I continually receive comments that 1) question the validity of the Elliott Wave Principle, or question 2) why different analysts achieve different results. Let me address the second point here.
As a result, I’m convinced that the movement of the market should be considered a science. The reason the Elliotticians waver in their analysis is because of the errors in the Elliott Wave Principle, most of them due to the additions, or changes to Elliott’s original work, done without proper research.
Here are a few examples.
- Truncations. Nobody has ever seen one. The example charts in the book on this subject are invalid because they’re both waves within an impulsive pattern that continued up after the supposed truncations occurred. One of the examples cited is a three-wave, second wave of a sequence.
Bob Prechter, in his writings, has expressed a desire that EW Theory be classified as a science. However, his adoption of this truncation “anomaly” certainly doesn’t support this want. You can’t have a valid scientific theory that fails periodically. After going back a hundred years in the DOW, I can’t find a single occurrence of a truncation either at market highs or lows.
- Leading diagonals. Nobody’s ever seen one. There has not been a valid chart presented to support this pattern. It was a Prechter addition to Elliott’s work.
- Second waves in an impulsive pattern must retrace 62%, based upon my experience. I’ve cited this several times over the past two years in my work and it has yet to fail. This fact is often the difference in whether analysts are correct in their calls, imho. In Prechter’s book, the requirement is that they only have to retrace 38%, which has caused analysts to be wrong over and over again.
- The role of fibonacci ratios in both corrective and impulsive markets is woefully incomplete in the book and, in my work, has time and again proven the most important factor in determining both wave end-targets and whether a structure is corrective, or not.
- First waves of an impulsive pattern have a different structure than all other impulsive waves. This fact simply isn’t addressed in the book.
- The difference between a corrective five wave pattern and an impulsive five wave pattern has not been addressed at all in the book. This perhaps the most important distinction in determining corrective vs. impulsive wave structures.
There are more, but they start to become more technical.
So, if your tools are blunt, you’re going to do a less than adequate job as an analyst, through no fault of your own (other than laziness, I suppose).
I find your comment, “He [Prechter] literally wrote the book … “ odd. Elliott wrote the original book (and many articles). Prechter and Frost wrote another book, based upon his work. There are others out there.
Prechter himself spent a few pages on this very topic:
“Despite the fact that many analysts do not treat it as such, the Wave Principle is by all means an objective study, or as Collins* put it, ‘a disciplined form of technical analysis.’” — page 94
- Charles Collins wrote the foreword to the Elliott Wave Principle.
As a result, I don’t generally look at anybody else’s work. I do not let news or events play any part in my analysis. My job is to remain completely objective in my analysis. I only look at indicators after I have done my initial analysis to see if they support (or not) my prognosis.
Finally, your comment that “[Bob] has made several brilliant calls in his career. I had a good chuckle. This is not meant in any way to be critical of the work Bob has done in that regard, but here’s my point through an analogy.
We have a traffic system that requires motorists to stop at a red light. If you know the rules, it’s not particularly “brilliant” when you stop at that light. However, if you came from the backwoods and have never seen a traffic light, it would be really brilliant if you stopped when you saw your first light turn red.
Based on that standard, I make several brilliant calls each and every day. However, as I often say, “I’m simply an Elliott Wave-following moron.
Bob knew the rules when he made those calls. Any good Elliott wave practitioner can do the same.
It’s Elliott who was the brilliant one in discovering the science.
Where I find Bob Prechter’s brilliance is in his Socionomics work. This to me is his crowning achievement and something I would also like to see classified as a science sometime in the future.
So, as an EW analyst, are you an “artist?” Perhaps, because you’re given a set of tools that are roughly hewn and have to use them to bring clarity to a market that moves in a predictable manner, churning out the same patterns over and over again, with Fibonacci relationships to each other most often provide multiple target options.
I suppose the real art is weeding out those options through experience. So, there is art in analysis, but I believe how the market moves to be a science that was uncovered by Ralph Elliott, with rules and guidelines that were refined, clarified, and communicated by Prechter and Frost.
I’m putting together a stand-alone page that goes over some of this same material in a little more depth, but without my personal story and experience with EWI. However, it’s not likely to appeal to the novice.
“Despite the fact that many analysts do not treat it as such, the Wave Principle is by all means an objective study, or as Collins* put it, ‘a disciplined form of technical analysis.’”
*Charles Collins wrote the foreword to “The Elliott Wave Principle.”
Errors in the book
First Wave Structure
Fibonacci Wave Relationships