End of an Era
The Elliott Wave Principle
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 parties in the successful applikation 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.
Here is the Chart of the S&P 500 Index from March 1, 2008
as shown to my subscribers:
S&P 500 Index, 03/01/2008
open window SPX,03/01/2008
S&P 500 Index, 10/24/2008
open window SPX,10/24/2008
BEFORE THE FACT !!
ELLtoday's market commentary & forecast of SPX daily, Sept 04, 2007According to W.D. Gann the timespan of 49 between a top and a secondary top is especially dangerous and that's why he called it the "Death Zone." Today, September 5,2007 IS day no.49! Actually, the SPX yesterday reached 1496 and retraced 126 points from the low of August 16. The speed of the fall from the top was 6.166 (!!) points per day and the rise since then was 7 points per day (126/18). My target of 1484 based on the 0.618 Fibonacci calculation was exceeded and the market has now retraced 0.681. But in time there is a "Golden Section", as the low cuts the entire rise in part 0.382 and the decline is 0.618. Both, ML-1 and ML-2 have been slightly penetrated to the upside and even the falling 1x1 has not been reached. In the Dow (see chart above) prices are quite near the falling 1x1 and near to the ML-1. [Elliott Wave Principle>>>]The wave count for the Dow shows a possible double three formation labeled a-b-c X a-b-c . If so, the market would undergo a sharp fall now, a recovery and another decline into October. SPTD-07>>>
1565
Another Record High
ELLtoday, Oct 09,2007"The SPX trades above the 1x1 and comes ever closer to the rising ML-1. RSI and ROC both showing bearish divergences.Forecasting With The Wave Principle:
Pattern - NOT THE NEWS !!
Textbook Elliott:
a-b-c zigzagWhat the EWI saw BEFORE THE FACT !!
Chart of SPX, Sept 30,2007
OUT OF THE BLUE ? The pattern I saw on the screen on the 10min S&P 500 cash was best counted as an a-b-c with wave b a triangle. Wave c clearly traced out a five-wave pattern, as it should. Second, the market retraced 50% of the preceeding impulse wave labeled a or i (-27 points). The wave e of the triangle completed the triangle and taken the closing price of that juncture the market fell -28 points. The "rally" ended a smaller wave c and wave b or ii gained +14 points. Together with prices at or on the falling 1x1 Fibo-fanline a strong case could be made that the recovery at least for the time being was over. A small degree five-wave decline supports the idea of an immediate decline most likely below the 1x1 AND even below the lower channel line of the Median Line.
The NEWS or The Pattern?Live Exampel #1:
S&P 500 Index (SPX)
... from the Weekly Update, July 13,2007
1555
SPX daily, Aug 2,2007That's what happened Friday, September 7, 2007. CNBC called the decline in the three major indexes as the worst slumps since March 2003 !! Intraday-price low Friday was 1449.20 !!! Even that price low was forecasted long before the fact, i.e., on August 27,2007I said, "the lower boundary of the ML channel points even lower to the 1440-1445 area." [Maria Kostelletou-Lachmann]"The News OR The Pattern?"
Only an Elliott Wave analyst CAN make such a forecast based on the building patterns of waves !! To answer the question from above: NO, NO, NO."Hi John - The Elliott chart I cited yesterday12:43 PM turned out to be the most prescient one of all - projected 1128; SPX high of day was 1127.65. Not too shabby!" Clearstation
Great call this morning! I caught most of the move up. Do you think the current consolidation is a fourth wave? Thanks, Eric
Live Exampel #1:
S&P 500 Index (SPX)
... from the Weekly Update, July 13,20071555
SPX daily, Aug 2,2007Live Exampel #2:NASDAQ Composite Index
NASDAQ Comp., Aug 2,2007"A drop to 2500 or even 2300 is a conservative statement."
[ELLtoday, 07/24/2007]Live Exampel #3:
A picture says more
than a thousond words...
ALCOA [AA]
Forecast & Outcome
Special Report
© ELLIOTT today, May 5, 2007
S&P 500 - Blow Off!?
The wave structure has now developed to the point that the mathematical relationships within the upwave from
March 2003 are delivering a compelling message. The prefered wave count shown on April 21,2007 is the best
interpretation for the wave structure up from October 2002. In Elliott terms, the pattern is called a double zigzag.
The chart of April 21,2007 displays the second (a)-(b)-(c) of that pattern. On April 21,2007 I also said,
"If the market chooses to display equality with wave 5 and 1, the SPX will reach 1512." Friday, May 4,2007
the SPX registered an intraday-high of 1510.34. As the chart reveals, the market has reached the upper parallel
of an Elliott parallel trendchannel AND the 1x1 Fibo-Fan line drawn from the low of March 2003.
Given the upside target for the advance from October 2005 , a five-wave sequence can be counted as complete
or nearly so. The advance not only divides into five waves of one smaller degree, but travels within a nice parallel
trendchannel drawn according to the rules and guidelines of R.N.Elliott. Elliott used parallel trend channels
to assist in determining normal wave targets and to provide clues to possible development of trends.In The Wave Principle, he asserted that as a wave progresses, "it is necessary that the movement be channeled
between two parallel lines." He regarded trend channeling as an important tool in establishing wave completion
targets and in the segregation of individual waves. As the waves near completion, the line which connects the ends
of wave two and four is the most reliable lower parallel for constructing the final trend channel. If waves one and three
are normal, the upper parallel is most accurate when drawn touching the peak of the third wave. If wave three is
abnormally strong, almost vertical, then a parallel drawn from the top of that third wave may be too high.
Past experience has shown that a parallel to the baseline which touches the top of wave one is then more useful.
(EWP, p.64)Due to the overlapping waves in 2004-2005 the wave count has left open several options. The most common count
among E-wavers is that on March 2004 an Elliott structure has been completed and the following attempts to the
upside have been counted as a series of 1-2, (i)-(ii). In my opinion, this is not the case. With respect to wave pattern,
the formation from March 2004 to July 2005 is best interpreted as a "Leading Diagonal Triangle, Type 2", (EWP, p.47).
When diagonal triangles occur in the fifth or C wave position, they take the 3-3-3-3-3 shape that Elliott described.
However, it has recently come to light that a variation onthis pattern will be found in the A-wave position of zigzags
and in the first wave position in "fives" in very rare cases. The characteristic overlapping of waves one and four and
the convergence of boundary lines into a wedge shape remain as in the standard diagonal triangle. However, the
subdivisions are different, tracing out a 5-3-5-3-5 pattern. The structure of this formation fit the spirit of The Wave Principle
in that the five-wave subdivisions in the direction of the larger trend communicate a "continuation" message as opposed
to the "termination" implication of the standard diagonal triangle. Thus, while type 1s, which may be called ending
diagonal triangles, appear as wave 5 or C, type 2s, which may be called leading diagonal triangles, appear as
wave 1 or A. This pattern must be noted because the analyst could mistake it for a more common development ,
a series of first and second waves.Bottom line: Last month's prefered count that wave (c) of a double zigzag pattern is ending is still perfectly acceptable. As of Friday, the market not only touched the 1x1 Fibo-Fanline drawn from March 2003 but also reached the upper parallel line of an Elliott trendchannel. If the S&P has traced out waves (1) and (2) in 2005
of a larger five-wave sequence, then waves (3), (4) and (5) remain to unfold. Wave (3) should be in its terminal progress and wave (4) is due next. This interpretation should be taken into account, as long as the market holds within the area of support, the previous fourth wave.
Line in the Sand...?
![[cover]](images/BA-AJ173_430cr2_20070427214613.gif)
Source: Barron's online, April 28,2007
An Interlocking Tapestry Connecting All Degrees
S&P 500 Index (SPX)
© ELLIOTT today, April 21, 2007
When a dramatic event occurs in the stock market, it is common to hear that "we must throw out the
technical indicators for awhile because we're in uncharted waters." On the contrary, markets which
are impulsive, when the fundamental human emotions of hope and fear are in full rage, are precisely
those to which technical analysis and particularly pattern analysis is most applicable. The price pattern
from the low of August 2004 to the high of April 20, 2007 is classic "Elliott". Elliott waves are always
precise. This is a fast and hard assertion but history of Elliott wave forecasts by different analysts strongly makes the point that this is correct. As Zoran Gayer pointed out, price targets will either be reached at the
end of the directional move, or at the high of the topping pattern, or lastly at the bifurcation. The bifurcation
level is the most important in the topping structure. For over a year now the expectation was that a terminal would finish off the up move from the Iraqi War triangle *) bottom. Important retracement levels all year have
been the 61.8% Fibonacci retracement level and the 78.6% Fibonacci retracement. Many scientists have
an aversion to phi, perhaps because mystics have sometimes waxed eloquent over its properties. In many real-time examples quoted here on this website in which phi has obviously appeared, researchers do not
even mention it.*) the Iraqi War Triangle ended at 859 on April 10,2003 (see chart of Dec 05,2006, below).
859 - 1163 = +304 points. 1178 - 1484 = 306 points (+/-2)For example, 769 - 1163 = +394 points. 1090 - 1484 = 394 points. Equality?
As already observed, the leap out of the end of the triangle on October 27,2005 formed Minor wave 1.
Minor wave 1 gained +148 points. Minor wave 2 retraced 68.9% of Minor wave 1 and formed a flat.
Minor wave 3 gained +238 points, which is exactly 1.618 times the lenght of Minor wave 1. Minor wave 4
retraced 41% of Minor wave 3 and traced out a zigzag correction. Minor wave 5 reached another new
high for the entire year at 1484.44. In percentage, Intermediate wave (a) gained +15.94%, Intermediate
wave (c) gained +25.97%. Now guess what? The ratio is 1.629 (phi = 1.618). Another striking observation
is the fact, that on Friday prices reached the upper ML-channel drawn from the low of wave e of triangle.
Recall the weekly update from February 10, 2007: DJIA
"Measuring the same 1571.03% rise from the 1982 low, of course, gives 12,983.90."
[ELLtoday, Feb 10,2007]. As of this writing, the Dow quotes are 12,931.
Excerpt from the Weekly-Update, February 10,2007: DJIA
"Identifying common wave length relationships has helped us to call intermediate tops quite accurrately.
For example, the high of May 10, 2006 at 11,670 occurred at an exact 0.618 wave length with respect
to the first upwave from 7,197 to 9,054, which is 24% (+/-1%). The high of March 7, 2005 occurred
at 10,984 (+1276 points) which is 0.382 of the gain from 2003 to 2004 (7416 - 10,754). In each of that
occurrences the market turned down. In the case of the last turning point in May 2006, the market
retraced 65% of the advance from the end of the triangle (10,156) to the high of May 10, 2006 at
11,670. A multiplication of the decline from 11,670 to 10,683 (-987) with 2.236 projects a target of
12,889 not far from the calculation cited above for Cycle wave V or B."These relationships do not merely produce striking after the fact formulations, but conform to
formulations long ago recognized. As a result of observation at smaller scales, it was stated
in EWP regarding times when ware three is extended that if waves one and five are not equal,
"a Fibonacci multiple is the next most likely relationship." If the market chooses to display
equality with wave 5 and 1, the SPX will reach 1512.The fact that the gains of the waves create nearly perfect continues 0.618 Fibonacci progression
from one degree through the other further suggests that each wave's components are direct
descendants of the larger wave through phi. These unifying observations for impulse waves must
then be considered in conjunction with the properties of corrective waves, which produce pinpoint-
precise Fibonacci retracements of their preceding impulse waves as well as cross-relationships with
each other that are highly suggestive of Fibonacci mathematics. Simply stated, the record of the
stock market, which is a thermometer of social valuation of man's productive enterprise, produces
an intricate fractal tapestry governed by the 0.618 ratio.
The Structural Beauty of Cycle Wave B
S&P 500 Index (SPX)
© ELLIOTT today, January 28, 2007
All the way up from the low of 10/10/2002, 03/12/2003 or at 859, (Iraqi War Triangle, see chart below),
the S&P 500 Index (SPX) produced exact Fibonacci proportions relative to the decline from March 24,
2000, when the index topped at 1553. At 1163 for example, the market retraced exactly 50% of the
preceeding decline (1553-769). At 1217, the wave form 1060 to 1217 (+157 pts) produced a gain of
14.81%, which matches an exact 0.618 of the percentage gain of the advance from 769 to 954 (24%).
At 1245 the market advanced +185 points from the low of 1060, the same wave length as the wave from
769 to 954. At 1326, the percentage gain from 1060 was 25%, within 1% of the gain of the first advance,
(24%). Ever since the market reached one of these marks, it tanked, producing big gains for those pulling
the trigger. For example, 1163 to 1060 (-103 pts), 1245 to 1168 (-77 points) or 1326 to 1224 (-102 points).
I excluded the high of 1217, since at that time the market choosed to travel to another new high at 1229
in a three-wave advance, wave (b) of an expanded flat.
At the recent high of January 24, 2007 at 1440 the SPX produced another striking Fibonacci web.
As A.J. Frost put it, "keep it simple", the first striking Fibonacci wave length relationships comes from
the fact, that a Fibonacci 2.618 times of the first advance (+185) matches within 1.67 points the recent
high. [185 x 2.618 = 484.33. (Note 484 is 0.618 of the decline 1553-769). 484.33, when added to
the high of 954 the result is 1438.33.]
185 x 3.1416 (pi) = 581.19. When added to the wave e triangle at 859, the result is 1440.19 (!).
Precisely. Since The Wave Principle produces a form displayed by markets the most important
task is to identify the completion of a specific form as provided by The Wave Principle. Wave forms
allow for variation, to be sure and market analysis is forever a task involving probability, not certainty,
and each conclusion must be accepted on those terms. Experience shows that at its ultimate turning
point, the market will produce relationships such as those describe here whether or not the current
matrix remains intact. As you can see, the entire move from October 2002 is taking the shape of an
a-b-c X a-b-c pattern, i.e. , seven waves, thus, a count of 7, 11 or 15 waves with numerous overlaps
is likely corrective. (EWP, p.47). The pattern in the SPX is called a double zigzag, with wave [c] of
the second a-b-c a gigantic expanding diagonal triangle. DT's are the most bearish pattern the Wave
Principle has to offer and once complete, foreshadow an dramatic reversal ahead. In percentage terms,
the second a-b-c is 0.618 of the first a-b-c, a common wave length relationship.
S&P 500 Index (SPX)
The Iraqi War Triangle
© ELLIOTT today, December 05, 2006
Elliott waves are always precise. This is a fast and hard assertion but history of Elliott wave forecasts by different analysts strongly makes the point that this is correct. As Zoran Gayer pointed out, price targets will either be reached at the end of the directional move, or at the high of the topping pattern, or lastly at the bifurcation. The bifurcation level is the most important in the topping structure. For over a year now the expectation was that a terminal would finish off the up move from the Iraqi War triangle bottom. Important retracement levels all year have been the 61.8% Fibonacci retracement level and the 78.6% Fibonacci retracement. Many scientists have an aversion to phi, perhaps because mystics have sometimes waxed eloquent over its properties. In many real-time examples quoted here on this website in which phi has obviously appeared, researchers do not even mention it. In January 2005 when the S&P reached 1217
I posted a special report presenting the following calculation:Why 1217? In percentage terms Intermediate wave (c ) would be 0.618 the length of Intermediate wave (a) at 1217 (24% x 0.618 = 14.83%. 1060 x 14.83 = 157.20. 1060 + 157.20= 1217.20. (SP500 Index, Special update, December 23,2004) On April 20, 2005 the market bottomed at 1136/1139 with a loss of -78 points. The April 20th low marked both a classic 50% retracement of the advance from 1060 to 1217, momentum indicators were oversold and the sentiment measures showed extreme bearish readings. The market started the next leg up and on July 18, 2005 the S&P 500 reached 1245, only 8 points shy of 1253.51, the point which marks the famous 0.618 Fibonacci retracement measured from 1553 to 769.
As expected, the market declined into October 2005 but again started a powerful wave to the upside, labeled wave 3 of 5 of (c) on the chart. While Fibonacci retracement measures depends on what data one chooses, the high of May 8, 2006 at that time could well be classified as the end of an Elliott double zigzag pattern. Supporting this case was the observation that the market retraced back to the fourth wave of the preceding decline, a natural point of resistance. In June 2006 the S&P 500 touched the most important falling 1x1 and bottomed at 1219. The second bottom occurred four weeks later on July 18 as the S&P bottomed at 1224. From there the most powerful rally since March 2003 started and as of December 5, 2006, the market gained +191 points or 15.6%. (1415 high). At this point, some exciting Fibonacci wave length relationships come together indicating at least an interim top may be in place.
Weekly Update
A Brief Update of the S&P 500 Index
S&P 500 Index (SPX) daily
© ELLIOTT today, September 14, 2006
The very bullish interpretation of an ongoing expanding diagonal triangle was first introduced in June 2006 as I counted the decline from the high of May as a clear "three-wave structure", not an impulse wave down. As it turned out the market probably finished up wave iii yesterday and trades now in wave iv Under this count a retest of the high of May is likely. However, the gains of the upward waves show lesser and lesser momentum and the possibility that wave v ended yesterday is a valid one. The entire rise from the June low can be interpreted as wave (c) of 5 of (c) of an ongoing expanded diagonal triangle as labeled with respect to the Dow so many times before. The rise from the June low then, is a three-wave structure completing Minor wave 5. Momentum readings support this interpretation, since wave 5 has been weaker than wave 3.
As can be clearly seen on the daily chart of 9/14 the 1x1 FiboFan-line points to the price-highs of May 2006 and the length of wave 5 will equal the length of wave 1 at 1328. This is not a forecast but a probability based on wave relationships.
Related studies:
Realtime Elliott Wave Structures
As They Occured Live In The Markets
Weekly update, SP500 (SPX)
© ELLIOTT today, May 13,2006
The August 12,1987 WSJ published the following article:
"Try being a skeptic and sitting on the sidelines when the market has just gone up 400 points," said ..."You can't wait for a correction anymore. If you're managing someone else's money, you have no choice but to buy."
Remember, August 12,1987 was just thirteen days before the high of 2723 which led to the crash in October 1987. By April 1987, however, diehard "doom & gloom" writers began talking about Dow 3,600. Fundamental analysts with no market forecasting tools made cases for Dow 3600+. The level of bullish conviction, and lack of fear over decline, were shocking. One thing I have learned is that if the majority doesn't laugh (lol) at or dismiss as worthless my long term market opinion, it's wrong. Given the fact that the market reflects the sum total of people's opinions, it must be ever thus. Everyone wants to be a contrarian, but it takes many trials and years of experience to recognize when to swallow your pride and go contrary to your own prior conclusions.
On May 4, 2006, I said:
"A move above 1314 or better 1315 would clean the air for a push to new highs for the year. I would be glad if the SP500 would reach my long standing target of 1320-1323, but with respect to the Dow's structure, I think we're close to the end of this upward cycle."On May 8, 2006 before the market opened, ELLtoday made this commentary:
The last upwave to the labeled wave v ? traced out what looks like a five. If so, this could mark a "truncated fifth" (5th wave failure, EWP, p.29) and gives a warning of underlying weakness in the market. The market rallied strongly along the steeper rising GL until wave iii of iii but moved away from that line thereafter. Caution is advised since today was day number 378 (Fibo 377) since the April 20th low in 2005. The ML channel (red) should give us a clue where the market is headed.
On May 8, 2006 the SPX reached an intraday high of 1326,12 and on May 9 the intraday high was 1326,60. The closing price of May 10, 2006 (along with a new high in the Dow) was 1323.52, matching my long standing target of 1323. The advance since the low of 1168 to the recent high of 1326 equals the distance of the first advance from 1060 to 1217*) by one point difference. If the countertrend rally from 2003 is completed, it followed the rules and guidelines of the Wave Principle, but contained three elements which made it less-than-perfect. First, the advance itself does not channel well. Second, the peak did not reach or exceed the upper channel line and finally, wave (2) and (4) were substantially different sizes, falling 89% and 8.8% respectively. (If one counts the advance from 2002 as a "five".)Counting the advance from April 2003 (840 print low at the end of the contracting triangle, according to Zoran Gayer) as a five-wave-structure fits the overall picture in tune with "The Right Look," since wave (2) corrected 8.85% (1163-1060) and wave (4) corrected 7.56% (1229-1136). There is another aspect worth noting: at 1326 the SPX gained +486 points from the end of the triangle at 840 and guess what, 486 is 0.618 of the decline from the all time high to the low of October 2002 (-784).
*) 1217? Fibonacci: In percentage terms Intermediate wave (c ) would be 0.618 the length
of Intermediate wave (a) at 1217 (24% x 0.618 = 14.83%.
1060 x 14.83 = 157.20. 1060 + 157.20= 1217.20. (SP500 Index, Special update, December 23,2004) Please see SPChartMap