How Elliott Wave Analysis Helps You Find Opportunities

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How Elliott Wave Analysis Helps You Find Opportunities

By Neil Beers
Tue, 14 Apr 2009 15:45:00 ET

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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):

Find out how you can anticipate these “wonders to behold” and get intraday updates on the emerging opportunities in European stock indexes now.

(Do you prefer U.S. or Asian stocks to European stocks? How about commodities, interest rates, currencies, metals or energy? Get forecasts for the markets you follow – We have the right Specialty Service for you)

Tags: Elliott Wave Principle, Swiss Market Index (SMI)

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The Elliott Wave Principle is a detailed description of how financial markets behave. The 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. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.