Elliottician has gone too far

Starting in the 1930’s Ralph N. Elliott formulated from his convalescence bed, the tenets that we know as the Elliott wave theory of market behavior. Much has been written about it, but not many have dared to ask the question. How good could this theory be when it was all formulated by a man whose only tools were pen and pencil?

Today, the power of computers can be put to great use to test the theory upon millions of chart patterns. Rich Swannell has done just that, and his research has resulted in a very expensive, yet prodigious software called the “Refined Elliott Trader”or RET for short. I know Elliottician well, because at the very same time Swannell started the early version of RET (then called WinWaves), I was doing my own Elliott wave counts using a simple charting software in my Mac, downloading data from Yahoo financial. All through the 90’s, I traded a group of 30 stocks, for which I had a very clear understanding of their wave patterns. So I had no use for WinWaves, although I did have the chance to test a demo copy.

By the end of the bull market, I lost faith in the Elliott wave, mostly because the corrective waves suffer from too much ambiguity to make it practical to profit. The advantage of trading options with the Elliott wave that proved to be so profitable in the 90’s was no longer valid, in my opinion.

That did not stop Swannell. You have to admire his tenacity. While I took a 3 year break from trading, Elliottician continued its progression. I focused my own research into the PCCRC and other trading strategies.

By 2005, I found out that much research had gone into the new RET software, which indeed refined the Elliott tenets and actually quantified the frequency of the Elliott patterns to the point that one could selectively recognize tradable patterns. The Zigzag, lacks the ambiguity that other patterns have, except for the impulse pattern. But because the recognition of both patterns as they progress through the 2 first waves (1 impulse and 1 correction) is the same, and because the outcome is also the same (1 final impulse), one needs not be concerned in differentiating them, the result is the same: an aggressive 3rd wave, this time in the direction of the trend.

Ironically, this simplification, necessary to make the RET software valuable, makes other approaches to identify the first 2 waves, just as valid, perhaps rendering the RET software unnecessary. The issue is, how much computer time and processing power is necessary to identify an impulse and a correction in sequence from among the thousands of possible stock patterns that may occur at any given day?

Searching through the S&P500 to located such patterns with RET takes me usually 2-3 hours, and it usually results in the identification of several dozens of potential candidates for trading. You still have to go through these individually to select the ones you would really trade. Unless you are willing to pay an exorbitant amount of money ($5000 additional) to buy an upgrade to the program that would automatically go through the selection process. I have not tested this portion of the program.

I bought my copy of RET back in 2005, and last year I was ask to shell out another $700 to buy a “powerpack” that would make sure that RET could deal with the specific markets I trade, the US stock market. Buying more packs would be needed for other market such as currencies and commodities.

Now, I still think that Swannell deserves a lot of credit for attempting to crack the nut, which is the Elliott wave theory. You can certainly not compare the work R.N. Elliott wave have done with paper and pencil with the untold number of computer hours in a network of computers around the world that Swannell used to create the databases behind RET.

To me, RET has become nice to have, hard to test and more like wishful thinking. Hard data is difficult to generate because the advantages that RET might offer are mostly statistical. Even Elliottician would tell you that most trades (not all) might turn a profit, you’d be stopped out of the failing trades. There is nothing new about this, but hardly worth thousands of dollars to locate stocks with an impulse and a correction in sequence.

Yet, the Elliott theory is still close to my heart, just because I made so much money at least in part, to my knowledge of Elliott theory (or at least that is what I thought it was). This and my scientific nature is perhaps the reason I have been willing to go with Swannell to, as he puts it, a journey of discovery. In essence, we pay, he discovers.

This is perhaps why I am quite dismay at the latest marketing stunt Elliottician has pulled on us, long time supporters of his efforts. I received an e-mail informing me that if I could still belong to his elite group, I was going to have to joint as a “founder member” for the “modest” fee of $3,000, or else, I could never, ever take advantage of the new super duper version of RET. Why? Because RET is no longer going to be marketed to the public, like you and me. You have no time to waste, you only have until the end of Aug. to make up your mind and pay up.

Now, this is a hard question for me. It really is. It has me quite upset since yesterday. Should I once again shell out another few thousands of dollars in the hope that this time the RET would be perfect and meet all of my expectations? Or should I feel concern that I am in a suckers’ list? After all, I paid for many “improvements” along the way. I took the basic and advanced courses, and bought the power packs, and I was even tempted to take the upgrade that was going to automate it all, just a few months ago. Now, I just have to pay up just to make sure I have the latest upgrade?

Or should we even believe that RET is truly going to be taken off the market? After all, only 2 months after I bought my copy back in 2005, I was told that they were going to do just what they are going to do now: take RET out of the market to be sold to big financial institutions, not the general public. Only 3 months later, they were there, marketing it again!

I am hereby officially asking Elliottician to cut it out. Stop the high pressure tactics targeted at the very people that have made it possible for Elliottician to get here and offer all of us a reasonable upgrade path. Convince us that there is a really good reason why we should upgrade out of what we have told millions of times was the perfect trading systems. Convince us that the new version does not take hours to search through the S&P500, only to leave it up to us to select through dozens of patterns to “guess”, which one is worth trading. Give us what we were promised in the first place: a program that would make us trade well and be free.