Question of the Week: 7/30/2008

Ellioit wave worked well in the 80's, now its accuracy is disappointing. NEoWave works great today, but how can we be sure it will work well 20 years from now?


This is one of the most important questions ever asked in this forum and strikes at the core differences between Elliott Wave and NEoWave.

Elliott Wave is a concept "locked in time," similar to (but not exactly the same) as curve-fitting a mechanical trading system. By focusing on Fibonacci relationships, with the assumption markets "should" adhere to them, and by using a static, limited group of standardized patterns, the analyst is unable to adapt to the increasingly complex trading world (which probably began with the introduction of computerized analysis and trading systems in the 1990's).

On the other hand, the core foundation of NEoWave is LOGIC, not Fibonacci relationships and not the subjective identification of standardized wave patterns. Instead of attempting to force the market to fit a predesigned template, NEoWave is an "after the fact," observational process of logical induction, deduction and logical behavior.

For example, if the concept of degree is to have any meaning, it is illogical to have a smaller degree pattern consume more price and more time than a larger degree pattern BUT I see orthodox Elliott Wave analysts constantly break this rule. As a result, their counts must change all the time. As another example, it makes no sense for a correction to stretch upward if the future uptrend is weak (you might need to think about that for a second), BUT I see orthodox Elliott Wave analysts constantly show running corrections followed by advances that are smaller than previous advances. It is also common to see orthodox Elliott Wave analysts produce multiple levels of interlocking 1's and 2's of smaller and smaller degree, with no attention paid to the fact the smaller patterns are subdividing more than the larger patterns.

So, how do I know NEoWave will work for the next 20 years and beyond? Because it is not a complete, static theory, but a constantly evolving phenomenon that does not predefine or pre-suppose future reality. It does not "force" a perspective on the markets, but lets the markets (through logical deduction of behavior) define their own future and their own reality.

Click here to view NEoWave's Question Of The Week archive