Predicting the Next Move of the Market by Elliott Wave

The Elliot Wave model is based on a crowd psychology that changes between optimistic and pessimistic states creating patterns that can be fitted to natural sequences. These days, the Elliott Wave principle can be improved and used in stock market forecast. Combining this method with Neural Network (NN) helps to eliminate the subjectivity in counting waves.

Instead of assuming that waves obey only the sequence of Fibonacci, harmonic, or fractal ratios, a more general approach can be used to process all extracted waves. Besides, employing NN enables identifying both the price and date of extremes. Although the Elliott Wave does not generate always accurate and consistent forecasts, its result can be successfully used as an additional input for making a trading or investing decision in modern market conditions.

The chart and the portion of output result below can give a clue for a possible next move of S&P-500 for the next week:

Symbol: ^GSPC
Total waves number: 126
Cases number: 108
Target: 1,382.35$ at 2012-02-21 (change 3.10% from 2012-02-14)
     No        Date                $           %   up/down  period
    115  2012-01-02         1,284.62        2.88    100.00     3
    116  2012-01-04         1,265.26       -1.51      0.00     2
    117  2012-01-11         1,296.82        2.49    100.00     5
    118  2012-01-12         1,277.58       -1.48      0.00     1
    119  2012-01-20         1,322.28        3.50    100.00     5
    120  2012-01-24         1,306.06       -1.23      0.00     1
    121  2012-01-26         1,333.47        2.10    100.00     2
    122  2012-01-30         1,300.49       -2.47      0.00     2
    123  2012-02-09         1,354.32        4.14    100.00     8
    124  2012-02-10         1,337.35       -1.25      0.00     1
    125  2012-02-13         1,353.35        1.20    100.00     1
    126  2012-02-14         1,340.83       -0.93      0.00     1

Chart and calculation results by SMFT-1 (a version of FTA-2 sub-system Waves module interface)