Any Market, Any Time: "Waves of Uncertainty" Vs. Elliott Waves
Only one of these two alerted traders to a recent opportunity in the MSCI Taiwan SGX
by Nico Isaac
Updated: August 15, 2017
Today I logged onto a popular financial web portal to see what information they provided in the way of gauging market trends. The market I was specifically interested in was the MSCI Taiwan stock index.
I clicked on the market and was routed to a page chock-full of every imaginable facet of price action -- including, but not limited to:
- A technical summary of moving average history and five-column breakdown of over 50 candlestick patterns
- An Opinion and Discussion Forum
- A section summarizing fundamentals, such as ROE, ROIC, and EPS
- And a section on news directly or tangentially relating to the market, such as the potential political upheaval caused by rising tensions between the U.S. and North Korea and how that may affect emerging markets
I felt like I was in a rabbit hole ... inside a rabbit hole ... inside a rabbit hole. Which made me realize: When it comes to capturing a market's volatile price swings, too much information can put active traders at a disadvantage.
Here, a recent news source elaborates on this very challenge:
"Trying to project the day to day short-term movements of the stock market may be all but impossible. Stocks have the tendency to make sudden moves on even the slightest bit of news or for apparently no reason at all.
"Riding out the waves of uncertainty may not be easy ... Having the patience to wait out abnormal moves may help evade the mistake of letting go too soon out of panic." (August 14 Clayton News Review)
Bottom line: stick to the long-term trend changes and leave the volatile, short-term swings alone.
See, in our experience, trying to "project the day to day, short-term moves" is challenging for sure; but not impossible. The reason being: We don't see any market moves as "abnormal." Rather, we see them as natural steps along a predictable trajectory.
In our experience, those "waves of uncertainty" are replaced by Elliott waves directly on a market's price chart.
Let's go back to the MSCI Taiwan index. On August 9, our Asia-Pacific Stocks Pro Service editor Matthew Gress provided one piece of data to guide his subscribers through the market's near-term course; namely, a bearish Elliott wave pattern:
"Currently, a bounce in wave ((B)) is at work and ideally will meet resistance in the area of the .618 [target Fibonacci retracement level] near 396.2 before the next decline in wave ((C)) toward the mid-380's."
The next chart shows how prices rose in wave ((B)) before falling in wave ((C)) toward Matthew's cited downside target:
The fact is, no method of market analysis is 100% accurate. Elliott wave analysis is no exception. But when it comes to identifying high-confidence trade set-ups, even those on a near-term basis, Elliott wave analysis often leaves the competition in the dust.