These patterns take many years to complete. They are likely to take equal number of years to fulfill. As investors and traders, we are unlikely to have the patience and discipline to sit through the fulfillment period.
My suggestion is that we should not invest or trade based on patterns developing on longer time frame charts.
We should stay focused on charts in daily and intra day time frames. Big picture charts are mainly of academic interest only.
We suggest that readers should be careful when they read about some ’88 year supercycle’ or ‘Elliot Wave that started in 1938’ or something similar.
It is difficult to believe that market movements in 1938 can still influence the stock markets in 2002.
Short term trends are easier to forecast. Momentum and investor psychology today can influence events in the next few months, but how can they influence events 5 years hence?
I soemtimes read about some ‘grand elliot wave count that will peak out in 2012’. How can anyone know what will happen in 2012 or similar?
Again, suppose that the ‘grand elliot wave count that will peak out in 2012’ is correct. So, what are you going to do now? Buy and wait till 2012?
Finally, trading and investing is about clear cut trading signals. If this happens we buy. If this happens we get stopped out for profit or loss….
We will offer many charts of big picture patterns. Given below is a digial weekly chart.
After a sharp down move in September 2001, Digital made a bullish head and shoulder. This patten broke out on the upside around 628. An investor looking at this breakout would be justified in buying Digital at 628 with a target of 1050.
Now, what would be his stop loss? The Right shoulder low is at 509. The stop will have to be put below 500.
How can anyone say that Digital will rally to 1050 in one year or two years? What will be the economy be like in the next few years? It is easier to look at the next two months than at the next two years.
Chart patterns often fail. When a pattern on a daily chart fails we end up with small losses. And we know about it in a few days. If a weely or monthly chart pattern fails, we will about it in many weeks or years. Not a pleasing idea.
