As an understanding of the EW principle and yes, luck, would have it, I nailed the exact top in that post and then I followed up on it a month later in this post. Even though a powerful double bottom looked to have been put in, the wave count was telling me that the unwind hadn't even really begun yet. Yes, SCE, the chart and only the chart was behind this model. The "fundamentals" at that time were strongly against another Greek "panic" (AKA return to sanity regarding the solvency of PIIGS). After all, the supposedly potent director, Draghi, assured us that all was well.
Fast forward to today and have a gander at what happened since. It is, in a word, fugly. GREK will collapse below the prior 2008 low before this is over and then Spain and Italy will follow and then, I think to everyone's amazement, France and then German will swirl the toilet bowl as well.
But of course, nothing goes straight up or straight down and GREK counts like it is getting very near a panic bottom of wave 3 down. In fact, today's collapse could be part or all of the tip of W3.
I expect a significant bounce, either red or blue, to begin soon and most likely within the blue circle. Of course, right now the fundamentals scream "stay away from Greek debt". And so here is yet another lesson on my long standing views that fundamentals are bullshit because the true fundamentals are unknown and unknowable to mankind. Whether or not you are willing to acknowledge the facts says a lot about you. The facts are that, based on wave count alone, I modeled this last move down with some pretty incredible accuracy not only on the timing of the pullback but also of the severity of it. This is not luck people. This is why I stopped referring to EW as "Elliott wave theory" and began referring to it as "The Elliott wave principle" quite some time ago. You just cannot produce this kind of accurate forecast any other way in my experience.
Of course, the count could have turned out to be wrong as well! But the key is that I would have known very quickly and would have exited the trade (had I been trading this at all). You do not get this luxury with so called fundamentals! Fundamentalists tell you "just hang in there a bit longer and be patient". Good EWers will do nothing of the kind! We will only get in on a good setup and we will get back out just as quickly if the model breaks and the breaks are very clear when using the EW principle. There is no room for subjective analysis once you have stated your wave count. That particular count will be right or it will be wrong and you will know pretty quickly which it will be.
Prior to discovering your blog, I believed that EW was just another attempt to forecast or predict movements. I dismissed it as no one can consistently make correct predictions. It's instrumental in determining the likely hood of movements and more importantly help identify exits and reduces impact of investor behavioral biases.
ReplyDeleteDo you think applying the principle is an art or science? My guess is both as rules are prescriptive but there's room for subjectivity.
-TJ
I struggle with the science/art question sometimes as well until I remind myself that art is science. The great masters of the renaissance didn't just suddenly become better at painting because they were "winging it in an artsy way" better than those before them. In fact, they started to understand the science behind what makes paintings appear realistic to the human eye and they wrote about these discoveries in what are basically technical journals.
ReplyDeleteAt the end of the day, EW is science IMO but it feels artsy because, like anything, it takes a long time to master. Is golf art or science? Science of course, all physics. Then why do so few people master it and so many try but fail?
I suspect that sometimes what people characterize as art is simply their unwillingness to invest the ridiculous gobs of time into perfecting one's ability to perform the science. While I still fall far short of perfection in this endeavor, I have literally thousands of hours invested and it has pushed many other things out of the way in my life so I don't even recommend that most people do much more than learn the basics and then find someone to follow along with. I pay EWI for their insights even though I am finding more and more that I disagree with their counts (and eventually winning the debate).
Still, with the size of bets I am making they are **WELL** worth their sub price of something like $60/month just as a sounding board (although it annoys the crap out of me that they only provide updates mon-wed-fri).
Bottom line, for God EWI is science. For mortal man it can appear as art given our limited vision and processing power. If time is as nothing to God, it is everything to man.
Thanks for your comments.