Exponential VS Log scale

            
             We all live in an exponential world, and many of the market analyzers use that fact  in their analysis.
The main problem comes from fact, that sometimes analyzers use linear, sometimes logarithmic graph.
            You can't use log scale and make linear calculations, and the opposite.
              Have a look at the both graphics bellow:

                            

At first hand they look totally different, and have nothing common. More observant of you have already noticed

that on both is DJ 30.

Here is an interesting example:

 

Let's suppose that you have invested $1000 in General Electric for $8 per share in 1995, it makes 125 shares. For two years the price rises to $16 and you cover the long, taking $8 profit per share in the pocket, which makes 100% profit.

Few years later the price rises to $30, and you decide to buy your favorite instrument again. But this time you spend $1000 to buy only 33 shares. However, the price is going higher, reaching $60 in 2000. Then you decide to sell again, taking profit $30 per share, which is 100% profit again. Visually the spread between the blue lines is four times wider than the red ones. It's easy to make a mistake, that the second trade's profit is four times bigger. It is so, because the graphic is linear.

Here is the same GE logarithmic scale example:

                             

I have calculated GE Fibonacci retracement levels of the move from $8 to $60 in both ways:

Fibo                          38.2%	50%	61.8%
Linear                     38.9	33	27.1
Logarithmic           27.21	21.54	17.05

        If we follow the linear calculating, could make a conclusion that GE's 61.8%Fibo retrace is nearly ($27.10)  of its rising up, and as an ewavers using Fibonacci tool to expect bounce up again.

        The picture is totally different, if we have calculated that correction in logarithmic way. It is obvious, that 61.8% of the correction is nearly $17, and there is more dropping down.

                                                                 Which scale to use?

 If we are daytraders, can use both, because the difference  is very small.

 If we are swing or longer term traders or investors- the linear one.

        P.S. The price now differs , I just use an example graph.  

    

Elliott Wave update

Sorry, no time for text part today.
Probably we'll see the valley from higher.
I changed the count a little.

Elliott Wave update

      
                 The picture looks almost the same as yesterday, no market makers left last few days, due to the holidays .The price seems to paint  any kind of "flat" or "triangle" corrective pattern, which is typical for 4th waves. Little more optimism is needed about 5th wave to be finished. Probably it will occur first few days in 2010.  

That is one of my counts, which shows almost completed complex correction(till now),only the (C) wave of Z looks unfinished.

                            

That is other variant of my counting. According to this labeling the last wave of the W,X,Y pattern is not completed too.Very soon (early Jan.) the price will meet important resistance zone, where will be the battle between bulls & bears.

                             

It doesn't matter which count is correct, the fact of bearish smell is all around in the air. I see many signs, that the market rally is running out of steam. It’s just a matter of time. Well, important tops are usually a process, not a one day event. Money first flows from more risky assets to more conservative. Then eventually it flees to bonds. And then it goes to cash equivalents. All that takes time. It doesn’t occur from one day to the next.

Some facts, supporting the bearish idea. 

1. According to AAII Sentiment Survey( American association of individual investors ), 11.5% have turned into bullish camp only for one week.   

Bullish	49.2% up 11.5
Neutral	27.9% up 3.2
Bearish	23.0% down 14.7

      2. The price moves up, but volume is going lower last few sessions. This is based on individual investors naked optimism. More investors (speculators), less money.
       3.Put/call ratio is going lower.

            

I don't have to reject next chart as well. I expect any dropping soon, but  I do not believe that this cyclical bull move is done yet. As I said - it's a question of time. 

                            

Wish you Happy holidays, God bless you all !

And better trading in 2010 !

              
                          

Elliott wave count on Gold

           Probably you have heard the maxima that Gold is not only an inflation hedge, but also a deflation hedge.It is wright. I believe the Gold will shine a lot next few years.  

         A general strengthening of the USD could break the back of the speculative element in gold as of late. Although I am  long-term bull on gold (believing it could reach $1,500 within 2014), this trade seems to have become too easy and too widespread to pay out in the shorter term. A serious correction towards the $870 level could shake out the speculative community while keeping the metal in a longer-term uptrend.

The Elliott wave count shows us short term bearish expectations according to my labeling.

Good luck!

Elliott Wave update

  Hello,  speculators. I am back again.  I hope you had a great Christmas Holidays.      


  However,  my alternative  count  came into play. And prise action doesn't  still show us reason to cover the long trades (if we have). 
Today the market did 6 green sessions I think.  I have labeled (V) wave as extended, which is probably due to the Christmas spirit  :-)   

See you.