Wave Times

One of the readers, Jim to be specific, has asked for the internal counts of waves (1) and (3)  of the wave count of the Down Jones Industrial Average that I had posted on 17 Jan 2010. He requested this because he wasn’t sure if they looked impulsive. As I have mentioned elsewhere, Elliott Wave Analysis is a flexible tool in the hands of the analyst. Counting the waves is more like art than a science. One could label these waves in a variety of ways and still come to the same conclusion. Again, one could count them differently and reach a completely different conclusion. What, then, is the “RIGHT” count?  Unfortunately, no one can be sure until the move is all over.  The only way to trade the markets using Elliott Wave Principle is to be faithful to any one count until the market signals that you are wrong. I have provided my internal counts of the Dow Jones Industrial Average in the attached chart. There are several Fibonacci relationships that you can observe between alternate and adjacent waves. Also, the three main rules governing wave principle are all respected. Hence, there is a reasonably good chance that I am on the right track. I always grant that I could be completely wrong, and will be more than happy to share my mistakes, not just because no one can claim complete mastery, but also because once I am corrected, at least my next trade on the Dow Jones will be on the right track!  Please feel free to share these comments and links with your friends. After all, this blog is meant to share our experiences in the market. With best wishes, Ramki

Here is the Elliott wave update on the Dow Jones as of 17 January 2010. It has been a while since I looked at this chart. Someone sent me a note that Bob Prechter has called the top in this index, and he had read about it in Planet Yelnick. So I decided to take a fresh look at the chart for the Dow, and you can see my wave count right on the chart itself.

One of the frequent criticisms against Elliott Wave analysis is that the same chart is capable of so many different interpretations. However, the experienced trader knows that in order to make money, one should follow any ONE count at a time. Only then can the trader know when he is wrong. As soon as he realizes he is wrong, he can take quick corrective action, perhaps switching to the alternate count that he prefers. As for the Elliott wave counts for the DOW, no one can be sure who has the correct wave count until the move is over. By that time, it will be too late to do anything, and the whole exercise will become academic. So I urge traders to read Planet Yelnick for comments on Prechter’s count, then go to Tony Caldero’s page, and finally come back and read my own count. Then you decide which one you wish to adopt for the time being, and stick with any one of us. At some point you will know whether you are on the right track to making money or not, and then you can decide your next course of action. Good luck. Ramki