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How Elliott Wave Analysis Helps You Find Opportunities
Elliott wave patterns are strong indicators of the way markets will behave. Our analysts here at Elliott Wave International follow all major global markets -- some of them 24 hours a day -- and apply wave analysis to spot crucial price junctures for you. The patterns they look for are in this idealized Elliott wave progression (for a bull market; in a bear market, flip it upside down):
Case in point: at 6:18 AM Eastern time on Thursday, April 9, our European Stocks Specialty Service posted this intraday forecast for Switzerland's SMI stock index:
“The 120-minute chart of the Swiss Market Index shows the impulsive structure of the rise from early March…This pattern points to a strong rally over the coming days in a third-of-a-third wave…Elliott enthusiasts tend to be enthusiastic about third waves because they are normally the longest and strongest segments of stock market moves.”
Why would "Elliott enthusiasts" be so excited about this chart? Well, the price action in the SMI on April 9 showed the development of a third-wave rally. Moreover, a third-of-a-third-wave rally -- in other words, a third-wave rally within a third wave of one larger degree (in the idealized chart at the top, this corresponds to the third wave within the larger third wave marked (3)).
What’s so special about that? Here's how Robert Prechter, EWI's founder and president, describes third waves in Prechter's & Frost's classic textbook on wave analysis, "Elliott Wave Principle -- Key to Market Behavior":
“Third waves are wonders to behold. They are strong and broad, the trend at this point is unmistakable… It follows, of course, that the third wave of a third wave… will be the most volatile point of strength in any wave sequence.” (EWP, p. 34.)
So, the European Stocks Specialty Service forecast for the Swiss Market Index told subscribers to expect a strong and broad wave up. Now take a look at this updated chart of the SMI, showing what the index did following that April 9 forecast (Eastern time shown at the lower right):
