Today, I sat down with with Jeffrey Kennedy, editor of Elliott Wave International's Futures Junctures Service, which brings subscribers daily and longer-term opportunities in commodities.
Vadim Pokhlebkin: Jeffrey, I don't think I'm alone in saying that whatever the problem, I prefer simple solutions. Complicated ones…well, why complicate things, right? Now, you use Elliott wave analysis on commodities every day, and I've seen you make it both simple and complex. Which approach do you think is more effective?
Jeffrey Kennedy: Well, I also prefer simple, but it really depends on the situation. When the chart picture is not easy to recognize as any specific Elliott wave pattern, it forces you to "make it complicated." From several probable scenarios, you have to select one that satisfies all three rules of Elliott and a maximum number of guidelines; that's your "preferred" wave count. Then, you select the next scenario -- one that's less probable because it satisfies fewer guidelines (but still all the three rules.) That becomes your alternate wave count. And so on.
VP: Does it ever get so black-and-white that you don't need to choose between a primary and alternate counts?
JK: It does. In my latest Daily Futures Junctures, for example, I focus on lean hogs, live cattle and feeder cattle. (September 14 issue; online now. -- Ed.) If you look at the chart of the lean hogs (below -- Ed.), you can see that at the recent September low, we had five waves down and done. What does that tell you?
VP: Well, in Elliott wave analysis, a five-wave move is always expected to be followed by a three-wave ABC correction in the opposite direction…
JK: Exactly. So just by using the most basic knowledge of Elliott, at that low, we were able to established two things: One, that lean hogs' decline was likely over, and two, that a three-wave pullback was next -- in fact, it's already begun, as you can see from the chart. But our "simple Elliott" doesn't have to stop here. You remember how much of an impulse an ABC correction typically retraces?
VP: I remember where an ABC move usually ends -- in the span of the previous fourth wave of one lesser degree… Right? And you can make that target more specific by applying Fibonacci ratios, correct?
JK: You can; I gave specific upside price targets for lean hogs in today's Daily Futures Junctures (Sept. 14; online now. – Ed.). So there you go, now you know three things about the trend. And before I let you go, let me throw in another piece of "simple Elliott" for you. What happens after a correction is over?
VP: It gets retraced. Impulse waves move in the direction of the larger trend, so once a counter-trend correction ends, we can expect another impulse wave to develop.
JK: There you go! Three basic facts from Elliott wave analysis, and you're already miles ahead of 90% of other futures traders.
VP: It is pretty cool, I must agree. And no heavy lifting! I like that. Thanks again, Jeffrey.
JK: My pleasure.
Delivered to your computer 5 days a week in Jeffrey Kennedy's Daily Futures Junctures. Try it risk-free for 30 days -- here's how >>
PLUS: Besides the brand-new, September 14 issue, you also get instant online access to the still-valuable September 13 and 12 Daily Futures Junctures.
- September 13 issue gives you the latest on wheat and corn futures
- September 12 issue focuses on feeder cattle, soybeans and soybean meal futures.