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Sunday, January 26, 2014

Market Report: Dow Crashes 450 in 2 Days

Anyone reading that headline would think it's some sort of surprise to most traders that the markets crashed 450 points in 2 days, but for us a wavepatterntraders.com we have been looking for a reversal in the markets for a few weeks and it was only a matter of time before things reversed. So it's no surprise to us, it was expected and I expect much more if a top is in place.

Is this the start of the large move lower that I am expecting? Well to answer that question honestly, it's too early to say, but regardless of the answer, what we can say for sure is that if it is the start of something sinister, we will be riding it lower.

In my last few articles I left readers with the idea of a potential JPY carry trade reversal. The analysis holds true today as it did the end of last year. I am a big believer that if the JPY carry trade unwinds, we will see much more downside in the markets, it will make last week look like a picnic, if the markets have indeed topped out as we expect they have, then its only just getting started. I urge all bullish traders and investors to pay attention to the JPY carry pairs, particularly USDJPY, those that understand the drivers of the market should be fully aware that the past 12 months it's the JPY carry trade that has helped stocks push to current levels.

Just as the markets move higher due to the borrowing of JPY, they can easily reverse lower as margin calls get called in as the selling forces more and more sellers to cover those margin calls. It's a self-fulfilling spiral that once it gets going is very difficult to stop until the sellers have been washed out.

SPX long Term

Preferred Idea

SPX Long term Preferred Count Chart
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I have posted this chart before, but as a recap I will post it again. If the trend from the March 2009 lows is only a 3 wave move, then the likelihood is that it's a B wave of a possible expanded flat pattern.

For those traders that argue that the March 2009 lows will never be seen again, I merely suggest you check the history of the markets, 2 examples are the 1966-1974 bear market, the market made a new high in 1973 and then made new lows, the other example which many investors are probably aware was the decline from 2000-2003, which made a new all time high in 2007, then subsequently crashed under the 2002/3 lows.

I think it's very naive to outright say there is no chance that the US markets can't revisit the March 2009 lows.

Look at it like this, when Gold was at $1900, I bet many thought it was a sure bet 100% that Gold was going to $2000, so at the time if you said Gold seeing $1180 was a possibility most Gold investors would have laughed in your face, 2 years on and Gold investors are not exactly pleased.

Put yourself in the position of those Gold investors, do you think that US stocks will be going up indefinitely?

And there is no chance of a move lower?

Bullish Alternative Idea

SPX Long term Bullish Alternative Count Chart
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Even if I am wrong and this will end up being a 5 wave impulse from the March 2009 lows, that still implies we will see a 4th wave pullback, so a large move back towards Dow 14500, SPX 1550 should be seen. Do you really want to be caught holding the bag and suffer a pullback to 1550SPX?

Short Term

SPX Dhort-Term Chart
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The 1st bearish clue would be a 5 wave decline from the highs; Friday's mini crash suggests it's still inside a small 3rd wave, so we want to see a 4th and a 5th wave to complete a 5 wave impulse wave, if that is seen it will be a strong clue of a trend change, the minimum target would be 1550SPX.

Whilst we don't have any crystal balls we do have a mine in the sand, if the market continues lower as we expect then we will look to see the bounce for a 4th wave and look lower for a 5th wave, then we should see a corrective 3 wave bounce as shown.

All is not as it seems

If you look around the globe and "under the hood" you can see all is not as is seems, whilst some US markets have made new all time highs, that can't be said for many other markets.


XLF Chart
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If you look at the XLF we can clearly see that it's lagged the SPX and by any criteria you want to choose in my book that's a bear market rally. We can clearly see it's a 3 wave bounce, so by definition it's a corrective bounce in Elliott wave terms, furthermore it's virtually met its measured move target where [C] = [A].

SPX versus XLF Chart
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Not exactly screaming a bull market is it?

We think the XLF could be a great set up to sell, if it's just put in a peak, and topped, then I am expecting a strong move lower. That's one sector I suggest readers watch for weakness.


NYSE Chart
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The NYSE is a very important US market and is often over looked, but as we can clearly see its only "just" tested its Oct 2007 highs, if that's a simple double top, then we could be on the verge of a strong move lower, again another market I think investors and traders should be watching.

Do you notice the look? It appears to be in 3 waves and only just above the measured move target where [C] = [A], so whilst the SPX and DOW have got all the headlines if you look around thins are not what they seem.

Around the world

What about other markets that "used" to closely follow the US markets?


CAC 40 Chart
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That sure looks like a 3 wave bounce to me, if you are an Elliottician and reading this, I will gladly debate the merits of a potential 5 wave move from the March 2009 lows, because I can't find a way to label that even remotely as a potential 5 wave impulse wave, it's a clear 3 wave move, so in Elliott wave terms a corrective bear market rally.

Incidentally we think this a great market to look to sell and if we can count a small 5 wave decline from the highs then we have a strong clue of a trend reversal, I am targeting 2500, so plenty of downside.

There are many other markets and stocks that suggest the move from the March 2009 is a 3 wave bounce, a 3 wave move is important to Eliotticians as it suggests it's a counter trend bounce.

So you are probably thinking, well you have just picked the markets to curve fit your bias. Why don't you pick a market that has made new all time highs?

Let's do that, what about the DAX, is that ok with you?


DAX Weekly Chart
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Do you notice the look; it sure looks like a 3 wave move to me. Do you see a 5 wave move there? Furthermore it is only just above the measured move target where C = A.

So whilst it's made a new all time high, it can be considered a B wave of an expanded flat pattern and if the pattern is correct we should see a strong move lower.

DAX Monthly Chart
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I have been targeting this box area for a few months, but if the DAX fails to continue higher and we see a closing print under the top of the box, I would consider that as a bearish sign, especially if we see a bearish candlestick such as a shooting star or a bearish engulfment, on a monthly scale that's a strong signal.
Now let's look at what is happening in Europe.

DAX versus CAC and EURSTOXX Chart
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The CAC and EURSTOXX50 sure don't look like a bull market to me, what do you think?
So having followed each other for years, we finally see a divergence between the DAX and the rest of Europe; I would say that's a pretty convincing statement to say something is wrong with the move in the DAX.

Whilst we will trade the markets both long and short, when you look at the bigger picture around the rest of the globe, both in stocks and other closely linked markets, it sure don't look like a bull market in many other sectors and world markets.

If you are interested in trading with a bunch of traders that don't drink the "cool aid" and looking to actually find trades to make $$, try us out, we offer a trial now for $9.99 for 1 week, if you don't like the site, you have no future commitments.

We are traders that trade for a living, not newsletter writers that have no "skin in the game" when we make mistakes we loss $$ just like you. You can rest assure no matter if its stock futures, forex or commodities we will always find something to trade with clear risk/reward trade.


The markets potentially have a peak in place, the evidence last week was encouraging for the ideas we have been using, however we need to see a 5 wave decline 1st from the all time highs, until we have that we don't yet have a strong clue of a trend change, if we do see more downside, it's likely to be much larger move that many think, with so many traders now addicted to buying the dip, Its sure to surprise a few traders, as it did last week.

Until next time,

Have a profitable week ahead.

Sunday, January 12, 2014

Elliott Wave Course

I have been asked a few times if i could arrange something to help with traders that have some knowledge of Elliott Wave but are struggling with the smaller details, the intricate details of Elliott Wave.

So as i have access to web conferencing software, i have decided that i will try arrange something if there is enough interest:

The course would be for around 4hrs and it would be held over the weekend , either a Saturday or Sunday.

Course content would include something like this

1) What is a WXY correction? What is an ABC, whats the difference? etc
2) What do Elliotticians mean when the say things like 12, 12 or 1x1
3) How to go about counting a suspected correction and most importantly, how to trade a correction and setup the trade for the next move?
4) Common Fibonacci relationships for each different waves etc
5) How to spot where you are on a particular chart, and what are the likely ideas going forward
6) Channeling techniques
7) discussing the various corrections, WXYZ WXZ. Ending diagonal, triangle etc

I can adjust the course to suit, if i get some idea of the issues beforehand people have with using Elliott Wave

I am sure i can think of some other ideas, but the basis of the course is the fill in the missing gaps that many budding Elliotticans have.

This is not for traders that want to learn Elliott Wave, you need to have some experience already.

If you have read the books, even saw the videos on You Tube that i have recommend and still confused on some areas of Elliott Wave, then this course would be for you.

Videos that i recommend here:  http://www.wavepatterntraders.com/topic/1343-elliott-wave-videos/

I am initially trying to get an idea of the numbers that would be interested.

The course duration would be around 4 hours, 3 - 3 1/2 hours to discuss the areas that are a problem, then a question and answer session at the end for around 30-45 mins

We could even discuss some current markets if we have some time

The price would be $100 each person

This is your chance to ask a professional Elliottician, someone that has used Elliott Wave for a long time and made many calls.

So if you are interested could you let me know, and let me know some of the problems you have, it will help me finalize the details of the course, then i will put together something and announce a date and time.

Please send me an Email to Enquires@wavepatterntraders.com

Elliott Wave Analysis of Crude Oil (CL)

Is it time for the bears to be cautious?? I think so.

Way back in August of 2013 i was very vocal on Twitter about an impending top in Oil, it seemed the media had finally got on board the Oil story. Usually when the media is bullish on a market its close to a top.

True to form the media did not disappoint, stories about $150 oil were common place, the more Oil rallied the more traders were bullish. That's exactly what i want to see when i look for a peak on any market.

Although its not a case of just taking the other side of the trade willy nilly, there has to be the right right Elliott Wave structure.

Around August 9th 2013 i posted this chart, i was still looking for a move towards $112-115.

We at Wavepatterntraders.com were looking for the opposite side of the trade, as Oil was moving higher i was telling members that this will be a top that will surprise many traders when it reverses.

The proceeding series of waves appeared to be a small triangle, so we wanted a spike, until we saw the spike we could not get bearish. As price pushed higher above $110, it was time to be looking for a reversal.

The initial drop was ugly to say the least and caused me some issues, i was still toying with the idea of a potential minor higher, but i presented this count for members that wanted to take a speculative short side bets against the last high at $112.24. That trade turned out to be a great trade.

A few members have rode most of the decline.

Low risk, high reward is what we are all about, looking for ideas no matter what market, if we can count it, we can trade it.

After a bit of back and forth, (including a possible setup to move above $112.24), it finally broke the $106 area and finally confirmed the bear idea, it was then aggressive shorts could be put on as members had a clear line in the sand to use as a stop (blue line).

Fast forward we have now hit those $92.00 targets i set back in Sept 2013. so its now time to be cautious on the market. I am not as bearish as i was near $112, seeing a potential 5 wave decline has me very cautious about seeing a rip your face off short squeeze to burn some of the late to the party bears.

NB: Long term ideas may change but over the coming years i am still targeting a move under the 2009 lows around $30, but the moves in between will still need to be counted and traded.

If something more bearish happens then we will adjust our waves counts and follow it lower, but having met our targets, we are cautious now.

Sentiment has now turned bearish, the complete opposite to when Oil was trading near $112.

I think there is a strong case to suggest a 5 wave decline has been put in from $112.24, although its a bit tentative atm, staying above $92.00 would help the bullish case.

If wave [1] is complete then i am targeting a move towards $100-102 for wave [2]

Are you interested in following our ideas? Why not take a trial for $9.99, that gives you access for a week to the whole site, although if you want to follow Oil, Gold & Silver that's just $15.00 a month, yes access to charts like this can be had for just $15.00 a month.

Can you really afford not to be without quality analysis?

Saturday, January 11, 2014

BRK Vs SPX (Where Buffett goes so does the SPX)

The title says it all.

I am not sure who leads who but the one thing i want to point out is that BRK is basically the SPX, well it has been from the 2009 lows.

If you overlay both markets you can clearly see that.

So that brings me to the point of the post.

If you look at BRK it appears to have failed to push to a new high, i was actually expecting it to move higher in alignment with the SPX moving towards 1850SPX, but we may have a truncation in place.

The prior price action appears to be a small triangle, which i suspect is in the position of a 4th wave in a 5 wave sequence from the 2011 lows. If BRK has just truncated, and we see more weakness, then it should not be long before the SPX follows based on the correlation.

My primary idea is this is a simple 3 wave bounce from 2009 as shown in black, my alternative idea is that the high we just saw is wave [3]. So i am still expecting a pullback towards $100 (BRK.B) if the idea in blue.

If BRK pulls back then by default the SPX should/will pullback.

Seeing $100 on BRK.B is around 15%. So if we slice 15% off the SPX that's around 1550-1570 SPX which is the target i would be expecting for my alternative idea on the SPX (not shown).

Until next time,

Have a profitable week ahead.

Monday, January 6, 2014

Market Report: US Stock Markets Still Setting Up


Short term

We went into this week looking for a short term top for wave [iii], the late day spike on New Year's eve appeared to give us the small spike from a small triangle, so it set up for a reversal this past week for wave [iv]. My preferred idea is that this is still in wave [iv] and a new high is still to come, although there is an alternative count that suggests the peak is in place for wave [v] of 5, however I would need to see a strong decline under 16200 to suggest a reversal.

So going into next week I am still looking a bit lower for wave [iv], where we will look to get long for a move higher once the market meets our targets.

YM Before Chart
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YM After Chart
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We are still targeting the 16300 area for wave [iv], so a bit a more downside is ideally seen early next week, then setup for a move higher for wave [v]. Although I am still looking for a major peak, I would prefer to see a minor new all time high first before setting up for a large decline.

Long term

I am still working 2 ideas from the March 2009 lows, both ideas suggest a short term top should be close and set up for a large move lower towards to at least 14000-14200. The bullish idea shown in blue suggests a pullback for a large 4th wave, the bearish idea suggests the move from the March 2009 lows is coming to an end, although at wavepatterntraders we focus on actually trading to make $$$ not hero calls, whilst I am a fan of having some long term plans, the real trading is still done on 60 and 240 min charts.

YM Long Term Chart
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In my last article I wrote about the potential for the JPY carry trade to unwind. The past week we saw some weak price action on the JPY pairs, if a peak is in place on Japanese stocks and the JPY pairs then I suspect that is going weigh heavily on US stocks. So it's important to watch the Japanese markets over the coming days & weeks.

This past week we finally saw some decent moves in the markets, if our ideas work out the way we want things are just getting started and a significant move lower is expected.

The moves we saw on US markets, EURJPY, GBPJPY and USDJPY are nothing compared to what I am expecting over the next few months, I am looking for some huge moves in the markets, exactly the conditions traders need to make $$.

Until next time,

Have a profitable week ahead.

Saturday, January 4, 2014

Elliott Wave Analysis of GBPJPY

Potentially this has finally ended a 5 wave advance from the lows made on 9th Oct 2013. From the last swing high at 174.82 there is a 5 wave decline, so I am looking for a 3 wave bounce to around 173-173.50

That can set up for a strong break lower towards 168-166

Stops need to be put at the last swing high 174.82

This looks a high reward trade providing we see a 3 wave corrective bounce, it MUST remain under the prior swing low of 174.82 as well as bounce in a corrective manor.

A strong break above 173.50 would be a caution for the bears, but this current bounce is the key aspect of this trade set up.

Friday, January 3, 2014

Elliott Wave Analysis of GBPUSD

Post taken from the forum

Please note i don't post "after the event" marketing shots to show you how good we are, we try to find trade setups like this everyday.

I see little point in showing you shots after the event, its just marketing, if you are going to post those sorts of shorts at least show the next set up. Unless someone can benefit in "real time" then its all marketing, only showing the ideas that work out.

Win, lose or draw, i put am confident in the ideas, to put the ideas out BEFORE the expected move and explain how to trade them. We know what we want to see, and we know where our risk is.


The lack of a new low has forced me to adjust the initial start to a small LD for wave [i], thereby realigning the idea

The sideways price action is not fitting with the initial decline, so it appears we are now in a correction to the decline from 16602

I am looking for a reversal between 16470-16510, we know there is HUGE resistance at 16480

So a 3 wave bounce from 16409 into the 16470-16510 are can offer members to get short, stops need to be put at 16602

The key is that we need a 3 wave bounce from 16409, target towards 162 then 160

Wednesday, January 1, 2014

Elliott Wave Analysis of DAX (short term)

Short term it appears that this is close to ending wave [iii], so a pullback should be close for wave [iv], i am targeting around the 9500-9450 area, although it will be decided on the form of the decline.

Once wave [iv] is in place we should then see a new high for wave [v] where upon a large decline is likely setting up to at least 9000, much more if my primary idea is correct.

The market is so weighted to one side and whilst we have been trading this current move to the upside i will be advising to be looking at long term puts once we can see a 5 wave advance completed from 8985.

I will be getting very aggressively short at the end of a 5 wave move from 8985, although short term i am looking to be buying some short term calls and get long on the end of wave [iv] and trade the 5th wave to new highs.

A strong decline under 9400 starts to be a concern but only if its a strong impulsive decline, then the bulls should most definitely have cause for concern.

The ES is virtually the same idea.