Dow 10,000

HolyGrail - I suppose one could make a similar argument about most any technical indicator or chart pattern. Each has produced a probability of success and failure in the past.

Although I do not have hard statistics on the WW pattern, anecdotally, in my experience the WW pattern is valid and in the past has a produced reasonable success rate, certainly much higher than the 1 in 10 you mention.

On the EW .vs. WW comparison, the originator of the pattern is careful to point out WW has no direct relation or dependence on EW theory. There are no fib relationships or wave counting variants. With WW the market structure either forms the 5 overlapping waves or it doesn't. WW is a distinct structure, it does not attempt to fit or explain the broad myriad of market behavior.
 
Quote from TrendPro:



On the EW .vs. WW comparison, the originator of the pattern is careful to point out WW has no direct relation or dependence on EW theory. There are no fib relationships or wave counting variants. With WW the market structure either forms the 5 overlapping waves or it doesn't. WW is a distinct structure, it does not attempt to fit or explain the broad myriad of market behavior.
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I never said it was elliott wave theory. I just said they go hand in hand. One either moves from elliott to wolfe, vice versa, or both. Everyone wants to be able to predict the unpredictable. I guess that is what keeps those people that follow any type of wave happy, because you can always find instances of success. Both elliott and wolfe are waves where you can say "wow it was right" but only after the fact. Their predicting ability SUCKS.
 
HolyGrail - I agree, and that is why I have never warmed up to EW, it's just to slippery (arbitrary) in actual use. The WW pattern just seems very natural to me, similar to a bull or bear flag might be to you. Perhaps you see a nice bounce off a fresh low in a downtrend and just say, yeah thats a nice looking bear flag.

Would you agree with the basic channel lines on the weekly chart ?

If so, what is your expectation, if any, of price now that the market is testing the upper channel line ?

As my initial posting here about a change in trend was not based only on the WW pattern, allow me to give you a little more evidence consider. Look at a 6 month or 1 year daily chart of the $VIX. Notice the steady downtrend in volatility. Compare this trend of declining volatility with where we are on the daily and weekly charts of the Dow.

In my experience, this is a flashing red light warning of market apathy (the lack of fear), and an impending (possibly imminent) shift of sentiment from the nearly 100% bullish sentiment we see today to a much more bearish tone ahead.
 
Quote from TrendPro:
The final wave 5 push up through the upper channel line is the bull trap.
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That's a good one, but I'd prefer the term "Pig Trap" :).

I too believe that the indices shot above the sustainable range and now it should be due for a correction (The Dow intraday high shot 80 pts more than my maximum-maximum upside target and now I'm looking at 11500-11700 area as a short covering target though I'll probably get out if 11800 area is reached) unless something fundamentally different happens (i.e. Vulcans contact us with a blueprint to create cold fusion :D). This flying pig fest almost makes me feel the moral obligation to short the market to help keep yet another asset bubble from forming :p . If this thing goes up parabollically, I'll most likely lose a dozen grand or two and move on, but the likelihood of the emergence of financial catastrophe would grow.

As for my thoughts on the fair value of the market the following two newsletters closely resemble mine (this is what financial analysts do in their free time, crunching numbers with different assumptions). It's mindboggling how often the so called long term investors forget that the market is mean reverting in the long run and the best value is found when things are down not when they are up in the sky.

S&P
http://www.investorsfriend.com/S and P 500 index valuation.htm

DOW
http://www.investorsfriend.com/djia_valuation.htm

* As for the bonus comment by someone else, fund managers get bonuses for outperforming indices not running them up to the highest point possible, so bull and bear both have good cases for argument at this level.
 
Quote from TrendPro:

HolyGrail - I agree, and that is why I have never warmed up to EW, it's just to slippery (arbitrary) in actual use. The WW pattern just seems very natural to me, similar to a bull or bear flag might be to you. Perhaps you see a nice bounce off a fresh low in a downtrend and just say, yeah thats a nice looking bear flag.

Would you agree with the basic channel lines on the weekly chart ?

If so, what is your expectation, if any, of price now that the market is testing the upper channel line ?
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I definitely agree with your channel lines. I just don't agree with the wolfe wave down to 10,000. I'm a long way from being an expert on wolfe waves but I have studied them. There are just so many patterns that don't work that it doesn't seem to me to be a viable pattern to make predictions on the market.

I don't think there is any doubt we will have at least a 10% correction real soon. I just don't worry about these things as I have trade triggers with market orders on all my positions. I go with the flow until there is no more flow.:D
 
HolyGrail - Thanks for the clarification... sounds like we are in general agreement.

This 2 year channel is a big pattern in the scope of things. Question is, how will it resolve over time.

I think the market is inching closer to a corrective phase, will that initial impulse down eventually develop into a larger breakdown and trend reversal ? We will just have to see when we get there. First stop will be a test of the 50 day moving average, where I expect the bulls to make their stand to hold the trendline.

I sketched up a chart this morning comparing the cash Dow with the $VIX. Blue Lines denote Lows in the $VIX indicator, and Red Lines denote $VIX Highs.

Note the horizontal green line at the 11 level on the $VIX chart. During this 2 year uptrend/channel, tests below 11 put in an intermediate term price high and pullback in price (and subsequent spike up in $VIX).

Another thing to note on the chart, price lows form distinct spikes up, but price highs are formed more slowly usually with a price retest and divergence on $VIX before price finally breaks lower.
 

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If you look at the 1 min chart of ES H7, then I think you can see a bull flag with a possible WW, target 1437, entry around 1432-33
 
Quote from romik:

If you look at the 1 min chart of ES H7, then I think you can see a bull flag with a possible WW, target 1437, entry around 1432-33
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a CPI above .2 could erase that entire target.
 
Quote from S2007S:

a CPI above .2 could erase that entire target.
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look at the chart, it's done & dusted son, bid stopped within .50 of target. The problem with WWs is the identification process.
 
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