Elliott Wave and my Rational for the PCCRC strategy

First of all, yesterday I reached a landmark on my public, verified paper trading account using exclusively the PCCRC strategy described here over the last 17 month. The account, which I started in late June 2007 with $100,000.00 has now reached $203,258.20, an annualized return of almost 47%.

In figure 1 you can see the starting point on 6/28/07, and the net liquidation value on 11/13/08.


Figure 1.

Needless to say, this stuff works. My approach has proven routinely profitable over months and months, even over the treacherous markets we are experiencing this year. The creation of the strategies described in this blog have not been by serendipity alone, although there is some of that too. No, my motivation from finding a method that would not catch me by surprise came to me by 2005, as I understood that the bull market between 2003 and 2007 was no more than a corrective wave B of a FLAT (see Elliott wave description below) in the S&P500.

To correctly count the sequence of Elliott wave counts in any market, one should start the count from the begin. Here is my long-term count on the S&P500:



Note that the Primary wave 4 that started at the climax of the internet "bubble", is still in progress, but at long last close to the end. This period has been market by events such as the Enron debacle, 9/11, the war in Iraq, Katrina, and lately the financial crisis. I have used the channeling method to identify waves 2 and 3 and project wave 4. Since the channel has now been broken, we can say with certainty that wave 4 may be close to concluding, since the minimum requirement (exceed the lower trend line) has been met. Also, I have examined every Intermediate wave since 1950 and are prepared to argue the validity of each one of the counts.

Primary wave 4 seems to be a FLAT, which is a 3-3-5 sequence. Wave A formed as a double zigzag, and wave B as a zigzag. Wave C is an impulse, and Minor wave 3 is in progress and almost concluded. Following Minor wave 3, we will see a corrective Minor wave 4, which will keep the range we have seen for the last few weeks, but eventually we will have a final Minor wave 5. I am expecting Minor wave 5 to test or exceed the bottom of Intermediate wave A, finally concluding Intermediate wave C, the last component of Primary wave 4.




Let us examine the components of wave C in more detail:



Intermediate wave C started a year ago, and it is likely to last a few more months. Currently in minor wave 3 is in progress and only a day or two away from finished..

I believe that Minute wave 5 is developing as an ending diagonal, which is the only impulse wave that may takes the unique 3-3-3-3-3. Accordingly, the S&P500 is in Minuette 5, which should bring the Minute wave 5 and Minor wave 3 to a conclusion, with a strong rally to 1010, the top of the 4th Minute wave. This will mark the beginning of Minor wave 4 which should take a few weeks. Be prepared to see the markets continue to zigzag with strong moves in either direction for a while.