The thousand year reign of the Elliott Wave Principle (OK, probably not the most appropriate idiom to paraphrase) would make it one of the longest running cycles to date. That is, if, it was just a stock market cycle like the Kitchin cycle.
But it's much more than a stock market cycle. These nesting dolls repeat without fail in a descending sequence to a level of degree smaller than the letter Z in Dr. Seuss’s The Cat in the Hat Comes Back. They're discernible at every level to the trained eye, presenting even on one minute charts with only minor rule breaches.
They're the basic building blocks of the market, and in all probability, as proposed by Ralph Nelson Elliott in Natures Law-The Secret of the Universe, and greatly improved and expanded upon in The Wave Principle of Human Social Behavior and the New Science of Socionomics, by Robert Prechter, all of man’s activities.
In all of technical analysis, The Elliott wave principle is totally unique. No cycle exhibits these characteristics. No other chart pattern in technical analysis presents with the consistency or predictability of the Elliott wave principle. All other forms of technical analysis eventually fail, everything but the Elliott wave.
Let’s review the status of the S&P 500. You will notice I've changed the labeling of the correction from last week. This is normal. Ellioticians are always revising and updating the labels on their charts as the market unfolds. You always predict from the current known situation, much like a meteorologist.
Click to enlarge
Focus on the move up from (1) to Y. Two probable outcomes exist. 1) We have either completed a double combination and are due for a retracement, or, even the turn preceding the next impulse wave down. 2) We will experience a breakout at 1404 and extend to 1415 or 1433.
Supporting evidence of a turn is a technically completed double combination pattern, a Fibonacci confluence including the 1:1 ratio of the a-b-c up from X immediately overhead, and the extreme reading on the stochastic, my favorite companion to the Elliott wave (a future story).
If this happens, the structure of the move down will need to be examined to determine whether it is impulsive or corrective. A 0.500 retracement would bring price down to the trend line so that is the most probable place for a bounce or turn back up.
The second option is that the recent move will be extended. Probable targets for an extended move are 1415/16, or, 1433/36 before we retrace or turn down. 1433/36 has a triple confluence of a Fibonacci target, the 200 day moving average, and the top of the channel all working for it. That is powerful.
In the stock market strength begets strength, and vice versa. If we extend here, it increases the probability that the next move down will also be a retracement, and increases the likelihood of our ultimate target of the Fibonacci confluence at 1454.
If we turn here at (1404), that denotes weakness in Elliott analysis, and favors a resumption of the down-trend. This is corroborated by a tendency in channel analysis, that when price does not reach the top of a channel, the probability of a breach on the downside increases.
1404-1406 is very solid resistance. A clean break of this area will validate the extension and my focus will turn to 1433-1436 with a probable pause at 1415/16.
Despite the appeals not to publish information about the Elliott wave Principle, Robert Prechter has produced at least 13 books on the subject. He said in the end he was persuaded by the nobler words of Elliott who said what is important above all else is the search for truth.
I agree. This is bigger than making money (but we can do that too). The Elliott wave principle is an astounding breakthrough with mind boggling implications for the social sciences. Once the curtain goes up, and you see it, you will also say, “of course it is true, how can anyone doubt it.” And when enough of us see it, and enough of us say it, social science will make a quantum leap forward. In the same manner the market jumps from one Fibonacci level to the next.
Reference: R.N. Elliott’s Masterworks: Edited by Robert Prechter
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