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Sunday, May 11, 2008

Elliot Wave Counts and Ideas

I thought I will spend some time in this post to outline where I think we are in terms of elliot wave in the longer term picture...The counts are far from clear but there are some things that we know for sure and this should be able to shed some light on future moves and what we can expect to come...

As I explained in an earlier post, Elliot wave says that there are 2 types of waves...The impulse or the bullish wave which consists of 5 waves - 3 UP and 2 DOWN - and the corrective wave or the bearish wave which consists of 3 waves - 2 DOWN and 1 UP. And these waves will keep reiterating in any timeframe.

Now let us look at the longer term EW picture.



If you see above chart(click on it to make it bigger or right click and open in new window), the mega bullish wave started sometime in late 2001 from 800 levels....In between we had corrective waves of 2 and 4 and the whole impulsive structure looks to have terminated last January at around 6350 levels. Fibo retracements tell us where we can expect the current ongoing correction to end....Above is a log chart and you can see that what we have seen so far is nothing and possibility for much more downfall is there....50% retracements stands at 3660 area and 38.2% retracement stands at 4330 area. Very unlikely case of 61.8% retracement stands at 3000 area.

One thing is for sure...We are correcting the multi-year bull advance from 2001. So it is not realistic to expect that the corrective will end so fast and we will enter a new bull wave....It is very likely that the Big C downwave is yet to come.

However I will look at the bullish possibility first before moving on to the more likely bearish possibility. Either way it looks to me like now is not the time for long term investing and better to ONLY trade for now....

First lets look at the shorter term bullish possibility...

Here I have marked that the ABC correction is over and that a new bullish wave has started. For this to remain valid, 4950(+or - few) CANNOT be taken out to the downside and the new wave should start upward. If it is taken out, it means that this is just a corrective wave and we will see C down coming in the near future.

And that brings us to our big bearish possibility...I am kind of favouring this for now...

The chart and moves are self explanatory.

Okay now let me say one thing - All above charts and expectations are very speculative only and I dont think we can trade based on these...I just wanted to present the bigger picture and what I see happening...For trading, let us just follow day to day moves and possibilities....

So again I stress, above is all quite speculative and is mainly for entertainment purposes...For trading, I do not use elliot wave EXCEPT to have a very high level guideline...For trading, channels, MACD, Moving averages, Stochastics and so on should be used....Elliot wave when used in conjunction with these tools become much more powerful.

Please leave comments.

Best.

1 comment:

prad said...

Hello Mathew,
Thanks for this EW LT chart. pretty much clarifies the big picture. Keep up the great work you are doing. Learning a lot from ur analysis.