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2018-01-16

 

Forecasting With The Elliott Wave Principle

 

SP500TradingDESK Nikkey225

 

 

 

Woman Gain Dominance In Bear Markets

The Rise of the Money Honeys

"Winfrey delivered a powerful speech during Sunday night’s Golden Globes 
after earning a lifetime achievement award..."

>>>

 

   

Nikkey 225, January 16,2018                           >>>              Five Waves Up...
EURUSD, January 15,2018                              >>>              EW & Cycles

 S&P 500,  January 15,2018                             >>>              Five Waves Up !           

DYH18, Jan 13,2018                                           >>>              Expanded Flat

Topix Index (Japan)                                          >>>               Back In Japan

EURUSD,  January 10,2017                            >>>              Classic Elliott....
Nikkey 225, December 21,2017                      >>>              Bearish Divergence.... 

Dow's Top !!                                                        >>>              January 4,2018.

 

 

 

 

 

The Socionomic Angle  

What is Socionomics: Learn the Basics of the Theory and Its Application Socionomics Theory

By Elliott Prechter

Imagine a modern, ground-breaking theory, which could link all human social behavior — cultural, economic, political, and more — into a single, elegant and unifying framework

Have you ever noticed how economists, politicians, and business leaders consistently fail 
to foresee major turning points in history? With all of today’s science and technology, why are we still unable to anticipate wars, economic depressions, financial bubbles and even fashion trends?

Conventional models for forecasting economic and social trends simply do not work because they rely on a fatally flawed assumption about how people behave. 
Unfortunately, “fatal assumptions” are common throughout scientific history, and they 
often languish for far too long. New ideas can blossom only after wrong assumptions are discarded. When evidence refutes long-held assumptions, truth has a chance. 
A new theory emerges, and the old theory’s plethora of special cases and exceptions 
fade away. A proper perspective enhances our ability to predict and prepare for the future.

The fatal flaw that economics and broader social science fields rely upon is external causality, or the notion that major events are the primary influence and shaper of history. This model is just as attractive –and just as mistaken — as the notion of the four 
elements, the four humors or a geocentric universe. Yet even in the face of contrary evidence, people find it hard to divest themselves of deeply ingrained notions.

Now imagine a modern, ground-breaking theory, which could link all human social 
behavior — cultural, economic, political, and more — into a single, elegant and unifying framework. Well, such a framework is here, and it’s called socionomics.

Socionomics succeeds by turning the assumption of external causality on its head, and 
it instead recognizes internal causality. People in groups share an unconscious collective disposition that is endogenously regulated. This shared social mood steers the actions 
that groups take and therefore the events that unfold across time to create history. 
In other words, psychology precedes actions, not vice-versa. Furthermore, social mood’s fluctuations 
are patterned, which makes it possible to forecast the type and character of social and economic events. Socionomic causality is the engine of history.

The power of socionomics is radical and unprecedented. Conventional social theory would have had you trapped in Germany when the Nazis took over; socionomics tells you when the political environment is likely to turn dangerously unstable. Conventional economics would have you lose everything in a major financial crash; socionomics tells you when and where to expect them. As research marches on, the evidence continues to mount in favor of the socionomic insight.

[The Wave Principle of Human Social Behavior and The New Science of Socionomics, 
1999, Robert R.Prechter jr.]

 >>>

 

 

 

Financial Man is Not the Same as Economic Man 


It is universally presumed that the primary law of economics, i.e., that price is a function of supply 
and demand, also rules finance. However, human behavior with respect to prices of investments is, 
in a crucial way, the opposite of that with respect to prices of goods and services. When the price
of a good or service rises, fewer people buy it, and when its price falls, more people buy it. 
This response allows pricing to keep supply and demand in balance. In contrast, when the price 
of an investment rises, more people buy it, and when its price falls, fewer people buy it. 
This behavior is not an occasional financial market anomaly, it always happens. Look back at 
Figure 7-3, the graph of the dollar-valued trading volume in the U.S. stock market divided by the
prevailing gross domestic product. As you can see, volume expands as stock prices rise and
contracts as they fall. In economic matters, rising prices repel buyers, in investment matters, 
rising prices attract buyers. This difference is not incidental, it is fundamental. 

Many market theorists argue that the law of supply and demand operates in finance but is simply
“suspended” for periods of time because people “overreact” and “rationalize” with “elaborate 
arguments” why they should pay up for investments. The difference between any such idea and 
what happens in markets for goods and services is irreconcilable by conventional economic theory. 
People never act in any such way with respect to goods and services. Most investors can quickly
rationalize selling an investment because its price is falling or buying it because its price is rising, 
but there is not a soul who desperately rationalizes doing with less bread because the price is
falling or who drives his car twice as much because the price of gasoline has doubled. 
In economic behavior, the law of supply and demand does not lie dormant ever. It is like the law 
of gravity; it works all the time. It cannot “fail to apply,” even temporarily. Prices are the balance 
beam from which the scales of supply and demand hang. Changes in buying patterns are virtually
instantaneous in responding to price changes for bread, cars, TV’s and shoes. 

In the same way, investment behavior has its own law: the Wave Principle. This law governs 
unconscious, impulsive, collective herding behavior, while the law of supply and demand governs
conscious, logical, individual economic decision-making. The former law governs prices for
intangible values, whether associated with tangible goods or not, the latter law governs prices for
utilitarian tangibles. Attempting to apply the law of supply and demand to investment markets
is akin to attempting to apply the laws of physics to falling in love. They do not pertain.

 

[The Wave Principle of Human Social Behavior and The New Science of Socionomics, 
1999, Robert R.Prechter jr.]

 

 

EWP

 


The Elliott Wave Principle >>>

The Wave Principle
is unparalleled in providing an overall perspective on the position
of the market most of the time. Most important to individuals, portfolio managers and investment corporations is that the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress. Living in harmony with those trends can make the difference between success and failure in financial affairs. 

 

 

Source: Elliottwave International

In the above illustration, waves 1,2,3,4 and 5 together complete a larger motive wave sequence, labeled wave (1). The structure of wave (1) tells us that the movement at 
the next larger degree of trend is also upward. It also warns us to expect a three-wave correction - in this case , a downtrend. That correction, wave (2), is followed by waves (3), (4) and (5) to complete a sequence of the next larger degree, labeled as wave [1].  
At that point, again, a three-wave correction of the same degree occurs, labeled as wave [2]. 

Note, that regardless of the size of the wave, each wave one peak leads to the same
result - a wave two correction. Within a corrective wave, subwaves A and C are usually smaller-degree motive waves. This means they too move in the same direction as the 
next larger trend. Note that because they are motive, they themselves are
made up of five subwaves. Waves labeled with a B, however, are corrective waves; they move in oppostion to the trend of the next larger degree. These corrective waves are themselves made up of three subwaves. The analyst's first task is to look at charts
of market action and identify any completed five-wave and three-wave structure. 
Only then can he interpret where the market is and where it's likely to go. Say we're studying a market that has reached the point shown in Figure 1 at wave [2]. 

So far we've seen a five-wave move up, followed by a three-wave move down. 
But this is not the only possible interpretation. It is also possible that wave [2] hasn't 
ended yet; it could develop into a more complex three-wave structure before wave (3) 
gets underway. Another possibility is that the waves labeled (1) and (2) are actually 
waves (A) and (B) of a developing three-wave upward correction within a larger downtrend.  According to each of these interpretations though, the next imminent movement is likely
to be upward. This illustrates an important point concerning the Wave Principle. 

It does not provide certainty about any one market outcome. Instead, it gives you an objective means of determining the probability of a future direction for the market. At any time, two or more valid wave interpretations usually exist. So it's important for the investor to carefully assess the probability of each interpretation. View the Wave Principle as your road map to the market and your investment idea as a trip. 

You start the trip with a specific plan in mind, but conditions along the way may force you to alter your course. Alternate counts are simply side roads that sometimes end up being the best path.


Elliott's highly specific rules keep the number of valid interpretations to a mininum. 
The analyst usually considers as "prefered" the one that statisfies the largest number 
of guidelines. The top "alternate" is the one that satisfies the next larger numbers of guidelines, and so on. Alternates are an essential part ot using the Wave Principle. 
They are not "bad" or "rejected" wave interpretations. Rather, they are valid interpretations that are given lower probability while the count works itself out. If the market doesn't follow the original prefered scenario, the top alternate usually becomes the prefered. Elliott's rules give specific "make-or-break" levels for a given interpretation. In figure 1 for example, if the move labeled wave (2) continues below the level of the beginning of wave (1), then the originally prefered interpretation would be instantly invalidated . 

a

         

 

The Wave Principle  is unparalleled in providing an overall perspective on the position of the market most of the time. Most important to individuals, portfolio managers
and investment corporations is that the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress. 
Living in harmony with those trends can make the difference between success and failure in financial affairs. 


Despite the fact that many analysts do not treat it as such, the Wave Principle is by all means an objective study, or as Collins put it, "a disciplined form of technical analysis." 
Bolton used to say that one of the hardest things he had to learn was to believe what he saw. If the analyst does not believe what he sees, he is likely to read into his analysis what he thinks 
should be there for some other reason. At this point, his count becomes subjective. Subjective analysis is dangerous and destroys the value of any market approach. What the Wave Principle 
provides is an objective means of assessing the relative probabilities of possible future paths for the market.  At any time, two or more valid wave interpretations are usually acceptable by the
rules of the Wave Principle. The rules are highly specific and keep the number of valid alternatives to a minimum.  Among the valid alternatives, the analyst will generally regard as preferred the
interpretation that satisfies the largest number of guidelines, and so on. As a result, competent analysts applying the rules and guidelines of the Wave Principle objectively should usually agree
on the order of probabilities for various possible outcomes at any particular time. That order can usually be stated with certainty. Let no one assume, however, that certainty about the order of 
probabilities is the same as certainty about one specific outcome. Under only the rarest of circumstances does the analyst ever know exactly what the market is going to do. 

One must understand and accept that even an approach that can identify high odds for a fairly specific outcome will be wrong some of the time. Of course, such a result is a far better performance 
than any other approach to market forecasting provides. Using Elliott, it is often possible to make money even when you are in error. For instance, after a minor low that you erroneously consider 
of major importance, you may recognize at a higher level that the market is vulnerable again to new lows. A clear-cut three-wave rally following the minor low rather than the necessary five gives
 the signal, since a three-wave rally is the sign of an upward correction. Thus, what happens after the turning point often helps confirm or refute the assumed status of the low or high, well in 
advance of danger.

Even if the market allows no such graceful exit, the Wave Principle still offers exceptional value. Most other approaches to market analysis, whether fundamental, technical or cyclical, have no 
good way of forcing a change of opinion if you are wrong. The Wave Principle, in contrast, provides a built-in objective method for changing your mind. Since Elliott Wave analysis is based upon 
price patterns, a pattern identified as having been completed is either over or it isn't. If the market changes direction, the analyst has caught the turn. If the market moves beyond what the 
apparently completed pattern allows, the conclusion is wrong, and any funds at risk can be reclaimed immediately. Investors using the Wave Principle can prepare themselves psychologically 
for such outcomes through the continual updating of the second best interpretation, sometimes called the "alternate count." 

Because applying the Wave Principle is an exercise in probability, the ongoing maintenance of alternative wave counts is an essential part of investing with it. In the event that the market violates 
the expected scenario, the alternate count immediately becomes the investor's new preferred count. If you're thrown by your horse, it's useful to land right atop another. Of course, there are often 
times when, despite a rigorous analysis, the question may arise as to how a developing move is to be counted, or perhaps classified as to degree. When there is no clearly preferred interpretation, 
the analyst must wait until the count resolves itself, in other words, to "sweep it under the rug until the air clears," as Bolton suggested. Almost always, subsequent moves will clarify the status of 
previous waves by revealing their position in the pattern of the next higher degree. When subsequent waves clarify the picture, the probability that a turning point is at hand can suddenly and
excitingly rise to nearly 100%.

Renowned financier Bernard Baruch, who was as close to markets as anyone, saw a connection between economic trends and the herding impulse of animals.
He also understood the crucial importance of that knowledge to a correct social analysis:

All economic movements, by their very nature, are motivated by crowd psychology. Without due recognition of crowd thinking... our theories of economics leave much 
to be desired... It has always seemed to me that the periodic madnesses which afflict mankind must reflect some deeply rooted trait in human nature - a trait akin to the 
force that motivates the migration of birds or the rush of lemmings to the sea.. It is a force wholly impalpable.. yet, knowledge of it is necessary to right judgements 
on passing events

 

 

 

 

 

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Copyright ©  2018. ELLIOTT today. All Rights Reserved.  None of these stocks are buy or sell recommendations. 
There is a high degree of risk in trading. 
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The Elliott Wave Principle is a detailed description of how markets behave. The description reveals that mass investor psychology swings from  
pessimism to optimism and back in a natural sequence, creating specific patterns in price movement.Each pattern has implications regarding  the 
position of the market within its overall progression , past, present and future. The purpose of this publication and its associated services is  to 
outline the progress of markets in  terms of the Elliott Wave Principle and to educate interested partiesin the successful application of the Elliott 
Wave Principle. This is probably the most comprehensive trading education on how to project high probability time & price targets based  on
 Elliott Wave pattern structure.