In a Sept 13th Trader’s Classroom lesson, editor Robert Kelley covers 4 stocks that are susceptible to the current historic seasonal tendency. He leads this lesson by showing two charts of Seasonal Tendency using data back from 1929 and 1998. See the intro to his video below. We hope it’s useful to you.
To get the rest of Robert’s Sept. 13th lesson, as well as 3 new lessons per week, check out Trader’s Classroom. Learn more about Trader’s Classroom now.
When an Elliott wave pattern develops, internal waves often relate to one another by a Fibonacci .618 ratio, a.k.a. the Golden Ratio.
Check out how our Interest Rates Pro Service used Fibonacci ratios to set a price target in T-bonds.
See how to use Fibonacci with Elliott waves inside Elliott Wave Principle: Key to Market Behavior.
This is a great question that we often hear. Let us show you how Elliott waves can help improve your trading. First up, trend recognition.
Get the full list inside How the Wave Principle Can Improve Your Trading.
See how Elliott waves signaled to our Crypto Pro Service that a rally in Bitcoin Cash was just ahead.
Triangle patterns offer some of the most compelling set-ups for Elliott wave traders.
They often occur in the fourth wave of a five-wave move. Elliott Wave traders try to identify the end of the triangle so they can pounce on the ensuing fifth wave.
Here’s what Frost and Prechter wrote about triangles in their classic book, Elliott Wave Principle — Key to Market Behavior. (Get your free copy here.)
A triangle appears to reflect a balance of forces, causing a sideways movement that is usually associated with decreasing volume and volatility. The triangle pattern contains five overlapping waves that subdivide 3-3-3-3-3 and are labeled A-B-C-D-E.
And here’s what it looks like in real life…
On June 26th, Nady Laymoud, EWI’s Pro Service Interest Rate analyst identified a triangle in 10-year Notes.
Notice how the triangle is in the fourth wave position and waves A, B and C have unfolded. Traders can expect waves D and E to unfold before expecting a swift breakout.
Result? Here’s what happened this morning…
Interest Rate Pro Service subscribers are now preparing for the next move in 10-years and other instruments. Get a forecast now.
Here’s a before and after story about the stock price of automaker Tesla. It's a perfect example of the power of Elliott waves.
On March 3rd, Global Market Perspective gave this chart to subscribers.
Take a look at the left side of the chart. See the five waves unfolding from Feb '22 to Jun '22?
To Elliott wave traders that indicates that the larger trend is down. So, after a countertrend bounce, the next decline is also likely to form the same five-wave pattern.
Now look at the right side of the chart. See the 1-2 red labels? You know what's next, right? Wave 3 down! And, according to Elliott wave guidelines, 3 is expected to be a strong drop, -- like March and April last year.
Result? See for yourself! Over the next 6 trading days, Schwab collapsed from $77 to $45 -- 41%! Now that's a third wave!
The May issue of Global Market Perspective just published and shows you 20+ 3rd waves that are either imminent or just starting. See the 3rd wave setups now >>
In this free video lesson Favio Poci from our Crypto Trader’s Classroom service reviews the five main Elliott Wave core patterns and focuses on the characteristics of the corrective structures.
Three times a week, your four crypto instructors deliver to your screen a new video lesson in Elliott waves and other technical analysis tools. You'll see many real-market opportunities, too – in Bitcoin, Ethereum, Litecoin, XRP, Cardano, Dogecoin, Binance Coin and other cryptos. Learn more about Crypto Trader’s Classroom now.
Worried about paying $300/sq ft for a pre-fab box?
Rising mortgage rates crushing your dreams?
Is it time to look at commercial properties?
Reasons are as varied as paint colors, but they all lead to one question:
“Can I use Elliott waves in the real estate markets?”
Real estate prices are subject to changes in collective psychology the same way stock prices are. For that reason, you can indeed apply wave analysis to the property market.
Our special report -- Home Prices: How Much Trouble Are YOU In? -- gives you compelling, Elliott-based analysis revealing where global real estate trends are most likely headed next. In chart after fascinating chart, you'll see key insights into future home prices that you won't find anywhere else. Read it now, free, with a Club EWI account.
EWI Head of Global Research Murray Gunn shows you the relative health of several major banks today. Watch to see how your bank stacks up...
Simply using the rules and guidelines of the Wave Principle can give us some great trading set-ups. Let’s begin with rule No. 1.
Wave two can never retrace more than 100% of wave one. It’s not that the market can’t go there, it’s just that if it does, you know one thing for certain – that wasn’t wave one and wave two!
Look at the figure below. We have a five-wave advance followed by a three-wave decline, labeled waves (1) and (2). Second waves typically retrace more than half of wave one, with a .618 Fibonacci retracement of wave one a common target. So in anticipation of a third-wave rally – a traders’ bread and butter – one could look to buy at or near the .618 retracement of wave one. OK, then what?
Well, your position is based on the idea that what you’re seeing is waves (1) and (2), and that’s valid unless that wave (1) origin is broken. If that’s the basis for your trade, then a breach of that point means your basis is gone, so at one tick below the origin of wave (1), you should probably be gone too! Time to reassess and look for the next opportunity!
Read Elliott Wave Principle by Frost and Prechter. DO IT TODAY, FREE!!
Extremes in stock market valuations set off alarm bells right before the Jan. 2022 peak in the S&P 500. Here are details from Robert Prechter’s eye-opening presentation at the 2022 New Orleans Investment Conference.
Absolutely unprecedented! These stock market related ratios skyrocketed in the years leading up to the January 2022 tops in the Dow Industrials and S&P 500.
Check out this chart and commentary from our Head of Global Research, Murray Gunn.
The chart below shows that the Federal Reserve has sharply increased its assets on its balance sheet in the last week, quantitative easing reversing the quantitative tightening seen since last year. Banks have swarmed to the Fed’s Discount Window, essentially where a central bank acts in its ‘lender of last resort’ capacity, surpassing even the usage seen during the Great Financial Crisis of 2008.
The question is whether this return of QE will continue or whether it is a one-off. The Fed meets this week so we can expect lots of volatility as the markets grapple with this potential U-turn in policy. Back in 2009, social mood was still in a high degree positive trend and so it allowed the Fed to print money.
If our Elliott wave analysis is correct, this time around it might not be so easy (pardon the pun). In fact, we expect the Fed and other central banks to become increasingly vilified as the bear market progresses.
Get instant access to Murray’s commentary, plus the latest interest rate forecasts via EWI’s Interest Rate Pro Service.
Fibonacci ratios when paired with Elliott can help you identify a high-confidence price range where the market might turn. The most common ratios (you'll see 'em again and again) are .618, .50 and .382.
Here it is in action. Taken from our European Short Term Update on March 10, editor Murray Gunn wrote:
EUR-USD seems to be tracing out an expanded flat wave B. Resistance sits between 1.0724 and 1.0783, the 0.382 and 0.50 retracements of wave A.
And, hey presto! Here's what happened just a few days later:
EURUSD hit smack-bang in the middle of Murray's range and reversed promptly!
Not every forecast works out like this, but many do. Like I said, it's important to have (time-tested) goals. ;)
Get Murray's forecasts for European stocks, bonds and of course, EURUSD -- 3 times per week inside our European Financial Forecast Service.
Our March Financial Forecast highlights a zigzag pattern in 3 major stock indexes: S&P 500, Russell 200 and the NASDAQ.
Here's how Elliott Wave Principle: Key to Market Behavior defines zigzags:
A single zigzag in a bull market is a simple three-wave declining pattern labeled A-B-C. The subwave sequence is 5-3-5, and the top of wave B is noticeably lower than the start of wave A.
In a bear market, a zigzag correction takes place in the opposite direction. For this reason, a zigzag in a bear market is often referred to as an inverted zigzag.
Zigzags in the March Financial Forecast:
No market approach other than the Wave Principle gives a satisfactory answer to the question, “How far down can a bear market be expected to go?” The primary guideline is that corrections, especially when they themselves are fourth waves, tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most commonly near the level of its terminus.
Watch Favio Poci, one of our Crypto Trader’s Classroom editors, address this question in this free, 6-minute video.
In our Crypto Trader’s Classroom, three times a week a team of veteran Elliott wave instructors bring you a new video lesson on how to spot new crypto setups in your own charts.
Each new video lesson uses real crypto charts and teaches you practical new skills you can put to work immediately.
A March 9 MarketWatch article stated that,
So far, jobless claims remain remarkably low and the economy is still adding plenty of jobs. Economists estimate that the U.S. gained 225,000 new jobs in February.”
Yet, the Dow dropped more than 450 points after the new jobless claims report.
Jobless claims are low, so stocks – and the economy – should go up, right?
Not so fast. Check out this 2018 video from EWI’s Bob Stokes:
Textbook Elliott wave patterns and real-life price patterns sometimes don't look quite the same. Real life, after all, is messy. But "messy" doesn't mean "unpredictable." Watch our Trader's Classroom editor Robert Kelley walk you through recent triangle wave patterns in AAPL and TSLA and show how to put them to use in real time. Get this free lesson now>>
If you know how to count to five, you can learn to how to spot the most basic Elliott wave pattern.
After five waves are complete, you can expect a move in the opposite direction.
Here’s an example of a completed five waves in Ethereum courtesy of Crypto Pro Service.
2/14 4:30 AM: "Bottom Line: On the lookout for bullish evidence from 1461.93."
Ethereum traded ABOVE $1700 less than 2 days later!
You can learn all about Elliott wave pattern recognition in our free online eReader of “Elliott Wave Principle: Key to Market Behavior.”
If you've subscribed to any of our services, taken a class with one of our instructors or even consumed any of our free content, you've more than likely come across the relationship between Elliott waves and Fibonacci. EWI's analysts often use Fibonacci retracements as a point of reference when forecasting a market's next move. Here's a very short explanation from Elliott Wave Principle -- Key to Market Behavior:
As we first showed in Figure 1-4, the essential structure of the market generates the complete Fibonacci sequence. The simplest expression of a correction is a straight-line decline. The simplest expression of an impulse is a straight-line advance. A complete cycle is two lines. In the next degree of complexity, the corresponding numbers are 3, 5 and 8. As illustrated in Figure 3-10, this sequence can be taken to infinity. The fact that waves produce the Fibonacci sequence of numbers reveals that man's collectively expressed emotions are keyed to this mathematical law of nature.
EWP goes on to explain the relationship in much greater detail -- along with The Golden Section and the meaning of Phi -- in Section 3. In section 4.1, you'll see an examination of Fibonacci time sequences and common retracement levels of various Elliott wave patterns. It's eye-opening stuff, to say the least.
Ah yes. The old can it or can't it conundrum, rearing its ugly head yet again. Is it a hard and fast rule? Are there exceptions? Are there nuances? Enquiring minds want to know!!
Well, you're in luck! Watch this free 6 minute clip where our Trader's Classroom editor Robert Kelley addresses this question.
One of the simplest technical analysis concepts and indicators to understand and use is the moving average. Basically, it smooths out the noise; at its simplest utility, price above a rising MA is bullish and price below a falling MA is bearish. And of course, you can get fancier.
One of the most popular methodologies is what is known as a moving average crossover ("cross" for the cool kids), where signals are given as a shorter duration MA moves past a longer duration MA, e.g, if a 5-day MA moves above a 20-day MA, it's taken as a bullish signal. Again, you can get fancier and there are nuances, but you get the idea.
And among moving average crossovers, the one known as the Golden Cross, where a 50-day MA crosses above or below the 200-day MA, is, well, the Golden Child of MA crossovers.
So, this year in stocks, with a Golden Cross having recently taken place to the upside, stock market bulls are encouraged to say the least. And rightly so, the Golden Cross has a decent record.
I asked one of my oldest technical analysis guys why I too shouldn't be unabashedly bullish.
"Ha!" he told me. "One of the very first backtests I ever ran (on my TRS-80 with 16K of memory and a cassette deck back-up) was using a moving average crossover on an hourly chart of the NYSE Composite. Would have been 1978 or so. Sucker KILLED during a rally! Easy street, here I come. Then the market stopped trending and went into a sideways mode. Nothing extreme, just sideways. Whipsaw city. I was the one who got killed. Lesson learned."
Bottom line? There ain't no free lunch -- including Golden Cross signals.
The new February Financial Forecast delves into the Golden Cross and notes several times when following it would simply have made you cross. Read that section now.
Ever been in a bad relationship and couldn’t figure out how to extricate yourself?
A couple months back, Blackstone limited redemptions for its $69 billion real estate fund. As the December Elliott Wave Theorist described it, “Unfortunately, some investors are discovering they can’t get out.”
Readers of Last Chance to Conquer the Crash are not surprised and have sidestepped this trap. Here’s what Bob Prechter wrote in Chapter 13, Should You Own Real Estate?
The worst thing about real estate is its lack of liquidity during a bear market. At least in the stock market, when your shares are down 60% and you realize you’ve made a horrendous mistake, you can swiftly get out (unless you run a mutual fund, pension fund, insurance company or other institution with millions of shares, in which case, you’re stuck). With real estate, you can’t pick up the phone and sell. You need to find a buyer for your house in order to sell it. In a depression, buyers just go away. Mom and Pop move in with the kids, or the kids move in with Mom and Pop. People start living in their offices or moving their offices into their living quarters. Businesses close down. In time, there is a massive glut of real estate.
What can you do? Easy! Just make a new plan, Stan – a plan that starts with reading the first two chapters of Last Chance to Conquer the Crash now, for free. It’s not too late to prepare yourself, your family, and your investments for the coming environment.
Just drop off the key, Lee – and set yourself FREE!
If you want to know if a market is about to turn, you may want to visit your local newsstand. (Is that even a thing anymore?)
This excerpt from the November 2022 Global Market Perspective shows how big exposure in mainstream media and an ending wave pattern can help you time the turn:
The U.S. Dollar Index continues to look like it's topping. The index is testing the level where wave (5) would equal wave (1), a common relationship... Bloomberg Businessweek published a cover highlighting the strong dollar, and Barron's followed with a similar cover less than two weeks later. The late analyst and EWI friend Paul Macrae Montgomery demonstrated over decades that specialist industry magazines sometimes highlight financial trends on their covers just as those trends are ending. His magazine cover indicator now supports our wave count for the U.S. Dollar Index.
The dollar traded under 102 two months later.
Global Market Perspective covers 50+ of the world's biggest markets -- global stocks, bonds, forex, cryptos, gold, oil, investor psychology and more. Click here.
Good poker players learn to read their opponents' "tells" - subtle signs in their behavior that tip off what cards they REALLY have. Good market technicians learn to do the same with oscillators - subtle signs in their behavior that tip off what the MARKET is getting ready to do.
Here's a great example from Charles Dow award winner and APSTU editor, Chris Carolan, regarding the ASX 200:
Australia - ASX 200 Index
The ASX 200 is holding on to recent gains while intraday momentum measures and the breadth oscillator are correcting. The ability of overbought indicators to correct themselves while prices move sideways is a hallmark of a strong trend. We remain intermediate-term bullish on the ASX 200. Market timers who attempt to catch short-term pullbacks are likely to find the market runs to the upside and does not give them a re-entry opportunity.
Carolan has been in the markets for nearly 40 years and YOU can read his analysis 3 times a week and get an education too. Click here.
Seasonal charts are another subordinate tool I like to use in conjunction at times with the Wave Principle to look for opportunities. Seasonals show us historical price tendencies over many years of data. Some markets/stocks are more seasonal than others. One approach I use is to note key turn dates on the seasonal chart for the upcoming year and record them in a spreadsheet. As the year moves on you have a heads up for potential turning points without having to look at the seasonal charts on a daily basis. If I’m counting a completed wave pattern into one of these date windows, it gives me a perceived added edge to a potential trade. Sometimes those perceived edges work out, and sometimes they don't!
Watch our Trader’s Classroom instructor Robert Kelley walk you through charts of S&P 500, VIX, VXX, AAPL, EUR/USD and more to show how to make seasonality work for you. Get this full 20-minute lesson now, FREE.
Trade secret time, kiddies! Want to know where most Elliott wave analysts get their first and best target from? This one little guideline from page 66 of Elliott Wave Principle, which says that:
Corrections, especially when they themselves are fourth waves, tend to “register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most commonly near the level of its terminus.”
Man, that’s a mouthful isn’t it? These guys must be super smart!
Nah, take a chill pill. See the green lines going thru the ends of waves 3 and 4? The area between them is the previous fourth wave span. That lesser degree stuff? Well, waves 1-5 complete wave (1) which is one bigger degree than any of its components, so the wave (2) correction ends here near wave 4 which is one lesser degree! It ain’t rocket science, folks!
Oh, and that bit about “terminus?” Another fancy name for the end of wave 4. And this works whether you’re looking at a 5-minute chart or a 50 year chart, or anything in between!
Done! Now you too can forecast like a pro, impress your friends and find fame and fortune! Get going!!
Every quarter, the mainstream media is full of headlines that spew the so-called “conventional wisdom” that good earnings equate to higher stock prices and poor earnings to lower prices.
Let’s see how that’s working out!
This morning, Intel announced weak quarterly earnings and the stock opened down 9%. OK, so that one makes sense.
BUT, at the same time, Amex announced that it missed profit estimates in Q4 and the stock traded….up 10%???
Wait, what? Seems like we might need some extra “guidance” on that one!
Robert Prechter, in The Socionomic Theory of Finance, has this to say:
Suppose you knew that corporate earnings would rise strongly for the next six quarters straight. Would you buy stocks? Figure 10 shows that in 1973-1974, earnings per share for S&P 500 companies soared for six quarters in a row, during which time the same companies’ stock prices suffered their largest collapse since 1937-1942. This is not a small departure from the expected relationship but a history-making departure. Moreover, the S&P bottomed in early October 1974, and earnings per share then turned down for twelve straight months, just as the S&P turned up! A speculator with foreknowledge of these earnings trends would have made two perfectly incorrect decisions, buying near the top of the market and selling at the bottom. Such glaring exceptions to the idea of a causal relationship between corporate earnings and stock prices pose a challenge for conventional economic theory.
In real life, no one knows what earnings will do, so no one would have made such bad decisions on the basis of foreknowledge. Unfortunately, the basis that investors actually use is estimated earnings, which incorporate analysts’ lagging trend-extrapolation bias (see Chapters 17 and 21), making their investment decisions often even worse timed than advance knowledge of earnings would allow.
If you’re an independent-thinking investor and want to understand what really drives the markets, read The Socionomic Theory of Finance now.
In April 1984, before many of us were born, Bob Prechter won the US Trading Championship, Options Division, returning 444% in a 3-month period. How did he do it?
In this free report, “What A Trader Really Needs to Be Successful,” Bob lists his top 5 tools and traits to trading successfully. Coming in at #1 is a method.
Here’s what Bob says about finding a method:
“I mean an objectively definable method. One that is thought out in its entirety to the extent that if someone asks you how you make your decisions, you can explain it to him, and if he asks you again in six months, he will receive the same answer. This is not to say that a method cannot be altered or improved; it must, however, be developed as a totality before it is implemented. A prerequisite for obtaining a method is acceptance of the fact that perfection is not achievable. People who demand it are wasting their time searching for the Holy Grail, and they will never get beyond this first step of obtaining a method. I chose to use, for my decision making, an approach which was explained in our book, ELLIOTT WAVE PRINCIPLE. I think the Wave Principle is the best way to understand the framework of a market and where prices are within that framework.”
Check out this free Introduction to the Wave Principle to see why and how Elliott waves work.
What's the best leading indicator for the economy? That's easy: The stock market.
Even so, other variables can also serve as leading economic indicators.
And, as you can see in the chart below, there are times when a measure such as the Conference Board U.S. Leading Economic Index can be valuable indeed... like right now.
Similar readings to today in the Conference Board LEI slightly preceded or accompanied all eight recessions since the 1960s but say little about its ultimate severity. Many economists today say they expect a recession, but most don't see it lasting the full year and don't think it will be so bad. But based on what? After all, these same economists didn’t even SEE a recession coming at the beginning of last year.
At EWI, we look at all these factors through the lens of the Elliott Wave Principle, which provides the backbone of our analysis.
The chart above was included in our December Elliott Wave Financial Forecast. To read the commentary – and the rest of the issue – check out our Financial Forecast Service.
If you’d like to learn more about the Wave Principle before diving into a service, our free digital copy of Elliott Wave Principle: Key to Market Behavior is a great place to start.
Elliott Wave Principle defines a triangle as a sideways movement usually associated with decreasing volatility. Sounds kinda boring. But in fact, it’s just the opposite -- this Elliott wave pattern is a favorite among traders.
Why? Because triangles are often followed by a swift, sharp move and their structure makes them ideal candidates for low risk/ high reward set-ups!
Check out this triangle pattern our Cryptocurrency Pro Service team spotted in Ripple (XRP):
XRP – Intraday Update: 1/18/2023 4:46 AM
We expect wave ((e)) to remain below 0.3987 and set the stage for a post-triangle thrust to take prices below 0.3766...
Here's what happened:
Read more about triangles and other wave patterns in our free, online reader: Elliott Wave Principle: Key to Market Behavior.
Which one of the core Elliott Wave patterns implies such a reversal?
Want to learn more? Click here to read Elliott Wave Principle - FREE >>
As the calendar rolled from 2021 to 2022, Global Market Perspective warned that stocks and bonds were setting up for major declines. Our analysts based these forecasts on completed Elliott wave patterns, accompanied by record-setting extremes in investor sentiment.
Here’s what happened during 2022, as published in the January 2023 issue of Global Market Perspective.
Global stock and bond markets lost more than $30 trillion. This Bloomberg chart shows 20 years of data but, according to the Financial Times, the past 12 months were the worst ever for a combined portfolio of stocks and bonds with data going back to 1871. (FT, 12/29/22)
Global Market Perspective gives you research, analysis, and forecasts for every major market in the world. Here's how to get it on your screen in minutes.
The MO of Motive Waves
When R.N. Elliott discovered the Elliott Wave Principle almost 90 years ago, he noticed that markets unfold in waves. Today, his unique observations are applied world-wide.
From Elliott Wave Principle – Key to Market Behavior (read it free)
Motive waves subdivide into five waves and always move in the same direction as the trend of one larger degree. They are straightforward and relatively easy to recognize and interpret... Their structures are called "motive" because they powerfully impel the market.
Once the five waves are complete, you can expect the market to move against the larger trend. Let’s look at this BITO (Bitcoin ETF) example from our Flash Services:
Our EWAVES software (which powers Flash alerts) identified a completed five-wave move in Bitcoin and sent subscribers a recommendation on January 10, at 11:05 am to buy BITO at 10.94 with a stop placement at 10.52.
The recommendation was updated on 1/17 to adjust the stop position to 11.50.
BITO is sitting at 13.54 as I type.
Flash will continue to monitor the recommendation and update subscribers through to completion.
If you can count five completed waves on your price chart, that’s a good sign that opportunity lies straight ahead!
Questions, we get questions!
Q: I recently came across a chart where the labeling appears to show a Wave v that is longer than a Wave iii. I was under the understanding that the third Wave was always the longest? Would you please explain that rule?
A: Wave 3 can never be the shortest wave, but it does not have to be the longest. If wave 3 is shorter than wave 1, then wave 5 must be shorter than wave 3. Read Elliott Wave Principle – Key to Market Behavior to review the rules and guidelines. The entire book is free here.
Why are Crypto Exchanges Collapsing? And What’s Next?
News doesn’t move markets. Markets move the news. And markets aren’t random; they’re patterned. The Elliott Wave Principle describes that pattern.
Here’s a recent example of how Elliott waves helped prepare subscribers for the recent crypto exchange debacle. Here’s what our Elliott Wave Financial Forecast said in August 2022 ...
In bull markets, financial exchanges are celebrated houses of commerce enjoying popular exaltation. In bear markets, they are necessary evils that need to be curtailed. This very dependable correlation is the reason we’ve tracked a dramatic turn in the valuation of crypto exchanges over the course of the last 15 months. In classic fashion, crypto exchanges bathed in celebrity associations at the final highs. Some attached their names to major sports venues such as the FTX Arena in Miami and the Crypto.com Arena in Los Angeles. The share price of each of those exchanges is down significantly in 2022. The chart on page 7 of the July issue shows declines of more than 90% in Voyager Digital and Coinbase Global from early 2021 when Elliott Wave Financial Forecast identified them as candidates for steep falls. These selloffs attest to the potential for further declines in crypto…
The Investor Psychology section of this month's Elliott Wave Financial Forecast provides updated analysis on crypto exchanges. As one EWI employee put it, "The crypto section of FF is worth its weight in anything other than cryptos!!" And a long-time (decades) subscriber said: "Goddamighty, Steve and Pete have outdone themselves on the Investor Psychology section. Congrats to the guys." Needless to say, you'll want to read this excerpt.
A Textbook Third-Wave Setup
One of the most exciting wave setups you can spot on a chart is a third wave. Even more exciting? A third wave at multiple degrees.
Elliott Wave Principle defines this as an extension (get your free online version of Elliott Wave Principle):
“An extension is an elongated impulse with exaggerated subdivisions... In the stock market, the most commonly extended wave is wave 3.” – Section 1.6
Check out this EURJPY call from our Currency Pro Service analyst, Favio Poci, to see the power of third waves in action:
EURJPY: 8/25/2022 9:43 AM
Outlook: Possible end of a three-wave corrective pullback in wave ((ii)). Looking for bullish evidence in wave ((iii)).
And here’s what happened next:
Ready for Takeoff!
You've seen those moments on a chart when the price first swings wide, then less so, then even less... until -- boom! -- the market explodes higher or lower.
Well, you've probably just spotted an Elliott wave pattern called a "triangle."
Elliott Wave Principle defines a triangle like this, "A triangle appears to reflect a balance of forces, causing a sideways movement that is usually associated with decreasing volume and volatility. The triangle pattern contains five overlapping waves that subdivide 3-3-3-3-3 and are labeled A-B-C-D-E."
What follows a triangle is where the real opportunity lies. "Elliott used the word 'thrust' in referring to this swift, short motive wave following a triangle." - EWP
Here's an example in Bitcoin:
A Wave Counting Shortcut
This wave counting tip comes straight from our 3x per week Short Term Update:
"One of the most useful shortcuts we learned quickly when we were first studying the details of the Wave Principle is to simply count the number of waves in a move to determine if it is an impulse or a correction. Impulse waves always subdivide as 5 waves, or (+4) 9 waves, or (+4) 13 waves. Corrective waves subdivide as 3 waves, or (+4) 7 waves, or (+4) 11 waves, unless it is a sideways triangle. It’s a quick way to peruse many charts without having to spend time delving into the variants of the subwaves to determine which of the waves is the extended one."
"The 90-minute range chart of the [S&P 500] shows how it is applied."
Short Term Update gives you forecasts for U.S. stock indexes, as well as global indexes, bonds, precious metals, the U.S. dollar and the economy. Learn more.
Want to learn more about the Wave Principle? Get your free digital copy of Elliott Wave Principle today.
Wonders to Behold!
"Third waves are wonders to behold. They are strong and broad.
"They usually generate the greatest volume and price movement and are most often the extended wave in a series."
-- Elliott Wave Principle, Frost and Prechter, p. 78
Our new, August Global Market Perspective identifies 33+ potential 3rd-wave setups -- across multiple global sectors. They are either just starting or are about to.
Here’s a 3rd wave setup from the new issue in Japan 10-Year Bond Yields:
Want to learn more about the power of third waves? Get your free digital copy of Elliott Wave Principle.
And now AMAZON Falls Into The Gap — And Then Some!
Third waves normally contain the strongest price action and, therefore, it’s common to see price gaps like the one AMZN experienced in late April. And, just like Billy Mays told us for years, “But wait, there’s more!” Here’s how Jeffrey Kennedy used where gaps usually occur in a wave pattern to foresee the NEXT 400 points down in Amazon.
Trader’s Classroom subscribers received this on 5/5. The most recent TC lessons include analysis of NFLX, AAPL, SBUX, JPM and more. Get instant access now.
Want to learn more tips on how to use Elliott to trade? Get your free copy of Elliott Wave Principle.
As our Senior Trading Instructor mentions in the Crypto Trader’s Classroom video below, “Whenever I’m labeling a price chart, I always start simple, and if necessary, move to a complex pattern. I always start with the 5 core Elliott Wave patterns.”
He explains why that’s important using an example in the altcoin Decentraland (MAN).
Want to learn more tips on how to use Elliott to trade cryptos? Check out our free resource, Crypto Trading Guide.
Did you struggle with math as a kid? Interested in technical analysis, but not exactly quantum mechanics material?
Can you count to five? Do you know the alphabet through the letter C?
Well, look no further. Have we got a methodology for you.
5s and 3s. 5s and 3s. That’s all you ever need to know. Here it is, summed up in one graph – THIS is what markets are all about:
Want to learn more? Click here to read Elliott Wave Principle - FREE >>
Earlier today, one of EWI’s analysts sent this seemingly enigmatic phrase to two other EWI analysts. But it’s not enigmatic at all, it very specifically indicated that the market was about to reverse. (Said market promptly dropped over 1.5% in the next couple hours.) That’s great if you get the lingo. If you don’t, but you’re ready to be one of the cool kids, here’s a resource you should check out - and it's free! Elliott Wave Principle >>
Elliott Wave Principle says this about the depth of corrective waves: “The primary guideline is that corrections, especially when they themselves are fourth waves, tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree.”
Now, check out this chart of Costco (COST) - as posted in our Flash Services. See that large grey-ish wave 4 over to the right? Now train your eye back to the left. See the red 3 and the red 4? (How can you not with the convenient lines we’ve added?) That’s the “span of travel of the previous fourth wave of one lesser degree.” Or, as they say in France, voila!!
And hey, as long as you’re at the store, grab me a few cases of something. I don’t care what; I just love volume discounts!
PS – COST rallied to over $600 by early April. That’s a LOT of paper towels!
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Here are two great examples of gaps occurring in one of the three most common places they are found – in the middle of third waves. (Chart courtesy of our U.S. Intraday Stocks Pro Service.)
Know the other two most likely places that gaps occur? Maybe you need some more education! Read this - FREE: Elliott Wave Principle.
We have a tendency as investors/humans to overcomplicate things. Elliott waves are no exception.
While it takes time to truly master the intricacies of Elliott, you can learn to spot Elliott wave patterns right away.
Let’s start with the two basic modes of Elliott waves, impulse (or motive) and corrective waves. Impulse waves go in the direction of the market trend, while corrective waves go in the opposite direction.
There are three types of corrective wave patterns: zigzag, flat or a triangle.
Today, we’ll zero in on the corrective pattern with a funny name: the zigzag.
Here is a description from the benchmark for Elliott waves, Elliott Wave Principle:
A single zigzag in a bear market is a simple three-wave rising pattern labeled A-B-C.
And here’s a real-market zigzag example in silver from our March 28 Short Term Update.
"Silver's rally from $24.44 on March 16 to $25.89 on March 24 is in three waves. Three waves unfold counter to the next larger-degree of trend, so the "three up" means that silver’s larger trend is down."
Your Next Step: Learn how to spot patterns in your charts with FREE access to Elliott Wave Principle.
Well, we're glad you asked because we just happen to have a great example right here!
That's the way an Elliott wave practitioner describes that part of an impulse wave where the market is simply going vertical. That's a great thing if you're on the right side of it and it's a bad thing if you're on the wrong side of it. (Trust me on that!)
Here's a picture in the Nasdaq from our Pro Services Stocks Intraday Services.
Update: 3/23/22 1:03pm
Here's another timely example of third-of-third waves at multiple degrees. This time in Cardano from our Crypto Pro Service...
03/18/22 12:30 PM ET (Last Price 0.85): Trend remains up from 0.75. Within that context but at rather short term very small wave degree as long as 0.82 nearby structural support remains intact, the existing preferred wave interpretation firmly favors price "going up a whole bunch real fast", doing so in a robustly third-of-third fashion at four wave degrees of significance.. Said another wave, that's a bevy of coiling one-two's poised to be unleashed with rather impressive impulsive buying pressure... if 0.82 structural support earns respect very near term. - Al Graham for Jim Martens
Chart from 03/23/22 2:07 PM ET:
Cardano has moved from 85 cents to almost $1.09. Now that's third-of-a-third action. Every wave trader's dream.
Your Next Step: Read how to spot thirds-of-thirds on your charts. It's all in Section 1.1 of Elliott Wave Principle. And it's free.