Sunday, August 4, 2013

Elliott Waves on DJIA

In my previous post, I mentioned the DJT indicates that we will still have some room to move upwards in DJIA.  This week, we will take a look at DJIA with Elliott waves.

This is the 5 waves that I marked on DJIA.  It seems like we are already at the end of wave5.  That means we are towards the end of the up cycle and should expect some correction.  However, anyone with some basic knowledge of Elliott waves should be able to tell that my marking is wrong, especially for wave3.  It is the shortest of 1, 3, & 5 in the chart, so my marking is invalidated.  Then where are we now?  I will guess we are somewhere in wave3, ie, we are still in the middle of a growth cycle.  We still have some room to move up, assuming March 2009 is the beginning of the new up cycle.

In this exercise, I also find that Elliott wave theory is fantastic, but just as what we say about the Mathematicians, they always tell us something that is true but useless.  While we are in the wave, we couldn't tell with great confidence where we are; by the time we are able to tell and demarcate the different waves correctly, the show is already over.  Money to be gained has been gained, money to be lost has been lost.  Marking the Elliott waves correctly on hindsight doesn't benefit us, and history will repeat itself anyway.

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