Elliott Wave theory - why does it work?

[FxGlider]

Here's a stupid question from an EW novice to the experts :-

Is there a remote possibility that this is the 4th wave which had actually started from 8th Dec 06 and has since evolved as an irregular correction.

Ok i know i am probably wrong, but just curious.

BTW, what are the other possibilities?

Regards,
Kalyan.

Experts in EW are the best contrary indicator and get regularly beaten by fellas with just a ruler and pencil -- I am of the latter variety.


The Bombay Sensex major move from June 14, 2006 up should have a 5-wave structure before it can be called complete -- so with reference to this move here are the possibilities .......

(1) Wave 4 down started Dec 6 and finished March 16. We are therefore in the final pushup, i.e. wave 5 and ought to exceed the current top or come close to it in the event of a failed 5th wave.

(2) Wave 4 down started Feb 8 and is ongoing with a C-wave down yet to come to around 12,000.

(3) The top is already in place (Feb 8th) and we are now in a wave 2 rally. For this count to hold, the top must not be exceeded. What number comes after 2? ... yeh, best to hide and watch if this scanario is the correct one.

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[kkseal]

Experts in EW are the best contrary indicator and get regularly beaten by fellas with just a ruler and pencil -- I am of the latter variety.


The Bombay Sensex major move from June 14, 2006 up should have a 5-wave structure before it can be called complete -- so with reference to this move here are the possibilities .......

(1) Wave 4 down started Dec 6 and finished March 16. We are therefore in the final pushup, i.e. wave 5 and ought to exceed the current top or come close to it in the event of a failed 5th wave.

(2) Wave 4 down started Feb 8 and is ongoing with a C-wave down yet to come to around 12,000.

(3) The top is already in place (Feb 8th) and we are now in a wave 2 rally. For this count to hold, the top must not be exceeded. What number comes after 2? ... yeh, best to hide and watch if this scanario is the correct one.

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Nice to know you have one scenario (the first one) which tallies with my tentative one And yes, if that one is true then we're indeed in wave 5 since the 12316 bottom on 16/3.

As for the 2nd scenario, i don't think we have the time to go down all the way to 12000 & then come up another 3500 pts. The 5th wave i think has time only till the 1st wk of July (i.e. till before the FY 08 Q1 results) & there can be some doubt as to whether the Dow can hold it's ground even that long.

As far as the 3rd scenario is concerned, it looks a bit unlikely to me from the valuation perspective. Valuations, though by no means cheap, hasn't yet reached the 'top' lvls. Another 10-15% from here possible. Also this scenario makes the 4th corrective a very short-lived one (which isn't usual, from the little i know of classical EW).

Anyway the implication of all this for me is

i) Book profits on every rise on the longer term holdings.
ii) Play only for the short term (5-6 days at the most).

Regards,
Kalyan.

 

[FxGlider]

Nice to know you have one scenario (the first one) which tallies with my tentative one And yes, if that one is true then we're indeed in wave 5 since the 12316 bottom on 16/3.

As for the 2nd scenario, i don't think we have the time to go down all the way to 12000 & then come up another 3500 pts. The 5th wave i think has time only till the 1st wk of July (i.e. till before the FY 08 Q1 results) & there can be some doubt as to whether the Dow can hold it's ground even that long.

As far as the 3rd scenario is concerned, it looks a bit unlikely to me from the valuation perspective. Valuations, though by no means cheap, hasn't yet reached the 'top' lvls. Another 10-15% from here possible. Also this scenario makes the 4th corrective a very short-lived one (which isn't usual, from the little i know of classical EW).

Anyway the implication of all this for me is

i) Book profits on every rise on the longer term holdings.
ii) Play only for the short term (5-6 days at the most).

Regards,
Kalyan.

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Take a bow -- your tentative scenario is actually very good work on your part for a newbie. The Dec 6 -- March 16 drop can throw detectives off the scent quite easily; wave Bs within 4s are not nicknamed "sucker enticers" for no reason.

But there is a reason why I mentioned the other 2 possibilities:

the Dec 6 -- Jan 10 move could also just be a 4th of wave 3, which would then make the current top on Feb 8, wave 3. If so, then the 5-wave decline from this top would qualify as a wave A of 4, and the current rally a B with the C portion yet to come to approx. 12,000. If this is correct it certainly does make the move from Jan 10 to Feb 8 look weird for it does appear to be a 3-waver.

But I've been had before by such devious structures, which upon closer inspection on the 60-min. chart revealed a mild wave 2 which then showed the clear 5-wave structure.

Unfortunately I do not have access to Sensex (or stocks) 60-min. data -- I'm a Forex trader but view the Sensex only for my brother in Bombay so he doesn't lose his shirt.

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[FxGlider]

Nice to know you have one scenario (the first one) which tallies with my tentative one And yes, if that one is true then we're indeed in wave 5 since the 12316 bottom on 16/3.

As for the 2nd scenario, i don't think we have the time to go down all the way to 12000 & then come up another 3500 pts. The 5th wave i think has time only till the 1st wk of July (i.e. till before the FY 08 Q1 results) & there can be some doubt as to whether the Dow can hold it's ground even that long.

As far as the 3rd scenario is concerned, it looks a bit unlikely to me from the valuation perspective. Valuations, though by no means cheap, hasn't yet reached the 'top' lvls. Another 10-15% from here possible. Also this scenario makes the 4th corrective a very short-lived one (which isn't usual, from the little i know of classical EW).

Anyway the implication of all this for me is

i) Book profits on every rise on the longer term holdings.
ii) Play only for the short term (5-6 days at the most).

Regards,
Kalyan.

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Just a general reminder: the upcoming correction is at least of Intermediate-term.

The clearly evident weekly uptrendline from April 2003 will crack @ 12,350 approx. Stick around thereafter at your own peril.

If it goes lower than 7000 it means that George Bush is not satisfied with just Crude oil reserves; he's coming for the stashes of Gharam Masala & Prawn Balchow too.

Since you brought up "earnings" ....... I don't mix fundas with tech A.

Stock market is a leading indicator for the Economy and the correlation to Earnings is counterintuitive -- for example, several long periods of strongly rising earnings but a falling stock market -- evidence w.r.t. Dow Jones brings home this point quite clearly. Presuming same for Sensex, but you can examine this yourself.

As for the length of time for wave 4 to complete -- max. 4 times the duration for wave 2 -- came across this piece of data 6 months ago -- cannot guarantee its validity.

As for Dow Jones, he just closed the May 9 gap. What significance? Price is like a romeo; once he's rejected by a pretty woman (= gap created), it takes days or weeks for him to overcome the mental anguish - then he makes a beeline for her (= chases the GAP), consummates (= closes the gap), and then in true playboy fashion, attempts a clean getaway (flees the scene).

Expecting Dow to catch a plane to Goa today or very soon. Crossing 13,225 will confirm he's on his way.

 

[uasish]

Watch Eveready Industries (for academic purpose)

http://www.traderji.com/90119-post87.html

It is now on 5th of 5th Down , after completion (will get confirmation by hindsight) see the Low of the 5th will be LOWEST for coming few weeks in FUTURE (after its marking ).
Just watch this & after few weeks we may revert back to find the 5th Low
is actually yet not broken.
1st let the Low form .

Asish

 

[uasish]

M&M Fut,though entered near support area 726.00 had to liquidate > 747.00,becoz of the (internal 5waves,denotes difficult to cross 1st wave Low=755.00 ) in the 4th Downward main wave.
Lets see,how it unfolds.Exit is being influenced by EW.
Long Entry will not be advocated by or initiated by any EW analysis method in M&M Fut,but still dont feel uncomfortable at Entry but for Exit. (may be profit booking at oppurtunate price gets more validation for back of the mind EW)

 

[FxGlider]

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Expecting Dow to catch a plane to Goa today or very soon. Crossing 13,225 will confirm he's on his way.

Wrong on the gap!

Wrong on the count too?

Here's my count:

Drop should begin right about now (13,590) -- wave 4 down to around 13k or 12,773 as lower limit. Then one final top in Wave 5.

Referencing the 5 waves that began March 14, 2007.

 

[beginner_av]

thats the beauty of elliott waves.

 

[uasish]

Today the low was broken for Eveready Industries ,now let us see when the downslide ends.
http://www.traderji.com/90614-post106.html

I am going to Long ( feeling sad it is not available at Futures) at my comfy price.

 

[FxGlider]

Wrong on the gap!

Wrong on the count too?

Here's my count:

Drop should begin right about now (13,590) -- wave 4 down to around 13k or 12,773 as lower limit. Then one final top in Wave 5.

Referencing the 5 waves that began March 14, 2007.

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Amen! Trendline broken.

Now let's see if he shows up in Goa?