By Elliott Wave International
This one-of-a-kind way to spot investment ideas is called “elliotticity.” The impartial arbiter of elliotticity is our proprietary computer program called EWAVES, Elliott Wave Analysis & Validation Expert System.
Elliott Wave International has been perfecting EWAVES for years; it already powers EWI’s Flash Services recommendations. And now, it can quantify the exact percentage by which a market adheres to the Elliott wave model by giving it an elliotticity score.
Our recent monthly Elliott Wave Theorist provided more insights:
Total elliotticity takes into account the entire history of a market. Markets with the highest total elliotticity conform best to the Elliott wave model at all degrees of scale. Short term elliotticity helps us recognize markets that have recently traced out clear Elliott waves and thus are good candidates for near term forecasting. …
Elliotticity is designed for practical use. We use a percentage scale of 1-100.
Currencies and commodities adhere well to the model, so both are high-elliotticity asset classes. Regarding stocks, high-volume and high market-capitalization stocks tend to have a higher adherence versus thinly traded issues — because Elliott waves track herding (or crowd) behavior, and generally speaking, the bigger the market cap of a stock, the bigger the crowd.
Here’s another quote from our recent Elliott Wave Theorist:
Trend following indicators are quantitative by nature, completely dependent upon pre-chosen numerical indicator settings. But the market’s trends do not adhere to quantitative norms. …
The most important advantage of EWAVES is that it is qualitative. It can identify the market’s patterns regardless of their quantitative duration, price change, speed, volatility or any other such aspects.
Like all market forecasting, EWAVES operates on probabilities, not certainties. Yet, EWAVES does offer investment ideas worth your attention — analyzing several hundred investment vehicles each day and ranking them to find the best wave counts.
Where can you see them?
You’ll find the investment vehicles sporting the highest elliotticity right now in our monthly Global Market Perspective in the section titled “EWAVES,” which includes the “EWAVES Chart Gallery.” In case you’re unfamiliar with the Global Market Perspective, it’s an Elliott Wave International publication which provides Elliott wave analysis for 50+ worldwide financial markets.
If you’d like to brush up on your knowledge of Elliott wave analysis, or are brand new to the subject, you are encouraged to read the Wall Street classic book by Frost & Prechter, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from the book:
Always invest with the preferred wave count. Not infrequently, the two or even three best counts comfortably dictate the same investment stance. Sometimes being continuously sensitive to alternatives can allow you to make money even when your preferred count is in error. For instance, after a minor low that you erroneously consider of major importance, you may recognize at a higher level that the market is vulnerable again to new lows. This recognition occurs after a clear-cut three-wave rally follows the minor low rather than the necessary five, since a three-wave rally is the sign of an upward correction. Thus, what happens after the turning point often helps confirm or refute the assumed status of the low or high, well in advance of danger.
Even if the market allows no such graceful change of opinion, the Wave Principle still offers exceptional value. Most other approaches to market analysis, whether fundamental, technical or cyclical, have no good way of forcing a reversal of opinion or position if you are wrong. The Wave Principle, in contrast, provides a built-in objective method for placing a stop. Since wave analysis is based upon price patterns, a pattern identified as having been completed is either over or it isn’t. If the market changes direction, the analyst has caught the turn. If the market moves beyond what the apparently completed pattern allows, the conclusion is wrong, and any funds at risk can be reclaimed immediately.
Here’s the good news: You can access the online version of Elliott Wave Principle: Key to Market Behaviorfor free when you become a Club EWI member.
Club EWI is the world’s largest Elliott wave educational community and is free to join — PLUS, members enjoy free access to a wealth of Elliott wave resources on investing and trading without any obligation.
Just follow this link: Elliott Wave Principle: Key to Market Behavior — free and unlimited access.
This article was syndicated by Elliott Wave International and was originally published under the headline Here’s a Unique Way to Spot Worthy Investment or Trading Ideas. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.