Judging by events in the past week, it would seem that the correction following the 2008 bust is over and the 2nd dip has begun the so-called Elliott C downwave and continuation of the long term secular bear trend or, is this a bit of fear setting in because of the disaster in Japan, a mere correction with the resumption of the uptrend to follow shortly. Of course, one must take into account the fact that the slide started before the Japanese crisis. So what are you, Bull or Bear?
From Investopedia on US markets: The Bottom Line While the markets could set a bear trap here and surge higher, the odds may be favoring more downside. Traders have been accustomed to buying every pullback, and the markets have rallied unchecked for months now. The general indexes broke under some key levels this week and unless they can rebound soon, the possibility of lower prices is likely. For traders who only trade to the long side, this may be a good time to raise cash and wait to see how the markets react. Even if the markets can find some footing here, the transition is likely to be toward more sideways trading rather than a straight shot higher. One of the keys to becoming consistent in trading is to recognize when to step aside. This may be one of those times where the day-to-day volatility is not worth the risk for short-term traders.
Wino, Wave C is always counter-trend so we cannot be WAVE C down if 2008 is your time frame.....Correction or trend, bear or bull, time frame is important, you must specify it because there could be a bear in one time frame and a bull in another time frame.So my bear could be your bull!Thats why some buy and some sell-different time frames.You could be long and short on the ALSI at the same time in different time frames and still make a profit.
Read an excerpt of Ed Easterling's "The game changer". In the book he focusses on the current excessive debt levels of western economies and their impact on growth and inflation. Herewith a paragraph "The level of P/E, driven by the principles of present value, reflects the price at which the stock market can deliver sufficient returns to compensate for inflation and risk. P/E is driven lower when conditions of inflation change the outlook for required returns. In addition, P/E declines when deflation changes the outlook for the level of future earnings. Of particular note, slower long-term economic and earnings growth reduces future cash flows and drive P/E lower. Conditions of solid long-term earnings growth and low inflation therefore provide the best conditions for a high P/E". Central bankers in Europe and USA are doing their damndest to create an inflationary environement by printing loads of money. Their debt levels preclude them from investing in infrastructure therefore lower growth. How are they going to service this debt? they need to inflate aka Brazil style. Inflation will also lead to higher interest rates thus adding to company costs and lowering income growth. For how long can the market shake off this scenario? I believe it will impact sooner then later and it therefore necssitates a portfolio adjustment aimed at cash and bonds or something a little safer. Better earlier then panic later.
Hi Rams. I am not a great student of Elliot waves. With my rudimentary knowledge I saw it as 2008/9 wave A down, the correction wave B (2009/11)that we are still in now with C down to follow as long as B does not exceed the top of previous upwave 5 in which case C is then cancelled. Does this make any sense?
Went back 10 years on ALSI. On 14 Feb,your wave B exceeded the wave 5 of May 2008!So cancell that analysis. May 2008 to March 2009 was a correction to Bull Run of 2003 to 2008 and retraced exactly 61.8% of the uptrend! March 2009 to Feb 2011 was a Bul Run to a all time high on 14 FEB 2011. The wave C now is a correction to the Aug 2010 to Feb 2011 uptrend.But the correction of the larger time frame Marcch 2009 to Feb 2010 uptrend makes this downtrend probably wave A.So until WAVE C is formed and the next wave overlaps into wave A , we will never know if this is a correction or wave 1 of a new bear trend. So trade what you see...
Hi Rams. Really been following your valuable comments on E Waves, since I am sure there is strong merit in the system. But, am struggling to see the f#@^%$ing things!!! Some are more clear, but as you say, time frame and this includes daily/weekly charts. So please, keep talking.
The problem with elliot waves is that for every bear count there is also a bull count.The present down on the alsi can be counted as a abc (bull count) and we are now starting wave 5 up,or if bearish we are now doing wave 4 up with wave 5 down to follow. I think what will give us direction is the present move up.A wave 4 normally retraces 38% of the total move down.Presently we are at that level.If we therefore break this level clearly to the upside i will become bullish. I am at moment more bearish because on a daily chart if u draw a trendline connecting the highs and draw a parrallel line from wave 2 up we have clearly broken the bottom trendline to the downnside.This line is now resistance and breaking it to the upside would turn me bullish.(elliot waves normally move in channels) The alsi and asx waves also look a lot more bearish than the US markets where we have a lot of overlapping which looks more corrective than our market.