Comments on: Triangle Action in the DIA

By: michael g

michael g — Mon, 29 Dec 2008 07:45:05 +0000

You have done an excellent job in your presentation regarding the present wave count. Many people don’t understand the significance of the EWave analysis. The main value is to determine the major and minor trend and to follow along with that trend. At some point in time a powerful move will occur as the market wants to change trend back up. Until such a move develops the trend is down. I simply look for abc upmoves to sell into.

By: Andrew Stanton

Andrew Stanton — Mon, 29 Dec 2008 00:19:55 +0000

This debate illustrates perfectly the shortcomings of using Elliott wave for normal trading. My experience is that Elliott analysis is an academic exercise about 99% of the time because that is how often there is enough doubt in your wave count to make a reasonable risk reward trade impossible. So you ask, why use it? Because every so often there is a crystal clear count, with such very well defined risk parameters, that offers a fantastic trading opportunity. For me this is usually when a fifth wave at three degrees of trend is found on an hourly, daily, and weekly chart. That is the sort of trade that justifies all the time spent agonizing over ambiguous counts. The next such opportunity will come at the conclusion of this C wave down from the 2007 high although rallies are not as much fun as declines since the latter usually offer the kicker of higher implied volatility for the options which I normally use for that type of trade. Happy New Year to all!

By: Corey Rosenbloom

Corey Rosenbloom — Sun, 28 Dec 2008 16:50:09 +0000

Samir,

The monthly averages, as easy analysis as that is, are powerful indicators that many investors and fund managers take very seriously. It’s sort of like a spiral – selling occurs to push price lower, dropping the averages, and when bearish patterns form on the averages, more selling results because of the averages (and other factors).

Looks like the ‘positive feedback’ of a selling loop has taken hold on all timeframes now.

By: Corey Rosenbloom

Corey Rosenbloom — Sun, 28 Dec 2008 16:48:37 +0000

Anon,

That is the direction my analysis is showing, but the market likes to throw curve balls for whatever reason so we need to be prepared for the possibility that an upward break could occur. Traditionally, triangles are indeed continuation patterns and with the strength of this trend, it looks like down is where we’ll be headed before long.

By: Corey Rosenbloom

Corey Rosenbloom — Sun, 28 Dec 2008 16:47:15 +0000

Andrew,

If that’s the case then we have a little more time left in this corrective move, though it would be just a little more than halfway over.

But you’re right as well – one can still make the case that the November lows were indeed the terminus of the large-scale 3rd wave, which actually would be quite good news for the market. As it stands now – if it is a fractal wave 4 of 3 triangle, we’re looking much lower for the end of the 5th wave.

By: samir ghadiali

samir ghadiali — Sun, 28 Dec 2008 16:09:47 +0000

Dear Corey,
First of all Merry Christmas to you.Just check monthly chart of dow jones hovering around 200 month sma and also check 20 and 50 ema are just crossovering each other in december itself i think 2009 is not good for bulls anyway

By: Anonymous

Anonymous — Sun, 28 Dec 2008 02:55:05 +0000

Triangle or not, consolidation it is, for continuation of the downward trend.

By: Andrew Stanton

Andrew Stanton — Sun, 28 Dec 2008 00:37:40 +0000

If an Elliott triangle is forming, then it is currently tracing out wave C with the October high as A and the November low as B. That is assuming the November low was not an ending diagonal circle wave 3.

By: Corey Rosenbloom

Corey Rosenbloom — Sat, 27 Dec 2008 16:40:49 +0000

Andrew,

If it’s an Elliott triangle, it looks different than most of the textbook definitions, at least on the daily chart. I’ve seen different interpretations but they all seem to depart from the ‘basics.’

It’s more evident on the weekly chart, that a triangle consolidation is forming but probably not in the nature of classic Elliott triangles – more like the classic TA pattern of a symmetrical triangle.

Either way, on the weekly DIA, we seem to be nearing the apex, or expected break-out point very soon.

By: Corey Rosenbloom

Corey Rosenbloom — Sat, 27 Dec 2008 16:38:36 +0000

Reggie,

That’s kind of more the line I’m preparing for, though it will be very difficult to believe it should the break be to the upside. It’s certainly getting a lot of attention, and for whatever reason in the marketplace, if everyone expects the same thing, the opposite is bound to occur.