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Recently I have started to follow something called Elliott Wave analysis. I see it as the only method of technical analysis that seems to be based on a theory that makes sense to me. See elliottwave.com (EWI) for as much information about Elliott as you can stand. The basic idea is that all markets, and indeed indiviual stocks, move in a 5/3 wave pattern that follows established rules based on Fibonacci/Fractal logic. Each wave in the pattern is given an index and as technicians label waves they come up with something called a "count." Right now the count that I have the most confidence in (EWI's) is suggesting that we are in a pattern where we are pointed down at the five most commonly talked about levels. (see below) --- Bob Prechter is the main theorist at EWI and he correctly predicted the start of the 1982 bull market using these techniques. In the mid nineties, he made a new long term prediction that a new bear trend would assert itself. Currently his analysis is more convincing (at least to me) than any other out there. He has us temporarily bottoming in 2003/2004 and then starting up for a while from there. This new upwards thrust, however would not be an uninterrupted leap to the skies; merely a period of bullishness. The amount of space left to the downside before 2003/2004 is where everyone scoffs at him. His predictions for the five wave levels are: Intermediate: below 9,000 (DJIA) Primary: below 6,000 Cycle: below 2,750 Supercycle: below 400 (no typo 400) Grand Supercycle: below 400 Why start this thread? To see if we can come to any agreement on how good these predictions based on Elliott are. They seem fairly good to me but they are weakest in the time span element. Prechter has been talking about a bear market for the last few years and even he admits astonishment about the length and size of some of these waves. -- There are interesting elements of psychology in the theory as well. EWI cover these as "Cultural Trends." An example would be the recent protests against the "colonization" of the Mission District and the "Starbuckization" of San Francisco. The theory suggests that the waves of the stock market reflect the psychology of the masses. As the mood of the people changes the market moves. To quote Prechter's "The Wave Principle of Human Social Behavior" in chapter 15, page 255 he states: "The trends in the stock market and such activities as described in this chapter are coincident because they reflect social moods directly. As positive mood waxes, many people buy stocks, watch Disney films, prefer music that expresses joy, and bestow their overflowing ecstasy upon pop stars. When the negative mood waxes, many people sell stocks, watch horror movies, prefer music that expresses dissatisfaction, and have little ecstasy to bestow. In contrast, most trends that are deemed important to history, such as those economic and political, lag trends in the social mood." What do you think? | ||||||||||||||
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