#142. KLCI Chart And Elliot Wave

Is The Market Predictable?




From Wikipedia:
The Elliott wave principle is a form of technical analysis that attempts to forecast trends in the financial markets and other collective activities. It is named after Ralph Nelson Elliott (1871–1948), an accountant who developed the concept in the 1930s: he proposed that market prices unfold in specific patterns, which practitioners today call Elliott waves. Elliott published his views of market behavior in the book The Wave Principle (1938), in a series of articles in Financial World magazine in 1939, and most fully in his final major work, Nature's Laws – The Secret of the Universe (1946). Elliott argued that because humans are themselves rhythmical, their activities and decisions could be predicted in rhythms, too.

The illustration above shows the movement of Elliot's waves. There are 5 waves up (1-2-3-4-5) and 3 waves down (A-B-C).

And within each wave, there are actually smaller waves mimicking the bigger waves.

You can read up further here in Google, or Amazon.

The above chart shows our KLCI performance. The red line is KLCI's movement from 28 November 2005 to 27 November 2008. In these 3 years, the market has moved up and down.

If you have bought the Public Index Fund (shown by the blue line) on 28 November 2005, and hold it, you would have only made 4.01% 3 years later. This is the reason why I disagree with the buy-and-hold strategy.

Should you have bought and sold at the appropriate times, you could have made profit a few times in the last 3 years when you sold at (1). Bought at (2) and sold at (3). Bought at (4) and sold at (5). And so on.

At this moment, I think we have reached wave C. And we just have to wait for the low point to be hit, and then a visible upturn before you can buy into the Public Index Fund again.

Even the gold market follows the same trend as in Elliot's Waves. We just need to know how to measure and study the charts and trends.

Again, it's not something easy, and it's not something difficult to do. Otherwise we would not have all these wonderful people showing us today on the ways of knowing the market movements. Elliot was one of them. There were and are also people like W.D.Gann and Bradley Cowan.

What do you think? Do you agree that the market is predictable and there is a natural law in the universe governing this? Or do you think this is utter nonsense? Please give your views.