Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
Deflation Watch: Key U.S. Economic Measures Turn South - 27th Mar 15
The Hard-Earned Truth About Recreational Real Estate - 27th Mar 15
Bitcoin Price Still in Important Territory - 27th Mar 15
Stocks Bear Market Conditions - Index Market Range Warning - 27th Mar 15
BEA Leaves Q4 2014 U.S. GDP Growth Essentially Unchanged at 2.22% - 27th Mar 15
Brazil Economy Victim of Vulgar Keynesianism - 27th Mar 15
Gold to Fuel Silver Price Upleg - 27th Mar 15
Gold and Silver Stocks Will Rise Again! - 27th Mar 15
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed - 27th Mar 15
FOMC Minutes Turned The Gold Tide - 27th Mar 15
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15
Stock Market NYSE Hi-Lo Index Aggressive Sell Signal - 24th Mar 15
Palladium Commodity Price Forecast - 24th Mar 15
Bitcoin Price Gearing Up for a Fall - 24th Mar 15
Safety Deposit Boxes In UK Being Closed By ‏HSBC – Not Closing Gold Vaults - 24th Mar 15
Japan Short Term Gains And Long Term Disaster - 24th Mar 15
China's Fragile Evolution - 24th Mar 15
David Cameron Announces Resignation Even Before Being Re-elected, Handing Labour 6 Seats - 24th Mar 15
City of London's Ownership of American Colonies - 24th Mar 15
Stock Market Reversal May Have Begun - 24th Mar 15
Casey Gathers Top Gold Experts to Share Secrets for Making Money in Any Market - 24th Mar 15
Thoughts on The Current Crude Oil Market - 24th Mar 15
U.S. Economy Still on Life Support - What Your Governments Hiding From You... - 24th Mar 15
UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video - 24th Mar 15
Is Stock Market Minor Top Taking Hold? - 23rd Mar 15
Greece and EU Running Out of Time as Bank Runs Intensify - 23rd Mar 15
Stock Market Slightly Negative Expectations Following Last Week's Rally - 23rd Mar 15
This Rising Interest Rates Play Could Make You a Quick 55% - 23rd Mar 15
Platinum Commodity Price False Break Low - 23rd Mar 15
The Real Reason The American Dream is Unraveling - 23rd Mar 15
Election Forecast 2015 - Budget Bribes Fail to Impress Voters, Tory's Lose Seats in Opinion Polls - 23rd Mar 15
Silver Price Reliance During U.S. Dollar Rally - 23rd Mar 15
Gold Price Outlook Dramatic Improvement Following US Dollar Topping Action - 23rd Mar 15
Wall Street Doesn't Want You to Do This - 22nd Mar 15
The "Natural Interest Rate" Is Always Positive and Cannot Be Negative - 22nd Mar 15
Exploring The Gold Market: The Fed, The Charts. The COTS and GLD - 22nd Mar 15
Stocks Bull Market Continues - 22nd Mar 15
Gold And Silver - China's AIIB Spells U.s. Dollar Demise, Not Clear For Precious Metals - 22nd Mar 15
Cocoa Commodity Price Technical Outlook - 21st Mar 15
Yield Curve, Futures, Suggest No U.S. Interest Rate Hike Until December - 21st Mar 15
Three Iconic Stocks Are Poised for a Dive - 21st Mar 15
We're All Hedge Funds Now! - 21st Mar 15
Why Stock Market Seasonality May Be Critical in 2015 - 20th Mar 15
Yellen's Tiger Riding Dilemma Keeps Interest Rates Near Zero - 20th Mar 15
FOMC is boxed in, Gold and Silver - 20th Mar 15
Silver Price Poised to Surge - 20th Mar 15
Why Aren’t These Investors Worried About The Gold Price? - 20th Mar 15
Gold Price Downside $850/oz; Upside Jump to $2,000/oz on ‘Grexit’ - 20th Mar 15
Cheap Paper Money - Precious Metals Technical Outlook - 20th Mar 15
Best Cash ISA vs Budget 2015 Scrapping Tax on Savings Interest on First £1,000 - 20th Mar 15
GDXJ / Gold Ratio - 20th Mar 15
What the “Yellen Effect” Ultimately Means for Crude Oil - 20th Mar 15
Sharp Fall In USD Index And Its Implications - 20th Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

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

© 2005-2015 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