James:
"What is wrong mathematically with Elliot wave theory?"
In the 1930's, R.N. Elliot posited that market movements unfold in rhythmic patterns based on shifts in mass psychology - greed, fear, etc. Those price patterns he called different types of waves: implulse waves (5 smaller ones - of four different sub-types) that moved in the direction of the market or counter to it (2 waves), and corrective waves (3 smaller ones - of 4 other subtypes). Each of those breaks down into smaller waves and can comprise or be a larger wave. If one makes a correct wave count, it can be amazingly accurate. An incorrect wave count is extremly costly.
The mathematical premise that is flawed is that wave counting is subjective. I don't know of a text or published description of EW that will deny this. Some software packages, like Advanced GET and some neural net systems attempt to address this, and have made some good progress doing so. Understand that Elliot Wave theory was developed to estimate potential risk/reward, not to predict market thresholds. Additionally, since it is attempting to qualify and quantify mass psychology, the forcasts are necessarily interpretive.
Please appreciate that I do not discount Elliot Wave analysis. In an adept practicioners hands, complimented with TA, or other analysis, it can be very useful. EW is no less a hindsight tool than any other form of TA. However, I would add that the mathematical premise is not less flawed for fundamental, technical or neural analysis. Its just more subjective for Elliot Wave.
I do not do EW analysis, but I attempted to years ago. I do respect those who do, regardless how successful they are.
lastshadow
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