Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
Pretium - Canadian Golden Elephant - 31st Oct 14
What USA Today Got Wrong About the Stock Market Fear Gauge - 31st Oct 14
Election Result - Labour Wins South Yorkshire Police and Crime Commissioner - 31st Oct 14
Gold Price Falls, Stocks Record Highs as Japan Goes ‘Weimar’ - 31st Oct 14
EUR/USD - Double Bottom Or New Lows? - 31st Oct 14
More Downside Ahead for Gold and Silver - 31st Oct 14
QE Is Dead, Now You Tell Me What You Know - 31st Oct 14
Welcome to the World of Volatility - 31st Oct 14
Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start - 31st Oct 14
US Mortgages, Risky Bisiness "Easy Money" - 30th Oct 14
Gold, Silver and Currency Wars - 30th Oct 14
How to Recognize a Stock Market “Bear Raid” on Wall Street - 30th Oct 14
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Stock Market Elliott Wave Theory Analysis - Semper Terminus

Stock-Markets / Elliott Wave Theory Feb 03, 2013 - 08:33 AM GMT

By: Nadeem_Walayat

Stock-Markets

The near 4 year old stocks stealth bull market punches through resistance at Dow 14,000 and S&P 1500 for the first time since October 2007, with the Dow closing at 14,009 and the S&P at 1513. What happened to the final fifth ? According to the most ardent or rather vocal adherents of Elliott Wave Theory the stock market should have peaked over 3 years ago ! Sept - Oct 2009, then again peaked several times during 2010, then some more times in 2011, how many final peaks were there in 2012?, and as for January 2013? Yeah you guessed the END IS STILL ALWAYS NIGH!


This Elliott Wave analysis is a sub component of Part 2, that aims to resolve towards a detailed trend forecast for the Dow (DJIA) for the whole of 2013 and possibly beyond. Part 1 (Going Beyond the Proton Gradient -87 Stocks Stealth Bull Market Analysis 2013 ) - Dealt with the broader drivers for stocks and financial markets such as answering the question how can the stock market keep going higher .....?

As Elliott Wave Theory is highly seductive in nature in that it gives analysts over confidence in future projections, therefore it is important that I share an excerpt from the March 2011 Stocks Stealth Bull Market Ebook ahead of my interpretation of the current wave patterns.

Stocks Stealth Bull Market Ebook DownloadThere are no hard and fast rules, no tenants, no absolutes that the price must obey as per theory, because in the real world the price action is the master not theoretically what the price action should do which is why over zealot proponents of elliott wave theory have missed the whole stocks bull market, instead of which the theory is just that, a theory, so should bend or even break in the face of real time price action and not engage in the exercise of ever expanding hindsight based pattern fixing.

The Dangers of Being Seduced by Elliott Wave Theory

Now, despite my interpretation of Elliot Wave analysis having proved highly accurate both before and since the March 2009 low and the above also very convincing on where the Dow could trend during 2011. However, before you start thinking that EWT maybe the 'holy grail' of analysis, take note that EWT Analysis on its own is just ONE component, and therefore one should not let oneself become seduced by what is highly seductive in the ease to which multiple junctures can be extended into the far distant future, which is how the highly public self professed Elliott Wave Gurus like it to be seen to be, though many of whom have apparently missed THE WHOLE STOCKS BULL MARKET as they continue to call one of the greatest bull markets in history a Bear Market rally and thus suffer from a case of permanent amnesia! which should send anyone's alarm bells ringing! Therefore Elliott Wave Theory, whilst continuing to strongly imply a bull run is expected to continue into end of 2011, however on it's own, in the long-run it is NOT going to be more accurate than a coin toss! The conclusions no matter how convincing of ANY single Component tool NEED to be confirmed by other fundamental and Technical analysis so as to arrive at a probable final conclusion rather than that which is perpetuated by EWT fanatics that have long since left reality behind them as evidenced by the fact that they still put their names to the worthless banner of a stocks "Bear Market Rally" that is anything but, under any rational measure.

Therefore despite EWT being a useful tool, I am ALWAYS on guard against being seduced by EWT as it is extremely easy to back fit onto what has already happened to imply something highly probable is about to take place when the complete opposite may be true. So yes, whilst it's implications can get the adrenaline pumping and one eager to hit the TRADE button! I do have to take deep breaths and remember that there are NO short cuts! NO matter how enticing it appears, on its own EWT in the long-run WILL NOT be more accurate than COIN TOSS !

So, always keep in your mind that the EWT component Equates to a Coin Toss Over the Long-run and you won't become seduced and end up missing whole bull markets as MANY so called MASTER ELLIOTTITIONS have proceed to do ! Because they believe their own hype, much as gannophiles have been seduced by the master price time squares that is yet again another example of coin flip analysis elevated to 'holy grail' high priesthood status so as to perpetuate myths along the same lines that religious myths of so called revelations are perpetuated to fit in hindsight any subsequent event! When in reality EWT's true purpose should be to skew ones perception of the price action thus enabling an unbiased and always skeptical analysts to interpret price action from another perspective as part of a broader whole, even this will not guarantee success because analysis and trading boils down to probabilities and NOT certainties of outcome.

Elliott Wave Theory - Impulse Waves

The impulse trend elliott wave pattern chart suggests that the stock market is converging towards a 5th wave peak. Given the length of Impulse waves 1 and 3 this implies a peak between Mid March and Mid May 2013. With this trend targeting a range of Dow 14,300 to 14,500.

The implications are clear that following a 5th wave peak (unless it morphs into a 7th wave extension, with elliott wave you never know until after the fact!) That the stock market looks set to have a significant correction that is likely to exceed the size of Wave 2 and wave 4 corrections, i.e. more than 1000 Points, suggesting an ultimate decline of approx 1,500 off of the Peak. So a 14,500 peak would imply 13000.

Elliott Waves - Sub Impulse

Zooming in implies we are in sub impulse wave 3 that should end imminently. However the more important implication is for a bullish trend towards 14,300 to 14,500 by Mid to late March 2013.

Elliott Waves - The Bull Market

Zooming way out of the chart shows that our five wave pattern is actually part of a larger 5 wave pattern that is also set to terminate, i.e. a 5th of a 5th. This acts to increase the order of magnitude for the subsequent correction for now it implies that this years stock market high will subsequently seek to correct the whole bull market trend from the March 2009 low. Again using the size of Wave 2 and Wave 4 as a minimum guide this suggests a decline of at least 2,000 points during a multi-month correction. In reality the implied correction could extend as far as 3000 points, i.e. to just below Impulse 2.

Elliott Wave Conclusion - The wave patterns appear pretty clear in that they do portent for a significant stock market correction this year on termination of the current rally that will at the very least retrace the WHOLE of the current rally, that's back down to BELOW 12,500 and probably extend to below 12,000.

Elliot Wave Implied Fantasy Pattern

On the basis of the probable simple pattern being for a 5th of a 5th, then this analysis further concludes that the termination point for the 5th of a 5th is a Larger Wave 1 and therefore implies a further 2 Larger Impulse waves 3 and 5 as the following graph illustrates -

Now don't take this as a forecast because it is way beyond what probability analysis can ever give confidence to, instead treat it as an indication that whilst stocks into mid year may look sickly in the broader context the move would be very healthy by setting the stage for the stocks bull market's next multi-year bull run.

Remember that the over-riding driver is the Inflation mega-trend to which stocks are leveraged, and the risk that the world constantly faces is not one of deflation but one of out of control inflation both as a consequence of rampant government money printing and as a consequences of any breakdown in our systems. For instance the crisis in Greece contrary to the economic academics did not result in deflation, instead it resulted in Inflation, because economic collapse results in the destruction of productive capacity, which results in the state forced to print money to pay the increasing number of unemployed workers.

Ensure you are subscribed to my always FREE Newsletter get what is turning out to be very extensive analysis (even by my standards) and high probability trend forecast for the stock market for 2013 in your email in box over the next few days.

Source and Comments: http://www.marketoracle.co.uk/Article38811.html

Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2013 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.

Stocks Stealth Bull Market Ebook DownloadThe Interest Rate Mega-Trend Ebook DownloadThe Inflation Mega-Trend Ebook Download

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

R.E.B
03 Feb 13, 18:17
EW Theory

Nadeem, When you say your "interpretation" of EW has been accurate, I respectfully suggest that your own faculties rather than EW theory are responsible for said accuracy. In other words, you would have arrived at the same conclusions without EW simply via your own analysis. Lets be honest, almost all of the EW posters on here are wrong almost all of the time, so often in fact that we can dismiss the few times they are correct as luck. Regards.


despe906
04 Feb 13, 19:34
Time Zones

My Fibonacci time zones suggest we may have a lower low from here into late March, then top in early July, then downward from there towards a AtoB low in early October. As to this long term 'fantasy pattern', it wouldn't surprise me if it turned out to be a quite correct forecast.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014