Elliott Wave Theory: A Wave 5 Top?

Hi Dave,

I’ve been very intrigued with Elliott Wave Theory and have been putting it to use after seeing your application of it.

After what I’ve learned from you and my own reading, it would appear we could be at the top of the 5th and final wave of this bull market. For example, I know the 4th wave generally can be some form of a triangle pattern before the 5th wave begins. Didn’t this happen from early ’15 through mid ’16 in the form of a HUGE reverse symmetrical triangle (set on a weekly chart)? If so, the final wave of this Bull is clearly seen with the bottom of wave 2 occurring 11/2016.

Finally, wave 4 within the final 5th wave was a descending triangle from March through April of this year. This would put the market at the top of the final wave now. Even if you completely disagree I would love to hear your thoughts. 

Thanks.

Mike M. – Aubrey, TX

Mike,

Thanks for the question.

There is certainly some truth to your EW analysis….but as I always caution, charts are only 1 part of the equation.

The fact is many people made Wave 5 calls on the S&P’s many times in the last few years….and guess what….it did not work.

I use EW as a guideline and then wait for the market to confirm or disprove my thesis. So, until the S&P’s break hard OR there are some catalyst news items I deem ‘trigger worthy’ I will not try to call tops….or bottoms.

Plus, I look at many other factors, not just EW. I look at a lot of quantitative and fundamental data as well as other technical indicators like DeMark Indicators. Many of those suggest a market that is long in the tooth, but not ready to roll over.

Look no further than this presentation on the whole ‘indexation mania’ that is happening presently. While it will no doubt end badly, timing it is really hard.

So, just like the dinner conversation between the technical and fundamental analyst, picking turning points is no easy task if you have approach it one dimensionally.

And by the way for those of you who either do or are looking to start EW analysis – you need to look at MotiveWave Charting – it makes labeling your charts so easy.

Hope that helps.

Have a question for me? Just ask.

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