Monday, August 29, 2011

Predicted vs Happened!!

In the name of God, the most gracious, most merciful

After first accurately predicting the August 23 (+/- 4 days) bottom on August 4, 2011, the Trading Algorithm once again accurately analyzed the market on Thursday - delineating the possible market trajectory. These two cases exhibit two different Bottom Picking and Turn Point Identification strategies employed by Understand, Survive and Thrive:

1- Inflection Point Model - Predicting Bottom Timing: August 23, 2011 Bottom Call
2- Market Structure EW Analysis - Predicting potential market bottom level: August 25, 2011 Correction Call

Following images show the Predicted Market Trajectory vs Actual Market Behavior.
Actual - Happened
The market bottomed at .786 Fibonacci retracement at 1137. At this level "a" wave also equaled "c" wave. Overall, we saw a 3 wave decline, which stresses the fact that the trend is now UP. Right now, we have a very good buying opportunity, with clearly defined risk-management level (1137).

Hurricane Irene turned out to be fairly benign, which is very good for the markets. With markets in the 3rd wave of a new Uptrend, we are about to witness a very strong rally. Since next UST Inflection Point Model turn date is in September, upcoming rally can last for a good 3 weeks. Its a good thing that we went partially long on Friday.

Markets have so far held above the August 23, 2011 low, thus, clearing the path for a sustainable rally in the coming weeks. Furthermore, over the past 2 weeks market indices have carved out a very nice base formation. These formations can provide a very good rally launch pad.

If we open strong tomorrow, it would suggest that we can raise the trailing stops to reduce the risk associated with the long positions. EW stops and trailing stops will be discussed in the upcoming Trading Algorithm summary.

I have always been fascinated by market's inherent Elliott Wave nature. It seems like whenever the markets are in an uptrend, we get surprises to the upside no matter whether the news is good or bad. Similarly, whenever the markets are in a downtrend, we get surprises to the downside no matter whether the news is good or bad.

This behavior is clearly evident from the Hurricane Irene event. Although it was supposed to wreck havoc throughout the East coast, it did not cause significant damage. Some might suggest that because it was not disastrous that is why markets are rallying. On the contrary, I tend to think that markets were supposed to rally no matter whether what Hurricane Irene did.


  1. Trading Algorithm Update
  2. Subscription Update
  3. Pick the Turn Point Challenge Review
  4. Inflection Point Model Update
If you like this article, Subscribe to our E-mail Analysis 


  1. Broke the 1204 level. Must be real bullish signal??

  2. Yes, I will publish the Trading Algorithm update tonight or tomorrow morning. Overall, market has been very strong.


I would love to hear from you! Please leave your comment below!!