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What technical tools are there to distinguish Elliott Wave 3 from 5?

Primary Wave 3

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#1 Geomean

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Posted 12 October 2017 - 09:43 AM

EWI has relied upon the Williams 5/34/5 MACD for years to distinguish wave 3's from wave 5's.  Bill Williams strongly recommends interpreting his 5/34/5 SMACD in this fashion.

 

The Williams 5/34/5 MACD of the DJIA in both the monthly and weekly time frames is now the highest it's ever been thus indicating that we are in Intermediate Wave 3 of Primary Wave 3, NOT in Primary Wave 5 which is EWI's count.  The SPX monthly reached it's highest so far in the monthly in 2015 and the weekly hit it's highest ever this past March far exceeding is 5/34/5 SMACD from the 1990's. 

 

I just sent an email to EWI asking how this affects their analysis. 

 

Chief has been espousing this view for a long time.  This is the only technical tool I'm aware of to distinguish Wave 3's from Wave 5's and it now confirms his view in both the Dow and the SPX charts.

 

Besides noting this signal, I'm also wondering if anyone out there is aware of any other technical tools to distinguish Wave 3's from Wave 5's.

 

TIA

Geo


Edited by Geomean, 12 October 2017 - 09:50 AM.

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#2 Geomean

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Posted 12 October 2017 - 10:16 AM

I'm also wondering if the price levels affect how to interpret these MACD readings.  Given the relatively high price readings currently in both indices, on a percentage basis an absolute divergence in the 5 and 34 SMA's now might be less in percentage terms than was the case in the 1990's.  In April 1999 when the SPX was at@ 1400 the divergence at about 135 in the 5/34 was slightly less than it was in March of this year with the SPX at 2400+ and the divergence was at 141, so percentage wise it is less now.  As you can see even the 5/34/5 MACD might not be a rock solid tool to use in answering the question on how to distinguish between large degree Wave 3 and Wave 5's and analysis uncertainty remains. Hence the search for another technical tool.

 

Fortunately, if one is a trader, this kind of question, given the long time frames involved, is not exceedingly pertinent.


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#3 NAV

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Posted 12 October 2017 - 10:27 AM

E-wave as a original theory was all about price structure rather than momentum. But looking at momentum does add value. When we say wave 3, the question is always of what degree ?

 

5/34/5 on monthly is as good as it gets when it comes to long term analysis of the market.

 

Look at 1987. We had a peak in monthly MACD and then folks like Prechter thought that was the cycle degree top. Once the 1987 MACD top was taken out in 1995 by a higher MACD, it was clear that the primary wave from 82 was extending. At that point people with little bit of IQ could assert that 1987 was not a cycle degree top, not even a primary degree top. But a supposedly high IQ guy like Prechter kept asserting about cycle, super cycle and grand super cycle top as went into 2000. It was a no brainer. After the 2000 collapse it was clear that a primary degree wave 3 had topped. The rally from 2003 was a primary degree wave 5 which diverged in 2007, with the MACD top made in 2000. Post 2008 collapse it was clear that 2007 was a primary 5 top and a cycle degree wave ended in 2007.

 

As the rally from 2008 started it was not clear whether we had started a new cycle degree wave up or just a primary degree wave B. Once the 2007 MACD top was taken out in 2104, it was apparent that a new cycle degree wave had started. Right now without an iota of doubt we remain in a primary degree wave 3 (cycle degree wave 1). So we have a long way to go in terms of the cycle degree wave. But one can only guess when the primary wave 3 will top out. It does not ring a bell at primary degree tops. But at least post price action will help us to assert when that has occurred. There are many tools to do that. When SPX 1376 broke in 2007 i warned of a long term top. Right now we are no where close to it and is least of my worries. When it occurs i will know it. Being a short term trend follower, i will catch it and trade it. 

 

I will post a chart later for those who might be guessing what i am talking about. 


Edited by NAV, 12 October 2017 - 10:31 AM.

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#4 NAV

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Posted 12 October 2017 - 10:42 AM

ewave.png


Edited by NAV, 12 October 2017 - 10:43 AM.

It's not the knowing that is difficult, but the doing. 


#5 NAV

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Posted 12 October 2017 - 10:51 AM

If you look carefully the June 2015 monthly MACD top has not been violated yet. That means there is a potential divergence between 2015 MACD top and now. If we get a price collapse here which takes out 2015 Aug lows, then we can assert that Primary 1 of cycle degree has topped. That would still leave wave 3,4 and 5 on the table which could take many years to pan out. All i can say is my child's future looks bright from a long term perspective, despite what the worrywarts say  !

 

Now if we take out the June 2015 top on MACD, then the divergence would get erased and lead to a much uber bullish scenario like the 1995 event. That would lead to a massive bubble. That's the stuff i am watching about. I don't try to predict whether it will or not happen, but i will know when it happens. That's the key technical event to look for in the coming months. If the monthly MACD turns down without taking out the 2015 MACD top, then bears can look for a 20-30% correction in this bull. If not, just keeping riding this amazing bull !


Edited by NAV, 12 October 2017 - 10:54 AM.

It's not the knowing that is difficult, but the doing. 


#6 da_cheif

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Posted 12 October 2017 - 10:52 AM

3d waves allways follow a second wave decline.....the amplitude and dispair generated by a 2nd wave is but a measure of whats to follow    2009 ended a classsic large abc 2 wave and the advance from there is classic 3rd wave stuff....and to those who say otherwise ....a message for you   https://68.media.tum...qyfpso1_500.gif



#7 fib_1618

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Posted 12 October 2017 - 10:53 AM

Besides noting this signal, I'm also wondering if anyone out there is aware of any other technical tools to distinguish Wave 3's from Wave 5's.

 

For the short term degree of trend: McClellan Oscillator.

 

For the intermediate to longer term degree of trend: McClellan Summation Index.

 

None better...from beginning to end.

 

Fib


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#8 NAV

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Posted 12 October 2017 - 11:05 AM

Again in e-wave, it's very easy to determine which wave we are in. But it's virtually impossible to say when it's going to top. That's the folly (or fraud in some cases) that most e-wave Gurus commit. The only way to determine whether a particular degree wave has topped is by "post price action" (thanks to Neely for that). All this Fib ratios and fib extensions to determine market tops are not deterministic. If a wave extends then you need to recalculate the next extension level. So it's a work in progress. The only way to assert price tops is by post price action. Calling tops based on Fib extensions is as worthless as DeMark counts, when the waves extend. As a trader one never needs to know when the market tops. The trailing stops should take care of it. It's sufficient to know what degree and what stage you are in the wave structure to take advantage of it. 

 

That's it for now. Hope it helps some folks new to e-wave.


It's not the knowing that is difficult, but the doing. 


#9 da_cheif

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Posted 12 October 2017 - 11:11 AM

clx analysis will open your eyes    .....learning this volume based analysis and its application changed my financial life and was a big reason for my timer digest unequaled record.....there is a thread devoted to teaching this easy technigue which however requires complete devotion is available on my SI thread



#10 NAV

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Posted 12 October 2017 - 11:25 AM

 

 

Once the 2007 MACD top was taken out in 2104

 

Correction: Once the 2007 MACD top was taken out in 2013


It's not the knowing that is difficult, but the doing.