This is Part 2 of a 3 part alternative Elliott Wave analysis series.

 

Part 1 is - Linear Time Fractals – AKA, Tractals©

Part 3 is - dL-tertiary© Elliott Waves

 

This is not to be considered a definitive text on how to create or
to use binary© Elliott Waves. It’s merely to say there is an alternative method for counting Elliott waves. A much easier method.

 

 

Thesis: Binary© Elliott Waves
by Ian Andrews

 

You have a desire to make money in the stock market.

 

That presents problem #1 -

How do you buy low and sell high?
Or, if you’re a “bear”, how do you “short” the markets.

 

Of course there's insider trading.

That's illegal.!!!
And you know “Murphy”, he’s omnipresent.

 

There are fundamentals.

Earnings, PE ratios, market cap, “C” staff, etc..

 

That requires a great deal of research.

And no little subjectivity.

It gets convoluted and messy.

 

*****
My answer - market timing – via Elliott Wave Theory.
Better still, my proprietary trilogy –
Tractals©, binary© Elliott Waves,
and dL-tertiary© Elliott Waves.

*****

But,
tons of investors, managers and analysts will tell you,

“Nobody can ‘time the market’.!!!”

 

I say “BUNK” !


I say you can time the markets.!!!

 

Because I’ve done it.

Not perfectly.
But, nobody
“bowls a 300 game”
all the time.


I’ve been tremendously successful, nonetheless.

 

There were approximately 2500 option traders nationwide. Everyone started with $500,000 October 1st. (1991)

 

I timed these option trades using just the
S+P 500 Index.

 

 

That was 1991.

Fast-forward to 2018, and, Tradestation’s Trading Challenge.

 

I was #1 the first two days of the finals.





Day 1 – an  11.12%  1-day gain.

 

 


 

 

 

 

 

 

 

 

Day 2 – an additional  7.61%  1-day gain.

 

 

 

 

 

So,
it can be done – successful, profitable gains can be made “timing” the markets.


Based on this assumption, your desire to make money in the markets evolves into problem #2 –

“How to time the stock market?”.

 

 

And the answer is, an emphatic -


the stock market can be timed
using Elliott Wave Theory.

 

The truth of the matter is, it’s not just “pure” timing.

In reality, it’s actually more of a combination of
timing and context.

Or even more accurately, timing-by-context.

 

You see, you understand “where” you are in the progression, or the direction, of prices.
Up, down, or sideways?

 

Better, with Elliott Wave Theory
than any other method of analysis.
Bar none.

Hands down.


That allows you to understand
“where prices are going next” –
continue on its original path?
Change directions?
Or ‘meander’ sideways.

 

It’s an analysis, a science, that really truly does exist.

The trick is in the ability to “decipher” this science in “real-time”. Or at least as soon as possible after the fact. Or, In other words, the ability to “adjust”.

This is the overriding, gigantic bonus perk to Elliott Wave analysis – this ability to adjust.

 

There is an “art” to interpreting Elliott Wave.

 

ELLIOTT WAVE PRINCIPLE

 

According to Robert Prechter -

“The Elliott Wave Principle is a detailed description of how financial markets behave.

This description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence.

Creating specific Elliott Wave patterns in price movements.

Each pattern has implications regarding the position of the market within its overall progression -
past, present and future.”

 

Please NOTE – This paper is geared toward the more advanced technical analyst.

 

It concerns advanced topics.
In order to get the most out of this white paper,
a solid, basic understanding of
Elliott Wave Theory is necessary.

 

If you do not have a basic understanding of Elliott Wave Theory, hopefully the following will help.

 

&&&&&&&&&&&&&&&&&&&&&&&&&&&&&

A small synopsis of Elliott Wave Theory,

in very simplistic terms would,

 

involves fractals.

It would involve the Fibonacci number series.

It involves cycles,

and a finite number of patterns – 13

(a Fibonacci number).

 

SHOW THE BASIC 5UP-3DOWN – SHOWING THE COMPLETE 13WAVE FULL CYCLE.

 

I have however, made a serious attempt to write this in a manner that the “average Joe” might understand as much as possible. Thus obtaining a solid overview.

 

I really do encourage everyone to study Elliott as much as possible. The knowledge gained will not be in vain no matter what.

 

(Again, this is by no means a comprehensive explanation of “Elliott”. That is beyond the scope of this paper. I suggest you use “Google” if you’re interested in learning more. Or go to EWI and get their book – Elliott Wave Principles, and/or The Socionomic Theory of Finance)

 

I embrace the concept of Elliott Wave Theory.
I have for over 30 years. I’ve studied it on 5-minute charts to yearly charts. And larger time frames. I’ve read numerous, original works of Ralph Nelson Elliott. Plus more modern works of, Hamilton Bolton, A. J Frost, and Robert Prechter.
(Additionally, I embrace Robert Prechter's Socionomic Theory of Finance.)

 

&&&&&&&&&&&&&&&&&&&&&&&&&&&&&

 

CONTEXT

 

The main theme, as espoused by Prechter, is, it can give one context of where you/we are, in the linear space-time of the stock markets.

 

The markets move according to human emotions. Reflecting mass human psychology's progress and regress.
Ups and downs. Bulls and Bears.

This takes place according to a set of rules,

some guidelines and a finite number- 13 - of patterns. (Again, simplistic.)

 

A preliminary, & tangent basic premise

Since mass human emotions reflect in the markets,
I advocate,
- the larger the mass, the better the results.

 

Stock market indices, and individual stocks prove this.

(Later, I will espouse my theory of “composite” indices. With actually one more degree of extrapolation larger)

 

 

 

If you go “down” from an index like the S+P 500,
to an individual company – say Hertz Global Holdings –

 

 

 

the number of people owning that stock, relative to the number of people owning the S+P 500  (the equivalent of owning stock in all 500 companies of the S+P) is smaller.

 

Subsequently, interpreting Elliott wave patterns for individual stocks can be much more difficult. But, it can be done. With relative success.

 

There will be times where the patterns are quite evident. But, there will be times when they are extremely obscure. And very difficult to find. And decipher. Therefore, it’s very difficult to interpret, and time, that individual stock chart via Elliott Wave Theory.

 

If you go “up” from the S+P 500 index,

 

let’s say, combine the S+&P 500 with the NASDAQ, and with the Dow, with the Russell 3000, with the Value Line, the NYSE,

 

it’s my philosophy and theory that, you will get a better analysis.

 

A much larger sampling of the population and their emotions is obviously at play here.

 

At least for the U.S. of A.

 

The charts should be smoother. The high frequency chatter will be smoothed out because of this larger sampling.

 

Doing so with all the US markets will give one a very nice overview of North America -

a Composite U.S. Index.

 

Now, take it a step further.
Combine this U.S. mass psychology with the mass psychology of the rest of the world – a World Composite.

Like my proprietary IaWc©.

 

 

 

We’re a much, much, smaller world nowadays.
With modern transportation, sophisticated higher tech communications and the Internet, one could argue it’s basically just a “world economy” anymore.

 

With each “sector” – the Eurozone, the Pacific Rim, the U.S., etc. -    being merely a subset of the larger macro set.

So,

add up the other basic major world markets,

North America, Canadian,

South America,

Europe, the Euro Zone.

And now, after Brexit, add in the Ftse.

Next comes the Australian All Ordinaries.

and the Pacific rim - the Nikkei, the Hang Seng and the Shanghai markets.

 

You will get a chart of world economics via the entire planets human emotions.

 

And they are very much connected.!!!

Or, very much “ONE”.

 

 

The above chart shows the S+P 500, the Nikkei Composite, and the French CAC indices.

 

Note how they are parallel.

 

Choose different markets, say the FTSE, the Dax, the All Ordinaries, overlay them, and you’ll see the same “parallelism”.

 

To extrapolate upon my theory,

add to “Earth’s Composite” stock chart,

an imaginary “Planetary Composite” stock chart that, say, includes Venus and Mars.

 

I know, I know. But, stay with me for the sake of argument and theory. The expansion will only help grasp the concept I’m espousing.

 

If there were people on these planets, if they had economies, and if the three planets conducted “interplanetary commerce”,

exactly the same way we conduct Earth’s inter-continental commerce, and we had a “planetary internet”, it's my theory that you would get an even better representation of R.N. Elliott’s Wave Theory -

 

represented by this
“Planetary Composite” stock market chart.

 

Back to our world.
 

To make the best use of this (Earth) World Composite, reverse engineer, or reverse “wave count”,
back “down” into the individual “sectors”
(the U.S., the Eurozone, etc.), such that “all counts
“come out in the wash”, i.e., they all have the same larger “node points” for making highs and lows.
And, they turn together.

 

But,

there is still a major problem interpreting Elliott waves on a stock chart, or an index chart -

that is - deciphering its smaller component
Elliott waves in real time.

 

 

 

 

While obviously a nice Bull market, that very extension makes for a difficult wave count.

 

So, while there are rules and guidelines and only 13 patterns, looking at price charts, and “seeing” the beautiful “natural” waves of Elliott,

 

this beauty is still “in the eyes of the beholder”.

“Counting” waves is still somewhat subjective.

 

In other words, while there can be no, or little, dispute regarding some of the more macro waves counts,

 

once you go down to the smaller fractals, individual interpretations come to the forefront.

 

Individual subjectivity.

 

There are, after all,

13 patterns.

Extensions.

etc.,

 

The number of permutations of how these patterns, rules, and extensions combine is, really very large.

 

Hence the various individual, subjective interpretations and wave counts from analysts.

 

That is problem #3.

 

My solution is -

 

“binary© Elliott Waves”

 

This is an introduction to binary© Elliott Waves. To show their existence. Not a definitive text how to create them. Or an advanced discourse on using them to count Elliott waves.

 

 

 

 

I believe I’ve gone a long way toward resolving a good deal of this subjectivity.

 

Because of their nature, and hence their name,

“binary” - zeros and ones -

counting binary Elliott Waves is much easier.

 

0s & 1s. That's all there is.

 

The charts are “priced-derived”.

They are “tweaked”, but not “manipulated”.

 

These binary© charts reduce the complexity of a simple price chart tremendously.
However,
they do not eliminate all need for subjectivity.

 

They are extremely easy and simple on the eyes.
And therefore the brain.

 

The waves are made of what I like to call “E”,
for “energy”. And “Gr”, for “gravity”.

That’s my “1”s and my “0”s.

 

The charts resemble seismic, earthquake displays.

     - But, labeled with binary© Elliott Wave counts.

 

 

 

 

 

I will interject here to say, do not think of these charts like a “normal” momentum chart. Or any other oscillator, where “below” the “neutral line”, or “zero line”,
is “negative”, or bearish. And “above” is “positive”,
or bullish.

 

ignore that, as a beginning student of binary©
Elliott Waves.

 

Concentrate solely on the “wild energy swings”. And the “voids” in between those sets of swings.

 

((

Up and down lines, and, above and below the zero-line, do have meaning. Each of their own. However, those are even more advanced topics of discussion for another day. And currently not within the scope of this paper

))

 

Continuing,

“E” – “energy” (in stock indices charts) looks like the seismograph chart during an earthquake - where the little pen spikes up and down. And goes crazy.

 

And it does so according to how much “energy” that earthquake is putting out.

 

With regards to investor price charts, think in terms of volume and momentum. And extreme sentiment.

 

This analogy maps over to my binary© Elliott Wave charts extremely well.

 

“Gr”, “gravity”, think, “no seismic activity”.

It’s “energy-less”.

 

 

 

To enhance your image, 

use the old ‘train analogy’.

 

Looking at an upward-trending bull market as a hill, it takes a lot of energy to power that train up that hill.

 

The saying goes on,

“when the train gets to the top,

all the conductor has to do is,

take his foot off the brake,

and “gravity” will do its job,

i.e. - a bear market downleg.

 

It’s the same with binary© Elliott Waves.

Energy, i.e., seismic up and down swings, and the train is going up its hill - a bull run.

 

Where the size of the up and down swings do play a role in understanding how much energy, seismic, or, investor-enthusiasm, is present.

 

In between these seismic energy swings is a period of nothing. No activity. The Earth is standing still. Think of it as “asleep”.

 

I like to think of the energy going to the ground,
via gravity. And just lying flat on the ground –
i.e., the “zero-line”.

 

It's as simple as that, really.

 

 

You have energy.

You have a “bull”.

 

Or you do not.

– i.e., you have a “bear”.

 

And if you will indulge me a little, a parallel illusion, as you think of gravity hugging the zero-line as no energy, think of a bear hibernating. There’s no energy there.

 

And yes, while a “bear” market on stock charts is down,

 

on my “binary© Elliott Waves”,
the “bear” is “hibernating”. With no energy.

Sleeping flat on the ground, at the zero-line.

 

 

Here’s how to count binary© Elliott Waves:

 

Example one -

Labels used:

energy – E, equals Wave 1.

gravity - Gr, equals Wave 2.

E - Wave 3.

Gr - Wave 4.

E, energy equals Wave 5.

 

 

 

 

 

The following chart shows 5 waves of ‘square green’.

Wave 5 then subdivides into another set of 5 waves – ‘white diamonds’.

 

 

 

Visually, E, energy, are the lines scribbled up and down – Wave 1. This is an impulse wave.

Then there's a void – Gr, Gravity. The Bear sleeping flat on the ground. This is a correction in Elliott Wave Theory.

 

Then there's more lines scribbled up and down – Wave 3. An impulse.

Followed by another void, Gr – Wave 4. A correction.

 

And, finally, another set of lines scribbled up and down – energy, E - Wave 5.

 

Example 2 -

Simply reverse the order.

If the context of your wave count dictates that you start with gravity as wave 1,

like in a correction,
this would actually be Wave A, gravity – Gr.

Wave B would be your up and down scribbles of seismic energy, E. Or investor energy.
“Bull” energy.
“Train” energy.

 

And, Wave C would be another bear sleeping on the ground, i.e., gravity - Gr, flat at the   zero-line.

- an A-B-C correction –

 

 

The simplicity of it makes it easier to count Elliott Waves.

 

Note 1:

You must synthesize these binary© counts back to actual price charts. This assures your tops and bottoms are “aligned”.

 

Note 2:

To begin, pick a very obvious node point. Preferably a low.

And go from there.

 

It's all visual.

You’ll have a spike (spikes). That’s your first impulse wave up – wave 1.

 

The bear will show up. The train conductor will take his foot off the brake.

And the binary© waves will hug the zero-line.

 

Rinse and repeat.

Waves 3, 4 & 5.

 

You have spikes and voids.

Ones, and zeros.

Energy and gravity.

Adding this “additional” analytical technique to your “regular” counting will absolutely enhance the ease and accuracy of counting Elliott waves.

 

Giving you the context you need.

You know where you are - short-term,
intermediate-term, and long-term.

 

You can finally time your investments.

And do it better because of this knowledge.

 

Better Elliott Wave counting, better context. Understanding context is paramount to better investing.

i.e. , bigger profits.

You have more money.

 

If you want more information, please, call me - +1.907.398.0788

 

If you want more information on Part One, or Part Three, again, plz. call me.

 

BSOT (be safe out there)

Ian

 

 

P.S.

Here’s a sample chart of Part One - Tractals©.

And my Tractal© Elliott Wave count.

 

Note the 2 “tweezer” tops, wave 3, right before the final wave 5.

 

P.P.S.

Here’s 3 charts on the day of posting this thesis,

Wednesday, July 29th, 2020 :

 

 

 

I believe the 5th wave of the 5th wave is finishing up.

 

 

Again, note the 2 “tweezer” tops right before the final 5th wave.

 

 

And finally, the S + P 500 –

 

 

 

 

 

I A - July 29th, 2020

 

**************************************

 

Revised and updated charts – Jan 8th, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

************************************

 

 

 

 

 

Stock Market Dynamics & Elliott Wave Counting

  • Posted on LinkedIn Dec. 99, 2020

 

Stock Market Dynamics & Counting Elliott Waves Evolution  

Humble Pie, or Checkmate ???

{started writing – Dec 8th; published Jan 2nd, 2021}

 

Anyone ever play chess? ---
           “if I move my Bishop to QR6,
           and then she moves her Rook to KR1,
           - I decide to take pawn on K6.
                       Or should I move Knight to Q7?”
(my apologies to all chess players,
this nomenclature is most likely not accurate,
but, you get the idea)

An awful lot of, “if, … then …”.
An awful lot of anticipation,
based on a lot of assumptions.

Counting Elliott Waves is fairly similar –
e.g. -

“if this is Minor Wave 3, Minor Wave 4 follows.
           Is it gonna be a single correction? A double? Maybe even a triple?
           Or possibly a triangle?”

Are we lookin’ at ‘daily charts’ ?
Should we be lookin’ at hourly? AND, weekly?
           For different perspectives?

Is our assumption that the previous wave WAS Minor Wave 3 correct?”

An awful lot of “what if’s ?”, and a lot of assumptions.

 

Then,
like in chess,
you “line up”
all the ‘permutations’ 
           - of all the assumptions,

and,
as long as no rules are broken,
Pick one - make a defendable, best, Elliott Wave count.

 

Then,
gather all the alternatives.
In order of which is most likely to be the best.

Then, when a rule is broken,
OR,
an extension shows itself,
see if the next alternative explains this new development.

Right on down the line.

Go back to the larger, more macro view.
See if everything is still valid.
Starting with a very good “obvious” “node point”  ---
like the March 23rd , 2020 bottom.

Rinse and repeat.!!!

 

({On a personal note,
when I “count”,
I prefer to emphasize “form” – how the waves “look”.
Is one wave “out-o’-kilter” ? Too small? Too big?
           e.g. - It just doesn’t look right.
                       It stands out, like an anomaly.

Obviously, Fibonacci is important. As are fundamentals.
And the “guidelines” of “what is normal”.
BUT !!!
form,
in the spirit of R.N. Elliott’s “the Wave Principle” and “Nature’s Law”,
that’s what’s paramount to me. )}

 

OK!!!
case-in-point
– let’s take the March 23rd bottom,
and count the ensuing Bull wave.

If  the March 23rd bottom is Intermediate Wave 4 ,

 

 


then the last 8 months and counting (to Jan 2nd, 2021),
is a 5th wave impulse.

Impulses are 5-wave affairs.
(or 9 when there’s an extension)

The next question is,
“Is this 5th wave gonna be a ‘regular’ impulse? ”
A 5-3-5-3-5 affair?

Or,
“Is it gonna be an ending diagonal triangle? ”
A 3-3-3-3-3 affair ?

On July 19th,  [ *** NOTE (1) ]
almost 4 months into the impulse,
I made a count –
I thought the 5 waves of an impulse were on their way to completion.

On August 3rd,  [ *** NOTE (2) ]
the count was very near completion.

 

 

BEFORE –

 

 

 

But, shortly thereafter,
one of the rules - “3rd-waves are never the smallest”
rule became broken.

My wave 3 was now the smallest wave –

 

AFTER,

 

 

 

so, it’s on to the next alternative, and “recount”.
(My opponent didn’t move his Bishop to QR5. He took my knight instead.)

 

By Aug 23rd ,  [ *** NOTE (4) ]
the market had played out just enough for me to formulate a new count –
           - a diagonal triangle was shaping up.

This was showing up very nicely on my “Tractal©” chart.
 

 

 

 

 

 


Now, . . .
this just became a waiting game.
The markets needed to play out their waves,

I just needed to “count”,
and make sure no rules were broken.

 

As I’ve stated numerous times in my posts,
“the stock market gods” just love to “dawdle”.
They love to string things out, and take their sweet ol’ time.

This was no exception.

On Sept. 7th, 2020,   [ ***NOTE (5) ]
I posted an article regarding how humble one had to be to analyze and predict the markets.
You have to be,
because “they” (the markets) will make you look like a fool more often than not.

One has to forget about a wrong call.
Just like a quarterback has to,
right after an interception.
Take ownership, LEARN, and get right back in the game.

By the 14th of October, [ ***NOTE (6) ]
waves 1, 2, and 3 appeared to be complete.
And wave 4 also looked near completion.

 

 

Wave 4 , and wave 5 appeared to be finished.

 

 

 

 

However,
wave 4 had 2 more weeks to go – until the 30th of Dec. 2020.

 

 

 

Now,
on to wave 5.
Wave “a” of 5 was a burst to the upside – Nov. 9th.
And what has followed since,
is possibly another diagonal triangle –

 

 

 

 

coming to an end around the weekend of Dec. 19/20.

 

On Dec. 10th, 2020 [***NOTE (8) ]
I posted an article on LinkedIn stating
- the conjunction of the “Kissing Planets” - Jupiter and Saturn,
was the catalyst.
Add in the winter Solstice,
and
“voila”.
(I’m writing this at 10:06 p.m. Friday night, the 18th)

So by Christmas we will see.

More “humble pie”,

or, did I
“ CHECKMATE !!! “      ?????????????????

This next chart of my Tractals© shows an almost perfect 3-3-3-3-3
textbook formation of a diagonal triangle wave 5
for Intermediate Wave 5, from March 23rd - Minor Wave 4.
To now - Dec. 21, 2020 !!!

However,

as I posted on Dec 27th, in LinkedIn,
“The Fractal Nature of Stock Markets”,
wave 4 of the “c” wave of wave 5 has extended –
just like it’s larger wave 4 fractal “older brother”.

So, wave 5 is now about to finish – Jan 2nd, 2021.

This coming week will, or should, confirm.

 

 

 

I say, this way.

Chronological bibliography of posted articles on LinkedIn :


NOTE (1)

https://www.linkedin.com/pulse/callin-another-one-soon-ian-andrews                             7.19.20

 

NOTE (2)

https://www.linkedin.com/pulse/within-days-ian-andrews                                                 8.3.20

 

 

NOTE (3)

https://www.linkedin.com/pulse/all-hail-kate-smith-ian-andrews                                 8.5.20

- named – “Turning Time”

 

NOTE (4)

https://www.linkedin.com/pulse/heres-theory-ian-andrews                                           8.23.20

 

NOTE (5)

https://www.linkedin.com/pulse/humble-pie-ian-andrews                                    9.7.20

 

NOTE (6)

https://www.linkedin.com/pulse/5th-wave-coming-end-ian-andrews                 10.14.20     

 

 

NOTE (7)

https://www.linkedin.com/pulse/macro-adjustment-top-ian-andrews                                                                                                                                                                                          11.1.2020

 

NOTE (8)

https://www.linkedin.com/pulse/centered-next-weekend-w-kissing-ian-andrews/                   Centered on Next Weekend – the Kissing Planets                       12.10.20


NOTE (9)

https://www.linkedin.com/pulse/centered-next-weekend-w-kissing-ian-andrews/                                     So Far So Good & On Schedule                      12.19.20

 

NOTE (10)

https://www.linkedin.com/pulse/fractal-nature-stock-markets-ian-andrews/
   
                                            The Fractal Nature of Stock Markets           12.27.20

NOTE (11)

https://www.linkedin.com/pulse/which-way-ian-andrews/
                                                           Which Way ???                                   12.29.20

 

NOTE (12)

https://www.linkedin.com/pulse/centered-next-weekend-w-kissing-ian-andrews/                                   100_Bulls – 0_Bears = Stock Market TOP     01.01.21

 

.