Elliott Wave Theory

" So we call in times like this and it is an honor and a pleasure because I've. I've. Of listened to you. Register a number of your books I've I've been in the business since 1977. Robert. Robert rector is on the line with is that this is the man. Who wrote the book about the Elliott wave theory and man you have nailed it more times than not robbery in the a lot of people come along and say dad as a means to welcome to the program first."

" Well thanks a lot if you've been reading my stuff since 1977. Also should extend my condolences. Whether it's great to great to talk to clubs around that long."

" I was gonna say yeah I -- all your bio where you began writing a market commentaries and 76 so I guess maybe you and I started kind of form around that the financial industry about the same time that."

" And and a few years under our belt or bear markets yeah I remember what it was like."

" Yeah but you know what's interesting is -- for a couple of guys like does. This is in fact I was talked into the chairman of black rock and I said immune going to hold on now losses about this is on my fox business side in my life and I was I said does so. What do you see when you see -- gives me this big analysis about you know since World War II this then everything else that. It's a wonder that maybe you're not going back far enough but you're using the wrong data as he's -- this is the chairman of black rock they have handled trillion dollars and he said. Yes it worries me like you can't believe so."

" Well that's great is way ahead of the economists and most of them. Seem to think that the modern world started after World War II."

" Yeah well whoever study human nature yeah that's what a lot of us have been exposed to and growing up in. Post World War II -- market cycles that we that appeared to be the same sense. Since the end of World War II so let me go back to be -- first of -- me introduce to you -- to the audience because. In 84 you set a record in the option division of the US trading championship. In 89 to then financial news network called you guru of the decade. You served on the board of market technicians for nine years on the board two years as president. Thirteen books on finance probably 141 no maybe about lost track. Beginning with Elliott wave principle in 1978. -- predicted the 1920s style stock market boom. You wrote conquered the crash in 2002. New York Times best seller. And you're on to while you of your market technicians association member Shakespeare Oxford society. The list goes on and you really have all the credentials but tell the audience what briefly. Is -- Elliott wave there."

" It's a model that a man named Ralph Nelson -- Derived from studying stock prices way back in the 1930s. And what was interesting about it is he said the market seemed to have a pattern it's not just random walk it's not just a rebounding against all the news items. So this seemed to be a structure to it. What he described was what we're calling five waves in one direction three waves in the counter trend direction but he also noticed. That those patterns appeared to be the building blocks -- even larger patterns -- look exactly the same musical and whether the very short term chart that's. Only looking at hourly changes daily changes or promoting a long term chart with monthly and an annual changes. He sees the same patterns again and again. And what happened was later on several decades into it. -- broad discovered that fractal -- nature. And what Elliott had described as the type of fractal hierarchical fractal where the smaller pieces are components of the larger than that -- very complicated. But it's no more complicated than looking at a tree. The branch of a tree if you tear off and stick to the ground looks something like the tree as a whole and you can continue to do that down the smaller branches. -- the market -- saying -- a big pictures we'll put the small. And that's why I was so. I don't know -- excited is quite the right word but. Maybe a little bit concerned -- in 2002001. We completed a very large picture dating all the way back to 1932 that was exactly as delegates that it should look for completed bull market so that's what it took the risk and wrote -- for the crash."

" And and I think the first time I really W word you're really getting a lot of national press. Very positive press with a crash and 87 because there were wiped. -- and it was born fifteen minutes is I remembered very very clearly and that was when I first heard about the only away ferry. You nailed that. And then. So war are we now because I just another guy out there and all I saw where you're starting to get into this area your new interest as a parent associate economics prize which. The history of and social prediction and and is that like Harry dent is that where you'd. Harry again has written a number of books about. Human behavior repeats itself."

" Well I know hearing were friend he's good guy our approaches are very different I've got a model of social causality. The no one's really come up with before and that of course makes it rather hard sell but here's the idea. Most people think that the events that occur such as political speeches and wars and peace treaties and various other social events affect people's. Long term -- and so you know someone declares war for example everybody gets. Frightened and angry. Or if someone makes a conciliatory. Political speech it's gonna assume their reward that's sort of thing. My vision of of the way the world works is the opposite I'm saying that the mood comes first because the question people don't have his. Where do these events come from where and why do people go on strike. What did they have peace treaties whether they declare war wire they're productive and one era. And they can't seem to get out of their own way and another. I think social mood is that the engine behind social actions people have to change their mood in order to change the way social actions. Come out and that is why the stock market leads. The economy and all sorts of other events most people partially the markets -- into the future I would say nobody can into the future hasn't happened yet. What's happening that the mood is changing. Ahead of the events so that as people become save more and more more and more positive in their mood they buy stocks -- one of the things they do. They also addressed more colorful and there wasn't -- happier music and they get more productive in the economy. It takes awhile for those decisions made as mood is improving to. Cause businesses to improve so that's way business conditions -- the economy and another reason why discussing the economy can't help because the market much what most people do all day long. And when the trend turns down in mood turns negative. That has consequences. One of them as people get nervous and worried and they sell stocks they get nervous and worried so they. Create protection schemes they get nervous and worried so they start attacking their neighbors are building up their defenses. We get all kinds of results from these mood changes the stock market is only one of them but unless you realize that these mood changes are patterned. According to the wave principle I think you don't really have a handle on the basis or context in which to make the kind of forecast the market and -- systematic."

" Makes sense -- to find if Simon a bad mood. I can tell you I'm not going to have a very productive day."

" Exactly and there's the difference between long term mood and very short term emotion sometimes the event can make you afraid for a day or two but. The it does not seem to change the overall trend. Those things you can look at major events such as the assassination of president Kennedy a blackouts in New York City. All kinds of things in and you can't point them out on the -- even in attack of the World Trade Center if you -- solid -- weekly chart those four years and they point -- out they can't because there's so much volatility. Before it as there was after."

" I'm I'm done and I'd come back and look for you where is that whereas Hitler's that I -- you so -- so if you look at the markets today though I mean. This is new territory for for me I'm looking at it and going -- market's been cut more than an half from the highs and a lot of people. The rules you know the the Ned Davis pessimism theories and everything else I'm gonna. We got about as much pessimism as we can possibly get some people are going well than than the bottom must be near but it looks like we -- bottomless bottom going here."

" Well some of those are good observations but here's another. Example of why I think. This wave principle model is so useful. Because when I wrote this book -- the crashes that this is not going to be a normal bear market were talking about we're tracing nearly probably the whole thing but at least a lot of the entire wave the 1980s and nineties in people's civil that's crazy and it's impossible and you know what he's smoking. But that is what the -- structure told us what happened now what happened about that in terms of this."

" Like I stopped either from yeah I started doing and I'm not only going to get my financial life that licenses and 77. But I started in the financial broadcasted the same about the same time 1980 great time well guess what I remember it was in the seven hundreds. Yeah now it had been higher. Came down but I sought to go up through 1002. And three and four so if I started 1980 you know remember the Dow was around 700 something rather. Are you saying the -- going back to 700."

" Well but what I suggest in my book with I think they can go back down under 2000 now that again is real sound crazy. But I think I can defended even today with as much as were down. You know you look back in 192932. Minutes you know the blue chip index went down 89%. Many many stocks went to zero PM and that was a deflationary period and one of the things we had done all through the nineties even including part of the eighties was build up to accredit. Extensions so big that was the biggest in the history of the world. So we had a tremendous opportunity or or risk that is so having a deflationary episode when the mood change. That was the only thing holding inflation together by 2007 was visible in the mood. Now as far as people being pessimistic today one of the reasons I sent out a week ago. Message and I said look we've been short since. S&P 1500. The 1550. I I think we should cover the shorts is that the traders got the only 3% nobles. They were 98% -- at the top so you're right there is a lot of pessimism about have been saying all along look we had ten years. When we had a net plurality of bullish advisors of the -- should -- There's no way that that entire tenure periods can be balanced by three weeks you know what 3% -- hopefuls so I think we've got a huge bear market progress. And due -- valuation and we can get into the stupid in -- cutting earnings and dividend and so called by all measures were not there yes."