Despite its effectiveness (which you have witnessed), E-Wave gets very little respect within and without the technical analysis community. Aside from the fact that it purports to "predict the future," which people don't like, it was also re-introduced to the world in the 1980s by Robert Prechter, who famously made astonishingly accurate market calls for years, becoming a crossover celebrity in the process. That is, until one day when he started making every call wrong. From hero to hated to laughingstock; it can happen that fast, and to anyone. Since then, Elliott Wave Theory has fallen from favor.
How did Prechter get it so wrong? I firmly believe it's because he had the wrong wave count, although he still refuses to admit it 20 years later. Elliott Wave, because it's so much an art (of counting waves), has a particularly revisionist bent to it. E-Wave technicians have to constantly go back to charts they've annotated and do a wave recount based on future information. So there is a question of reliability. To me, this represents the beauty of E-Wave: nothing is preordained. Part of the human condition is that we have free will: make the right choices, the wave count shifts, and a higher price target emerges, representing improvements to our society, to our culture and our civilization. Make the wrong choices, and bear markets come sooner, last longer, and are more devastating. There are only a finite number of ways to count the waves; it is not infinitely interpretable. Furthermore, the predictive elements only come into play once Wave 1 of a move has been completed. And there is no way to predict beforehand what wave 1 will do.
I'm going to share with you a chart from the best Elliott Wave technician that I know. That person is my mom. It's a messy chart, and one that she annotated in March of 2007, 1-1/2 years ago. It's messy because it shows two counts. The "primary count" represents Prechter's count, which I must emphasize, is WRONG. It also presents my mom's "alternate count" in pink. Considering that using her count, my mom in March of 2007 nailed the October 2007 Dow peak price of 14,198 within 220 points, or 1.5%, I tend to trust her over Prechter! (The prices on the chart are the actual ones people experienced, not the prices you find in Google finance, which are slightly off, distorted by adjustments). Without further ado, the chart:
First, some terminology. Keep in mind that people use different terms to describe the relative degrees of the waves. Also, in my analysis of what will happen in Wave A of a particular degree, I use the principle that Wave A is similar to Waves 2 and 4 of that same degree. Note that Wave C can only be likened to waves of a higher degree, as it is much worse than anything witnessed thus far in that wave sequence.
| Degree of Elliott Wave Sequence | Time Span on Above Chart (5 Waves Up) | Subwaves Labeled As | Total Gain in DJIA | Entire Sequence Comprises | Timeframe for Corrective Wave A of this Sequence | Magnitude of Calamity During Corrective Wave A | DJIA Target |
|---|---|---|---|---|---|---|---|
| Intermediate | 10/10/2002 - 10/11/2007 | not labeled | 7,017 | Wave 5 of Primary Degree | October 11, 2007 - January 22, 2008 | During Intermediate A, banks failed, culminating with Bank of America's rescue of Countrywide. | 11,634 |
| Primary | 10/04/1974 - 10/11/2007 | circled numbers and letters | 13,625 | Wave 5 of Cycle Degree | October 11, 2007 - October 10, 2008 | During Primary A, major banks (Bear Stearns, Lehman Brothers, WaMu, Wachovia) and entire nations (Iceland) failed, and America went into recession. By comparison, Primary 4 was the Tech Bubble crash. | 7,882 |
| Cycle | 1932 - 10/11/2007 | Roman numerals I, II, III, IV, V | 14,158 | Wave 5 of Super Cycle degree | October 11, 2007 - 2010 ??? | Major disruptive war. Cycle 2 coincided with WWII, and Cycle 4 took place during the Vietnam War. | 573—999 |
| Super Cycle | 1780 (birth of America) - 10/11/2007 | (IV), (V) Roman numerals in parentheses | unknown - based on historical records prior to 1896 | Wave 5 of Grand Super Cycle degree | October 11, 2007 - 2020 ??? | Depression. Super Cycle 4 was The Great Depression. | 40—400 |
| Grand Super Cycle | 1000 - 10/11/2007 | not labeled | unknown - based on historical records prior to 1896 | X Wave 1 | October 11, 2007 - 2050 ??? | Unprecedented mortality. Grand Super Cycle 2 took place in the period of the Black Death (bubonic plague), 1350—1400 AD. For our times, nuclear holocaust or a Heat Age are candidates. | There might not be a stock market at this point. |
This chart has grave implications for the fate of modernity and humanity in the coming years, as you can tell from the above table. The main points are:
- From the end of The Great Depression until 10/11/2007, we were in a secular bull market, a long one comprising Super Cycle Wave 5. (In fact, we were in a secular bull since the invention of modern stock markets, comprising the latter parts of Grand Super Cycle Wave 5.) Very few if any current market participants were trading in the market prior to 1932. Therefore we have been in uncharted territory for exactly one year now: a true secular bear market of Super Cycle (not to mention Grand Super Cycle) degree that could last as long as a century or two. Everything you've ever known about investing: that markets always go up in the long run, buy stocks in your 20s and save them into your 60s for a fortune, etc. gets thrown out the window under this scenario. Those investing truisms were based on historical data within Super Cycle Wave 5, which is in the past now (1932-2007). Ever wonder why the significance of the 1929 crash has not been surpassed, not by 1987, not by 2002? It has stood the test of time because 1929 represented the beginning thrust downward of Super Cycle Wave 4. Since then, the most we have seen are corrections of Cycle degree (e.g., 1962-1974) and Primary degree (e.g., 2000-2002). Note that the crash in 1987 was a correction of an even lesser degree (Minor) and it barely shows up on the chart. The 8-day crash we just experienced marked the end of Primary Wave A. And next up, after we rally for a few months, is a corrective phase that will be the equivalent of World War II: Primary Wave C, to conclude Cycle Wave A.
- Corrective waves unpeel like onions. What we just completed this past year was an a-b-c correction, each wave of which was of Intermediate degree. All that tumult and heartache merely added up to Wave A of Primary degree. As mentioned in the above point, there's still Primary Waves B & C to come. After Primary Wave C, we will have only completed Cycle Wave A and need to do Cycle Waves B & C, the latter of which could be a global depression. And then comes Super Cycle Waves B & C, and then Grand Super Cycle Waves B & C. I don't know what those'll entail, but it'll be bad. Anything from mass mortality to the onset of a new Dark Age in Grand Super Cycle C.
- The stock market is a proxy for human civilization. As our civilization grows, so does our economy, and vice versa. We are fortunate that in this age we have a way to precisely measure our progress in the form of a stock market average. Consider the one past civilization that was completely modern: Rome. We can't go by a stock market average; instead we must use historical records to determine the Roman Grand Super Cycle. The Roman Grand Super Cycle impulse waves lasted from 700 BC to 337 AD. In our current Grand Super Cycle, Wave 1 began in 1000 AD, and we completed Wave 5 on 10/11/2007. About a thousand years for each civilization before their declines began. What happened to humankind after Rome reached its apex is due to happen to the modern West (well, just the first 100 years; we won't see a 200-year Dark Age as happened from 800-1000), at least according to this count of the Elliott Wave. We are at the beginning of the end of American, and Western, hegemony.
13 comments:
I made sense of the begining of it, and then some of it didn't make sense, and then there were some numbers, and then I got to this:
"I think as a species we will survive.... blah blah blah... Please enjoy the time you have right now..."
BLANKIE!!!!!!!!!!!
Don't you mean "Dib"? PS Debbie was the one who came up with the Chrib moniker for me.
Here's an important counterpoint to what I wrote in that post. It's from the article I link to, the one discussing Elliott Wave since 10,000 BC.
This places us at a point where we must ask ourselves this question: How much validity does the Elliott Wave Principle have and how seriously should people take these horrible prospects? Based on our study of the Elliott Principle over several decades, we can say the Principle has great enough validity to convince us to watch its signals carefully and pay attention to them. Each reader will have to decide how much weight to give the Elliott Principle, after examining the evidence presented in this article, as well as other sources. We should all keep in mind that Elliott Wave interpretations can change over time as more data is amassed and evaluated. We feel fairly certain that any practitioner of this Principle has had to change an analysis at sometime in his or her career.
The last item to cover in this summary is to remind ourselves that in a serious bear market, which can last for many years, a "Buy and Hold" policy is not prudent (contrary to popular belief as fostered by the Wall Street Community). A more prudent approach is to exit most stock market investments and replace them with alternative investments. Each investor must decide for himself or herself the best course of action to take after careful consideration of the facts.
These dire predictions were written in 1999 under the assumption that 2000 would be the peak of the Grand Super Cycle. The authors were wrong—they miscounted. Their miscount is labeled as the "Primary Count" on my mom's chart. It is entirely possible that my mom's count is wrong as well. But based upon what has transpired in the past 12 months—events that would have been unthinkable to the average American—I would say that the bullish phase of the Grand Super Cycle indeed ended back in 2007. It is so much worse right now than we think it is, because we have never had to think like this before. The latest news has yet to develop. Billions of pounds sterling lost to Icelandic banks that failed, accounts that local British municipalities used to store their money. Will they get their money back? If not, how will local governments stay solvent? Britain already has massive tax rates.
Anyway, according to the alternate E-Wave count, what follows next is Primary B, which is a temporary resurgence in the worlds' fortunes. Use this time to enjoy the company of your loved ones, to enjoy your hobbies, to enjoy what you enjoy about life. I don't know how long this period will last—but it will probably be a year or less, as B waves are shorter than the A waves that precede them.
Also, get out of your stock investments at the peak of Primary B!! Let's not forget that I'm a market technician first and a doomsayer second!
chrib, love your mom's chart, does she feel that this move down that just ended on Oct.10,08. possibly ended wave C of a Larger Cycle degree wave 4, and does she think it could form a flat, since wave c went past 61.8% and I do realize it could still fall up to 138.2%? It would fit the rules of alternation, and we could have bottomed??? thanks.
I've forwarded your question to her, and no doubt she'll be pleased to hear how much you enjoyed her work, but I'm not sure I see what you're seeing. Where would you put Larger Cycle 1, 2 & 3 under your read? Also, wave C can't fall below wave 1, so which is the reference point for the 138.2%? TIA for clarifying.
Chrib, based on your mother's chart, does she have Grand Supercycle wave 3 circled in Red, finishing as stated on 1/14/00? or was that Wave 3 of Wave 3 finishing of the Grand SuperCycle? So, I am going to assume that that was Grand? OK, So if we completed Wave A circled(black) down and Possibly Wave B Circled(black), because we have crossed the support line of your mom's dashed red line- Where does she have this Wave "C" its not on the chart ending? And as my question too you yesterday was If we have ?Possibly Bottomed, Yea or Nea, as of closing today, who knows we could just be doing a 2nd wave down for a retrace or final wave 5 of Wave C? That would be circled in Black, but that could also only be the end of wave 1 or A of wave C, OK lets go back to my question from yeserday, if we bottomed in C we could form a 4th wave flat, then we would still have a D circled in Black and an E to do> do you see what I mean? These are of course cycle degree moves as we are in now. If we Have come close to bottoming, and we do not exceed the origin of A circle in black and wave D would begin to the upside, then we would have and E wave down, then go up for the final V wave, or Second scenario would be We Exceed the Origin of A circled Black, Then we could fall onto your mother's Solid red support line, back to around 1987, and form an Expanding Triangle, that could last past our life time?
Circled Red 3 is refers to the Cycle sequence, and here I am using Cycle to mean the 5 waves that began 7/18/32 and ended last year 10/11/07. The Grand Super Cycle sequence began well before what's pictured in the chart; we see the end of GSC 4 in 1932.
The black circled A & B you refer to are "Prechter count" annotations, which have proven to be incorrect with the new high on 10/11/07. One point of her chart was to illustrate that a valid alternate count was in effect, and what was taken to be the primary count was really a miscount. The full alternate count is provided in an updated chart she sent me this morning. Hope it helps!
Chrib, so what your mother is saying is that we are in the GSC Wave 5, and in 5 we are in wave 4 and in wave 4 we are in wave C and in wave C we are finishing A or wave 1 down, or does she think we have just finished wave C(possibly)????? Oh tell her Thanks alot for the Chart, I really appreciate her work. and your work too.
Sadly, her chart says we are done with GSC 5. All that's left are corrective waves for the rest our lives and our children's lives. We are now tracing all the As, and unraveling all the different degrees of As could take the next 40 years. Yikes!
Thank you very much for your comments. We are both very happy to hear that you appreciate our work!
Wow. What a chronical on the future. Unfortunately, my exceeding limited, although enthusiastic, study and knowledge of E-wave theory has led me to conclusions similar to your dear mother. I derived my limited knowledge from charting the DJIA analysis from 1895 to current, what I considered to be a potential super cycle, in and of its own right. Just look at the chart. The E-wave hits you right in the face. The numbers seem simple. However, I am in kindergarden in E-wave theory and principle. After reading your dire projections, I hope I have just entered a cult following with "end of the world to come soon" signs to follow. I hope that my new found optimism, and sought after understanding of E-wave theory, is not contemporaneously my soon to be found basis for armageddon. That said, like a whole body scan to predict your likely cause of death is an approach/avoidance situation (enter:blissful ignorance) I don't want to avoid truth. "Charts" may or may not predict our future. They certainly smart us up to what could occur and how to respond. Thanks so much for you and your mother's lessons and words. In perspective, it should probably guide all of us to potential, but hopefully not inevitable, eventualities. This is truly living and dying by the charts, or our interpretations of them, assuming our interpretations are, indeed, correct, and the charts are, indeed, predictive of future events. Again stated, I am a kindergardener to Elliot wave and I recognize that. Thanks so much again for you and your mothers insightful thought. Ramundo.
Ramundo, it's not all bad from here. There'll be some good times thrown in for good measure! (The B Waves, such as what we're embarking on currently.) Also, according to the EWave resource cited in the post, it won't be the end of the world. But framing what's to come in terms of having to correct 1,000 years of human progress, that's heavy stuff. Even if it's only 100 years we have to correct (going by the DJIA), it's not going to pleasant!
did you have the chart/image posted?
No chart for the GSC (1000 years in the making) since the Dow wasn't put together until late 19th century, but here's a table.
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