and Ending Diagonals

There are two types of impulsive moves that are a bit different to the normal Impulse wave. These are the leading and ending diagonals. In both of these patterns we have a breach of rule 3) for the normal Impulse wave. In both these patterns wave 4 will often fall into the price range of wave 1.

The leading diagonal when it occurs will always occur as wave 1 of an impulse wave. It cannot occur in wave 3 or wave 5. A leading diagonal will often develop as a result of a market that has been moved dramatically in some corrective move (such as a bear market plunge) and a new impulse wave is developing. Because of the dramatic move in the previous corrective move the market takes time to gain confidence in the new impulse pattern. So it is basically a weak beginning to a new impulsive move.

It has the basic form shown in the diagram below.




An ending diagonal looks very much like a leading diagonal but only ever forms as wave 5 of an impulse wave pattern. The ending diagonal is once again a weaker pattern than a normal Impulse wave. It normally forms when a market has moved too fast in waves 1 and 3 and is therefore weakening in this part of the market cycle.

It can never be a wave 1 or wave 3. It has the basic shape shown in the chart below.



We can see from the above diagrams of the leading and ending diagonals that both of them look identical. It is only thier position within a standard Impulse wave and their internal structure that differentiates them. Capping their positions within an standard Impulse wave again for emphasis. Leading diagonals are found as a wave 1 only and ending diagonals are only found as wave 5 in an Impulse wave.

The internal structures have the following format.

Leading diagonals have a Impulsive(Imp)-Corrective (Cor)-Imp-Cor-Imp or a Cor-Cor-Cor-Cor-Cor structure.

Ending diagonals have a Cor-Cor-Cor-Cor-Cor structure.

The Cheat Sheet that I posted earlier only indicates one of the two structures for the leading diagonal.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Monday, July 12, 2010 - 01:26 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



More on Impulsive Patterns

Further to the previous post there are a few more items relating to impulsive patterns that are worth noting.

Truncated (Failed) 5th Waves

Whereas the termination point for a 5th wave of an impulse is usually above the termination point (in a rising market) of a 3rd wave, there are times when we have what is known as a 'truncated' or 'failed' 5th wave. In this case the 5th wave will terminate at or below the termination level of the 3rd wave (see diagram below).





This event will occur when the trend has 'lost steam'. The following corrective pattern will often in these cases be quite large.

Throw-overs and Throw-unders in Diagonal Patterns

In all diagonal patterns whether impulsive or corrective an event called a 'throw-over' or 'throw-under' will often occur. The throw-over occurs when the market thrusts up through the upper boundary of the wedge (in the case of a rising market) and a throw-under occurs when the market does not have the strength to make the upper boundary of the wedge pattern (refer to diagram below). This event will often happen in the final leg of the pattern.



All of the above nuances in the pattern will provide an insight into the remaining strength of the market cycle and what may occur as a following pattern.

Channelling of Impulse Waves

A very common event in the formation of Impulse waves is the channelling effect. This is a common effect used in traditional TA for measuring the strength of a trend.




The above effect can often allow an EW analyst to determine the approximate levels for the terminations of waves 4 and 5 once the first three waves have terminated.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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gdd3
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Love your "cheat sheet", Rudy and its great to get your teachings(revisions for me)here. Refreshing ones mind is always a stimulant, for example, I had forgotten about the Throwovers and Unders in a Diagonal pattern.

XJO 'struggling' here in the short-term as you suggested; its the nature of any 'pullback' from here that I await with 'bated breath' and a little excitement.

Have a good one.

Dolphin


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rdumas
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Monday, July 12, 2010 - 02:26 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks Dolphin,

I try to give a 'fresh' approach to some of the EW subjects as often they are tackled in the same boring old way. Bit by bit we'll get there and hopefully there will be some more people with a bit more EW knowledge than before. It can only help their trading and market understanding.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Monday, July 12, 2010 - 03:13 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Price Action of XJO

I could be wrong but as of 1440 hours it appears that wave (a) may have completed. If so this would mean that a retracement should start as of that time.







I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Monday, July 12, 2010 - 04:18 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Zigzag Corrective Patterns

Probably one of the most common patterns in the market cycle is a Zigzag corrective pattern. It is a 3 wave corrective pattern having the form 5-Cor-5. Some analysts say that the structure is a 5-3-5 structure but that is incorrect because the second leg can be any corrective pattern (including a 5 wave corrective pattern). The details of a Zigzag are in the diagram below.




Zigzags are so common that they can form parts of other complete patterns. For example a simple Impulse wave can seen as being a combination of two Zigzags.




For the above reason if a trader is uncertain whether a Zigzag pattern or an impulse pattern is forming, he/she can still trade the pattern because the 3rd wave of the pattern will in most cases be at least the same range as the first wave of the pattern.

Wave equality in waves A and C of Zigzags are very common and allows traders to assume target levels for the termination of wave C with a reasonable degree of accuracy on many occasions.

Zigzag Rules

Following are some rules for the formation of Zigzags.

1) Wave A must be either an impulse wave or a leading diagonal
2) Wave B must be a corrective wave.
3) Wave B must be shorter than wave A in price
4) Wave C must be an impulse wave or an ending diagonal
5) If wave A is a leading diagonal then wave C cannot be an ending diagonal

Following are some guidelines applicable to Zigzags

1) In order of likely occurence wave B (in terms of price) will have a range of 38.2%, 50% or 61.8% of the range of wave A
2) Wave C is most likely to have the same range as wave A. The next most likely ranges for wave C are 61.8% or 161.8% of the range of wave A
3) If the range of wave C is longer than 161.8% of the range of wave A then the pattern is more than likely to end up being an impulse wave rather than a zigzag.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Tuesday, July 13, 2010 - 10:19 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Folks,

A number of readers have emailed me privately to say how much they appreciated having my new thread up and running as they consider it almost like an online course on Elliott Wave. Most don't want to post on the thread as they are too shy to go public or don't want to interrupt the flow of the material however that is not what I had in mind. I will continue to post "course material" until I believe that I have covered all of the important aspects of the EW methodology however other posters are more than welcome on this thread. People who are treating the thread as a sort of online course on the subject are more than capable of cutting and pasting the relevant posts into a Word document of their own making.

I really appreciate the interaction with other posters like Dolphin and encourage others to post not only to ask questions but to give their own views on the subject as well. As far as questions are concerned please know that my belief is that there is no such thing as a dumb question. Quite often there will be others who have the same question and are too timid to ask. Also sometimes it is the very simple things that can cause a blockage to further learning so it is worth clearing away that obstacle.

Posters who have different views to mine on particular EW counts are more than welcome to post as I still have much to learn. I have found that the EW methodology is just as much as an 'art' as a 'science'which is why there are many different ways of counting the waves on a particular chart. It is only once the pattern is complete that we can be even close to being sure which count was correct.

The reason for the various counts on even so called obvious patterns is that waves can often be seen quite differently depending on the 'wiring' of the minds of the analyst and their own particular biases. I try as much as possible to avoid bias but we are all prone to it.

Whilst we may not always agree on a particular count, it is always an advantage to be able to see counts from various vantage points so I do encourage other posters to contribute to this thread. My recent post on the various long term EW counts for the XJO are a typical indication of just how different the counts can be even amongst the best EW analysts.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Tuesday, July 13, 2010 - 03:05 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



More on the 3 Long Term Scenarios for the XJO

Following is a private email received from one of my friends with some comments/questions about the 3 long term XJO scenarios that I posted on Sunday. I will comment on Bill's points within the text of his email.

"Hi Rudy

Thanks for your reply & for your posts on EWW. A huge effort Rudy so thank you for your guidance.

Your comparison between the Three Scenario EW Counts was of particular interest - thanks for doing that. It made a lot easier for me to understand the StockChart EW Counts I sent to you.

I recall that you stated a few months back, that you got considerable comfort when your EW & TA analysis was all suggesting a similar outcome. At the moment all Three Scenario EW Counts are suggesting an imminent pullback (i think?). Obviously, Scenario 1 is a stronger pullback than Scenario 2 and of course your Count on Scenario 3. Might be worthwhile on EWW giving your considered view on such a coincidence & the value to trading the event! Those trading the short side might see this of significant interest.


If we look at the most recent price action for the XJO in all three scenarios we will see that they are all in similar positions in terms of their short term wave counts . In fact even the wave counts at the Minor and Minute levels are identical in scenarios 1 and 2 as shown in the following chart.






For scenario 3, whilst the wave labelling is different to that of scenarios 1 and 2 at the Minor and Minute levels, the actual wave patterns are identical.



Note that in all three scenarios we are at a stage of forming a corrective wave at the Minute level (wave "circle ii" for scenarios 1 and 2 and wave "circle c" for scenario 3). I should state that I believe that the current wave at the Minute level that is forming is only halfway complete as I expect a Zigzag corrective move for this pattern. It is possible that it may be nearing completion however I personally doubt it.

Regardless of where the current Minute level corrective pattern terminates, what follows in all 3 scenarios is a large decline in the market. Scenarios 1 and 2 will be forming Minute wave "iii" of Minor wave "1" and scenario 3 will be forming Minor wave C.

So from a trading perspective, in spite of quite different wave counts for the longer term the shorter term expectation is that once the current rally leg completes, there will be a significant decline in the market. Traders therefore could trade that expectation.


It will be interesting to keep an eye on all Three Scenario EW Counts as we go along, especially to observe when the three worlds coincide again.

As indicated in my original post on this subject, the shorter term upcoming patterns for all three scenarios will continue to play out much the same way for the time being and it will be some time before we will see which of the scenarios are invalidated.

The next Bradley Turning Point is on 10 August I recall. On your Scenario Count I assume that may be a 'high', but on Scenario 1 & 2 we might be looking at a termination of the low of 'minute wave iii of minor wave 3'. Perhaps that might give us an initial steer as to what Count looks more promising.

Time is a very difficult parameter to lock down Bill as you have seen in the past. The Musketeers at this time are looking at the completion of the current corrective rally to be over in late July/early August. If that is the case then the 10th of August would be another interim high (or low) for one of the Minute or Minor wave patterns.

Interesting to see the Musketeers thoughts on the turning points from other methodologies.

See comment above.

Much appreciation Rudy for the time you give to 'teach' us beginners...

regards

Bill"



I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Tuesday, July 13, 2010 - 03:28 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Current Price Action for XJO

Hi Folks,

In my post 3605 I suggested that Minuette wave (a) had possibly completed but that has not turned out to be the case. This wave is extending. Sometimes it is helpful to go to a higher time frame in our analysis to filter out the 'noise'. If you look at the daily chart for the XJO it becomes obvious that we are only in a 4th wave of this pattern.

I suspect that our new target level will be around the 4465~4490 level.



(Message edited by rdumas on July 13, 2010)


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Tuesday, July 13, 2010 - 04:38 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Rudy,

Sorry for not posting earlier. I had kind of forgotten that you had said you were starting up this thread. Just been reading through all of the posts - great work mate and to you too Dolphin.

I had been scanning the ODB thread and hadn't seen any of your EW work for a couple of days and thought maybe you were "in the garden".. that's when I remembered!!

Anyway, just wanted to say this could the start of a fantastic thread and I look forward to your posts Rudy and of course from all other contributors!

It's funny Rudy, opposite to you (although I daren't challenge you given your past performance!!!) I believe that we may have just about completed the recent rally up with 50% retracement levels reached and close to 61.8% (not after today's effort) but the Dow is close to 61.8 - about 20 odd points away. Has been rising on very poor volume which is never a good sign. I would expect falls from these levels and think we are heading down to 3600 by end of August September. This is unless it trades back up above 4600.

From EW Int this morning;

The DJIA retraced 62% of Minute wave i (circle) at today's 10,220.30 high, while the S&P 500 has pushed to 1080.78, which was in the range of 1071-1083 that we noted last week. The Dow made a new recovery high this afternoon, which, so far, is unconfirmed by the S&P. The upward momentum of the rise from the July 1-2 lows is dissipating, but the wave structure allows for further upward development over the short term, if the market chooses. The Primary wave 2 (circle) high on April 26 and the Minor wave 2 high on June 21 both ended with intraday spikes. The 1083-1092 range in the S&P includes the next to last open gap of Minute wave i (circle) at 1092 from June 23 (10,260-10,298 is the equivalent Dow range). The final gap is at 1106 (June 22), which coincides with the 78.6% retracement of wave i (circle) down. The equivalent Dow level is 10,394. Neither index must rise to these areas to satisfy the wave structure of the upward correction, which we consider in its very latter stages. But we cannot rule out these ranges just yet. Hopefully, we will be able to in the near future.

While the Dow and S&P both closed up on the day, NYSE breadth and S&P 500-only breadth were negative, with more declining issues than advancing issues. The same holds true for NYSE volume, where there was a greater percentage on the downside than the upside. Total Big Board volume, according to my CQG data, ended the day at just 848 million shares traded. Yes, it's summer and traders are looking elsewhere. But today's volume was the slowest day of the year. Equally important, daily volume has contracted for three straight days despite a higher closer each session. As we've discussed previously, contracting volume on a rising market is generally considered a bearish sign.

Cheers
MM

PS - this thread is now bookmarked!!


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rdumas
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Hi MM,

Delighted that you found the thread. I look forward to your future posts. For other readers, the EWI scenario mentioned by MM is the equivalent of the scenario 1 mentioned in my posts on the XJO but for the S&P and DOW.

The wave patterns are slightly different but the higher level EW counts are the same.

Yes MM, it would not surprise me at all if Minute wave circle ii did complete around this level based on the key Fibonacci level that is being approached. There are certainly a lot of good reasons for this level to be an appropriate place to turn but to me the pattern just doesn't look right at present. I certainly wouldn't be betting my house on it either way.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Wednesday, July 14, 2010 - 10:59 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi MM,

Just some further thoughts on the likely termination level of the current rally pattern for the XJO. I have mentioned in my previous posts that the likely pattern that is forming was probably a Zigzag. What lead me to that assumption was the fact that we were forming a 5 wave pattern in this rally leg.

Traditionally the first leg of a Zigzag is an impulse wave......hence my thought that we were forming a Zigzag as a final pattern. The other part of my reasoning is that our timing studies indicate that there will be a high probability of a market crash scenario sometime late July/early August. This led me to the assumption that this period would most likely be a top.

On reflection however, if a crash were to happen, the most likely time that it would occur would be during the formation of a wave 3 at some level as they as you know give us the biggest market moves.

This leads me to propose another possibility and that is that the 5 wave move that is currently underway is a 5 wave corrective pattern and not an impulse wave as I have been assuming. I will be dealing with 5 wave corrective patterns at a later date as I would loke to deal with some other corrective patterns before introducing that particular class of pattern.

As you mentioned in your recent post, the current rally leg has already chewed up much of the down leg range of the move down from the 21st June. I do understand that you were talking about the US market and I am talking about the XJO however there are similarities in the patterns.

If the completed current rally moves above the high of the 21st of June then those EW analysts who believe that the 21 June top was a Minute wave circle ii then they will have to readjust their wave counts. Assuming for the moment then that the current rally is in fact a 5 wave corrective pattern then it is quite feasible that the pattern will complete prior to the level of the 21st June top and start an impulse wave move down. That move down would be a Minuette wave (i). The following counter rally would be a Minuette wave (ii) and the following move down would then be a Minuettw wave (iii) of Minute wave circle iii of Minor wave 3. That sounds complicated but in a simple picture would look like the following diagram.






I'm probably getting way ahead of myself but the above scenario would meet the requirement for the current rally leg to complete before exceeding the level of the top at the 21st June and would also fit with a crash scenario in late July/early August.

At the time of writing this post the 5 wave pattern of the XJO is heading for my target level of 4465 to 4490 suggested in my post yesterday.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Wednesday, July 14, 2010 - 11:44 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Rudy,

Yes, I agree that we are on the way to 4490 on the ASX200 - if it cracks through 4450 - there is no real resistance until 4500, which should be tough to crack. That last graph fits well with my line of thinking.

Interesting tho that our market hit the 61.8 retracement level and came off it this morning. US futures are up strongly on the back of the Intel result so we could be up at that level by tomorrow.

China not playing the game today and are off 1% at this stage. How badly has their market performed recently - its funny how the fall since April coincides with when they began futures trading on their market!

Cheers mate

MM


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rdumas
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Wednesday, July 14, 2010 - 12:19 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Folks,

My friend Bill is in the midst of gaining the ability to post directly on IC. In the mean time he has asked me to post the following portion of his private email on this thread as he feels (as I do) that his questions would add to the content on the thread. As I did last time, I will respond to Bill's questions within the text of his email.

“Thanks for your reply 3608 on EWW Rudy.

Your post 3598 on EWW very kindly labeled three of the main EW scenarios that are most favored at present. As a newcomer to EW I am initially taking the view that it is best to stay open-minded, so as to see all the options, and to avoid eliminating any possibility - until I get my L plates off. Let the charts tell you what the market has to say, not the other way around.

I have a few questions on the three scenarios you identified:

XJO Scenario 1 – Large Impulse Wave Down
The EWI ‘followers’ are obviously getting very keen on a significant wave 3 action south. The two wave 3 events within Primary Wave 1 back in 2007/08 wiped off 1400 points off the XJO. Scary stuff I recall!! If repeated this would take out March 2009 lows. An initial target for the completion of Wave 3 to the 61.8% fib @ 3848 on the XJO might be a more conservative retracement under this scenario? Wave 5 would take out the March 09 low....Thoughts?

Bill, it is important to remember which wave 3 level did the damage. If you go back to the drawing for scenario 1 you will note that the wave 3 that did all the damage was the Intermediate level wave 3.

Currently we are operating only in the Minor level so we are only in the early stages of wave 1 at the Intermediate level. The damage will come some time down the road when we are in Intermediate level wave 3.


XJO Scenario 2 – Large Corrective Wave IV (completed primary wave B)
The outcome of this wave 3 event could match that of Scenario 1 above I assume?

As with the scenario 1 above, the Intermediate level wave 3 of the Primary wave C will definitely be ugly. The only thing that would moderate this is if the Primary level pattern turns into a Triangle rather than a 3 wave pattern. In this case it would mean that the March 2009 low would remain the low for the entire bear market.

XJO Scenario 3 – Large Corrective Wave IV (incomplete primary wave B) Rudy’s Count!
I noted on Tuesday that you feel we are in a 4th wave of this current pattern with a revised new target level around the 4465~4490 level. I assume you are still calling for a minor pullback (50% fib XJO c.4350?) at the end of this rally, before a further rally to take out the April ’10 high >5025 to complete primary wave B?

I have spent some time discussing an alternate view to the Zigzag scenario for Minute wave circle c for Minor wave B in an earlier post on this thread.

Your assumption stated in the last sentence does not reflect my view expressed in scenario 3. Once Minor wave
B completes we should form Minor wave C which also completes Intermediate wave (B). Now I had suggested that we might have been forming a Flat pattern for Minor wave B. If this is correct then Minor wave B could terminate anywhere in the region of the level of Minute wave circle c. Minor wave C on the other hand could terminate in virtually any level as its termination level will depend on its own pattern.

It is only once Minor wave
C has completed that we will get a rally that will take out the April 2010 highs to complete Intermediate wave (C) and primary wave Circle B. The above description is shown in the diagram below.






I noted on your post, that Scenario's 1 and 2 would be invalidated if the 4th Intermediate wave rallied above the termination level of Intermediate wave 1 (ie, 4175.7). Scenario 3 would be invalidated if a 4th Intermediate wave formed that did not go above 4175.7 and then formed a 5th Intermediate wave which went further down than the termination level of the third Intermediate wave (ie Minor wave C).

If this next correction takes out XJO @ 4175 and heads lower, I guess the higher probability would be for Scenario 1 & 2 to prevail?

No that is incorrect. As the range of Minor level wave A was quite significant there is nothing stopping Minor level wave C from having a similar range. As I have mentioned elsewhere, it is likely that it will be some time into the future before we will see one of the scenarios invalidated.

thanks Rudy

Bill


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Wednesday, July 14, 2010 - 12:22 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi MM,

Have to agree with you about that 4500 level. It should provide some pretty stiff overhead resistance. I didn't know that the Chinese have only recently started trading futures on their market. I'm not sure why it would have that effect.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Wednesday, July 14, 2010 - 01:15 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Rudy,

I think with China trading futures has probably increased a bit of volatility ontheir market? Perhaps they have been 'attacked' by hedge funds etc who don't readily have access to buy sell shares or short individual shares. Therefore, they could short sell the index and may have doen this over the past few months. Not sure but it seems more than a coincidence that they have goen down more than any other market since they were introduced.

Cheers
MM


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rdumas
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Wednesday, July 14, 2010 - 01:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I've had an EPIPHANY!!!!!

I am quite annoyed at myself for having been so blind. Whilst having lunch it suddenly occurred to me that the 5 wave pattern that was developing at this time for this rally was indeed an impulse wave and not a 5 wave corrective pattern.

Let this be an object lesson for budding EW analysts. Keep it simple. In my focus on the larger pattern I had forgotten all about the fact that we were seeing the third wave of Minor wave B completing. And remember what I said about what I thought that Minor wave B was probably going to be????

A FLAT pattern and a FLAT pattern will always end in either an impulse wave or an ending diagonal.

The though occurred to me when I posted the following chart in my previous post.




This adds more weight to the view that I was forming earlier about late July/early August not being a significant top but probably the top of a wave 2 of some kind prior to a crash in the following wave 3.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Wednesday, July 14, 2010 - 03:03 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Looks like there is a bit more to go on the XJO and SPX

Looking at the Bollinger Bands and the PercentR indicators it looks like there is still a bit more to go even though the Slow Stochastic is turning.







I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Wednesday, July 14, 2010 - 03:37 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



FLAT CORRECTIVE PATTERNS

It's probably an appropriate time to discuss Flat corrective patterns. As shown in the diagram below there are 3 different kinds of Flat corrective patterns, namely the Regular, Expanded and Running Flat.




We can clearly see that in a Flat pattern the termination level of wave C is somewhere near the termination level of wave A. So it is clear that this type of corrective pattern does not retrace as much of a preceeding trending pattern as does the sharper Zigzag pattern. The reasons for it being called a Flat pattern to me appears to be rather obvious.

As it doesn't tend to retrace as much of the trending market as some corrective patterns it can often occur in a strongly trending market and also can occur before an impulse wave extends.

Whilst a Zigzag has the normal structure of a 5-3-5 pattern, the Flat normally has the structure of a 3-3-5 pattern. Note that in both patterns the final pattern is a 5 wave impulsive pattern hence it can be either an impulse wave or an ending diagonal.

It is because these corrective patterns always end in a 5 wave impulsive pattern that many EW traders will trade the final C wave of these patterns.

I should stress at this time that the above 3-3-5 structure is what you will find is the structure defined in all EW books however I personally will still consider a corrective pattern to be a Flat pattern if it has the general shape shown in the diagrams above as long as they have the structure Cor-Cor-5.

I believe that it's important not to be too pedantic about EW patterns. If it is a simple 3 wave corrective pattern that is sharp then I call it a Zigzag and if it is flat in appearance then I call it a Flat.

Whilst the Standard Flat is fairly common, probably the most common flat pattern is the Expanded Flat. As can be seen its B wave is longer than its A wave and the C wave is longer again.

The least common flat pattern is the Running Flat. Here the B wave terminates well beyond the beginning of the A and the C wave will not travel its full range.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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breaker_1
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Wednesday, July 14, 2010 - 05:48 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



rdumas ,

Seems to me that its hard to tell till after the fact

ie hard to predict


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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billt
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Wednesday, July 14, 2010 - 05:54 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Rudy

After several months badgering you on email, I feel now is the time to go live on EWW. Hopefully it might encourage other ‘beginners’ to post as well.

Thanks again Rudy for all your help getting me underway. Thanks also to Dolphin, MM and the other posters – it all helps.

Thank you Rudy for your response on post 3621.

It would be good to receive your considered EW view where we now stand on your XJO Scenario 1, 2, & 3 and if have got the stamina on SPX.

On your last post 3614 you suggested under XJO Scenario 3 – Large Corrective Wave IV (incomplete primary wave B), we will retest the XJO 21 July high @ 4622 with Minor Wave (Impulse) 3 of Minor Wave B forming. After that top, you feel a pullback to c4000 will develop. Is that about right? Where do you now feel your wave count is from 6 July?

Interestingly today, the Bulls took the lead from Wall Street and ran hard on the XJO finishing at 4462, after clearing the 61.8% fib @ 4454, and the XJO is now testing the 50 day MA @ 4464. The 200 day MA @ 4554 sits now within view.

SPX cleared the 61.8% fib overnight, and is also testing the 50 day MA as well. The bulls did control the market, with a really nice finish at 7.09:1 advancers, on 92% buy volume. Volumes back up to c5b, after a few slower days. The Trend does remain bullish – at least for now.

However, it is very possible that we have a full five waves for this rally. We closed with negative divergences on the indicators, which would support a 5th wave? Some commentators have called a top - a head and shoulders pattern has developed on the SPX chart, with a right shoulder forming right on resistance into the close, so you would expect a major sell-off on this TA? Some ‘EWI type’ commentators are predicting a fairly quick trip to c.880 on the SPX, with a bearish P&F sitting at 900 beginning any time soon.

Interesting to get the alternate view on XJO Scenario 1 – Large Impulse Wave Down (Minor Wave 3 of Primary Wave 3), and XJO Scenario 2 – Large Corrective Wave IV (completed primary wave B - Minor Wave 3 of Primary Wave C). If these were your ‘babies’ – what would they be saying!?

}


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rdumas
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Wednesday, July 14, 2010 - 10:18 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

I'm delighted that you finally made it onto IC so that I won't have to post private emails on the site. In the back of my mind it didn't seem like the right thing to do because it could have been perceived as either breaching someone's confidence or possibly fabricating a story. By posting directly readers can see that there is another real life poster who is asking legitmate questions.

Re your question "It would be good to receive your considered EW view where we now stand on your XJO Scenario 1, 2, & 3 and if have got the stamina on SPX."

I will answer your question about the SPX in a later post when I have more time. I believe that I have given you my EW count for scenario 3 in my post 3614. Scenarios 1 and 2 are still in the process of forming Minute wave circle "ii" of Minor wave 3. The anomaly between the different scenarios however is as follows.

In scenario 3 I was viewing the current rally pattern that is forming for Minute wave circle "c" as an impulse wave. This makes sense for the final leg of a Flat pattern.

In scenarios 1 and 2 however, the current rally pattern must be a corrective wave as it is a Minute wave circle "ii". A wave 2 of at any level must be a corrective wave and therefore cannot be an impulse wave. At this stage I would classify it as a 'complex' corrective wave.

This is a typical example of how different EW analysts will see the same wave quite differently. As I have often stated, different EW counts come about because of the different wiring of people's brains and their particular bias. Naturally enough both views cannot be correct. Either the current rally wave is impulsive or is corrective.....it can't be both. Eventually as more of the pattern is revealed one or more of the EW counts will be invalidated.

What I am doing by presenting the different scenarios is showing readers that different analysts see the same pattern differently. Whilst I have my own particular bias due to other factors, I am not saying that one scenario is any more probable than another.

Re your question "On your last post 3614 you suggested under XJO Scenario 3 – Large Corrective Wave IV (incomplete primary wave B), we will retest the XJO 21 July high @ 4622 with Minor Wave (Impulse) 3 of Minor Wave B forming. After that top, you feel a pullback to c4000 will develop. Is that about right?"

Almost right Bill but just a little bit out. The wave that is currently forming is Minute wave circle "c" of Minor wave B, not Minor wave 3. A Regular (or Standard_ Flat pattern will normally terminate its wave C somewhere near what its wave A originated so your comment about testing teh 4622 is valid (but not necessary). At present I have a target zone of around 4465 ~ 4490 based on other methodologies. This as you can see does fall short of a normal target for a Flat pattern but the final termination level for the third leg of a Flat pattern is governed by many factors. These factors could cause it to fall short. I personally would not be surprised if it went to the 4622 level but equally I would not be surprised if it fell short.

As for how far the market will decline once Minor wave B is completed, I already answered that question in my post 3612. If you look at the last paragraph of that post you will see that I stated that since Minor wave A had a significant range that there was no reason why Minor wave C couldn't have a similar range.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Thursday, July 15, 2010 - 03:20 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

Further to my last post. Here are some more answers to the points raised in your post.

Re your comment "However, it is very possible that we have a full five waves for this rally. We closed with negative divergences on the indicators, which would support a 5th wave? Some commentators have called a top - a head and shoulders pattern has developed on the SPX chart, with a right shoulder forming right on resistance into the close, so you would expect a major sell-off on this TA? Some ‘EWI type’ commentators are predicting a fairly quick trip to c.880 on the SPX, with a bearish P&F sitting at 900 beginning any time soon.

Well we certainly have seen 5 waves so far in the XJO and are correcting at the moment. What we don’t know is whether that impulsive wave

1) Was the last wave in a Flat pattern
2) Was wave circle ‘a’ in a Zigzag for Minor wave B
3) Is the first impulse wave (ie, wave (i)) of a larger impulse wave at the Minute level

or whether that impulse wave is even complete yet as there is nothing stopping it from extending.

Assuming my scenario 3 is in play for the SPX and we are about to start a Minor wave C if we got a similar range to Minor wave A then we could very quickly get down to around the 920 level. So a drop to that level is quite possible. Keep in mind however that Minor wave A took 21 trading days to form.

And your other question "Interesting to get the alternate view on XJO Scenario 1 – Large Impulse Wave Down (Minor Wave 3 of Primary Wave 3), and XJO Scenario 2 – Large Corrective Wave IV (completed primary wave B - Minor Wave 3 of Primary Wave C). If these were your ‘babies’ – what would they be saying!?"

Scenarios 1 & 2

These scenarios would have seen Minute wave circle “ii” completing and Minute wave circle “iii” of Minor wave 3 commencing. As Minute wave circle “i” had a range of 120.3 points we could expect a range of around 194.6 (161.8% of wave circle “i”) so a target of around 904.8 would be reasonable.

Scenario 3

This scenario is a bit more difficult to predict because it depends on what kind of pattern develops for Minor wave C. As wave B only retraced around 50% of wave A (at its peak) then we could consider the Minor ABC pattern to be a ‘sharp’ pattern and hence could see Minor wave C have a similar range to that of wave A. The drop however would probably be spread over 3 waves (down-up-down). On that basis I would expect that the initial drop may not be as steep as for scenarios 1 & 2.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Thursday, July 15, 2010 - 04:57 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



15 July EWW

Hi Rudy

Thanks for that – your observations are now fully understood.

It seems difficult to accurately predict a top using only EW techniques. Other indicators are starting to look like a top has arrived - or close to completing?

SPX overnight showed signs that we might have topped out @ 1099.46.

- Bearish cross with negative divergence on the 60 minute
- Descending Triangle setting up on the 15 minute
- Overhead resistance on the 60 minute, 26 April/21 June high trend
- Broadening Top formation forming over the past two days
- Overbought on the RSI 60 minute
- Slow Stochastic, TMF, turning south
- MACD turning south
- Doji Reversal touching the SMA200
- VIX at support levels
- Volumes down 3.6b

JPMorgan Chase (JPM) earnings come out before Thursday's opening bell, which may alter things.

The XJO today followed suit.


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billt
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Thursday, July 15, 2010 - 09:24 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



thanks Rudy

I am getting the hang of it!

When you have the time, a technical piece on counting in the X Y Z method would be handy! That looks like a 'black art' to me...

As Ody is missing you too much on ODB, I have posted there today as well. There does not seem to be enough TA consideration to my mind! Colin has set up IC with 'Indicators Galore' but there are very few posts on the threads that seem to throw technical thoughts one way or another....

thanks for your response on 3619,

cheers

Bill


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rdumas
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Friday, July 16, 2010 - 10:40 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

Thanks for your posts both on this thread and on the ODB thread.

You are absolutely correct about EW having limitations as do all other methodologies when taken in isolation. When you combine a number of methodologies however it 'helps to fill in the picture' to a greater degree.

As I mentioned on the ODB thread the short term chart for the SPX shows that the index is in a bit of a compressed state having attempted 3 times to break through the 1099 barrier. Its retracements have not been great so I suspect that it will succeed on the 4th attempt tonight sometime.




There is of course the possibility that the 1099 barrier may be too great to overcome but looking at the longer term chart below we can see that the UBB has not yet been reached and the %R indicator still looks like it has a bit of room at the top left to fill. For these reasons I sense that the index is 'not dead yet'.





I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Friday, July 16, 2010 - 10:43 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

I will definitely spend some time on the more complex corrective patterns in the near future. I would like to deal with the Triangle corrective pattern before doing so as I don't want to move too far ahead of the game or it would become too confusing for the 'newbies'.

Many people do have problems with the more complex corrective patterns so I definitely want to spend some time on them.

Cheers


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Friday, July 16, 2010 - 11:07 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



hi Rudy

SPX: Black Friday scenario on Wall Street?

Assuming under Scenario 1 & 2, and a top on the SPX @ 1099.46, with Minute wave circle “ii” completing and Minute wave circle “iii” of Minor wave 3 commencing, subminuette wave i of minuette wave (i) of Minute wave circle “iii” may have completed intra day last night @ 1080.53, with subminuette wave ii possibly terminating @ 1096.48.

As subminuette wave ii over corrected, subminuette wave iv’s bounce should be minimal @ c1060? Subminute wave v of minuette wave (i) to complete c1010.

Then a series of minuette waves to take us under Scenario 1 & 2, with the likely target for Minute Wave circle iii being 904.

Alternatively, Minute wave circle “ii” may have room still to complete and a rally tonight above 1115 would not be out of the question.

Scenario 3 will not be as steep as for scenarios 1 & 2 - but a similar pattern?

We have two bearish hanging man candles crying for a reversal.

How do you read it?


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breaker_1
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Friday, July 16, 2010 - 11:25 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



It,s all to much for a 5th grade drop out


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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rdumas
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Friday, July 16, 2010 - 11:33 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

There is a real danger in the study of EW analysis to read too many levels and get caught up in the noise of the wavelets. When I find myself doing this I always go up a few levels and get my bearings.

I am not convinced at this stage that the current rally leg is complete. It's like the old fashioned TA methodology, when you're in a trend then the trend remains until it clearly changes. It hasn't changed quite yet with any real conviction.......until it does the current rally remains intact.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Friday, July 16, 2010 - 11:53 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I guess if you use 'subminuette' more than once in a sentence, you need to look at the bigger picture and get your bearings!

Very sound advice Rudy,

thanks again


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rdumas
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Friday, July 16, 2010 - 02:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Triangle Corrective Patterns

Whereas corrective patterns are often thought of as 3 wave patterns the black sheep of that mold is the triangle corrective pattern which is a 5 wave pattern. Naturally enough as we have both bull and bear market trends they can come in all sorts of different shapes and sizes.

They can be symmetrical, ascending, descending, contracting and expanding.

Somewhat similar to the flat pattern, triangle patterns have a tendency to not retrace the current trend dramatically. In my view this once again tells you something about the strength of the trend. One could consider the triangle pattern a sort of consolidating pattern within a trend.

Some of the variations to the triangle pattern are shown below. Note again that we have contracting and expanding triangle scenarios.

Contracting Triangles

First of all we have the Symmetrical Triangle. Note the 5 wave labeling of the legs in this pattern. The upper and lower boundaries are symmetrical about the horizontal plane.





The next is the Ascending Triangle. The lower boundary is ascending whilst the upper boundary is horizontal. The same wave counts apply in this case.







The next is the Descending Triangle. The upper boundary is descending whilst the lower boundary is horizontal.





Expanding Triangles

Similar patterns occur which are of the expanding variety. I will only show the Symmetrical expanding triangle but obviously there would be other expanding triangle types similar to those in the contracting variety.





Robert Prechter states that a triangle always occurs in a position prior to the final actionary wave in a pattern of one degree higher (eg, wave 4 of an impulse or wave B of an ABC corrective pattern).

Note that the structure of a triangle corrective pattern is 3-3-3-3-3. Note that the "throw overs" and "throw unders" mentioned for the 5th leg of the leading and ending diagonal patterns also frequently occurs in the E leg of a triangle corrective pattern. It is virtually a 'blow off ' type of price action in these type of patterns.

It should be noted that by far the most common triangle corrective pattern is of the contracting variety.

(Message edited by rdumas on July 16, 2010)


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Friday, July 16, 2010 - 03:20 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Elliott Wave Course Material

Hi Folks,

On the Our Daily Bread thread this morning I made a commitment to condense the stuff about the Elliott Wave methodology that could be considered to be course material into a series of pdf files so that interested parties could save them for future reference.

It is necessary to do this in a series of files due to the file size limitation on Incredible Charts. As time goes on I will produce a number of other pdf files covering any future material.

application/pdf
elliott wave watching part 1 rev 1.pdf (452.0 k)


application/pdf
elliott wave watching part 2 rev 1.pdf (462.0 k)



I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Friday, July 16, 2010 - 04:04 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



My Friday Homework.

Q1. You state: “Robert Prechter states that a triangle always occurs in a position prior to the final actionary wave in a pattern of one degree higher (eg, wave 4 of an impulse or wave B of an ABC corrective pattern)”. Using your last chart within EWW 3594 (triangle scenario for wave(B) of XJO), would the completion of the minute circle a, b, c, d, e triangle, and the completion of Minor Level Wave B, produce the ‘final actionary wave in a pattern of one degree higher’ in Intermediate Wave (B). So in essence, the triangle corrective pattern is simply preparing for the final leg down…'consolidating the pattern within a trend'??

Q2. You state: “Note that the structure of a triangle corrective pattern is 3-3-3-3-3”. Using your last chart within 3594 once again, you refer to a 3 wave pattern within each triangle leg on this chart .eg. Noted (a) (b) (c) on your chart between minute circle b and c. Is that the idea??

(I got through that without mentioning a single subminuette!!)


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rdumas
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Friday, July 16, 2010 - 04:20 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

Q1. Looking at that drawing again I notice I had a couple of extra labels on the chart. There is one c, (B) too many on the chart. Anyway onto your question.

Note that the triangle corrective pattern was Minor wave B and it led to the final actionary wave C of the higher level Intermediate wave (B). So that satisfies Prechter's comment.

Q2. Yes


Well done on the subminuette exercise. Just goes to show that you can do anything if you really try hard.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Friday, July 16, 2010 - 04:26 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy: Introductory Elliott Wave material

Rudy, - That is an excellent combination: digital posts and the opportunity for people to print them out. I shall keep the material in both versions. It prints out well (have just done the first lot), and I shall look forward to reading it in an armchair rather than behind my desk. I shall also keep the material ready to turn to if you write something which I think I need to consult the introductory material for. And, as well, we can refer to the files on-line.

Well-done: I think we are all much in your debt!


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rdumas
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Friday, July 16, 2010 - 04:29 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks Ody,

I'm delighted that you like it and were able to retrieve it and print it out.

Cheers







I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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visions
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Hi Rudy,

Many thanks for the PDF Files (Elliott Wave Course Material) you have supplied us all in Post 3630.

I'm aware of the amount of time, research and study that you have put into this area and to help and supply us with this info is just outstanding.

Congratulations on such a great Thread and thanks for your generosity, to us all.

I totally agree with Ody, we are all much in your debt.

Many thanks once again Rudy.

Cheers ... Max

 
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